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


                           FORM 10-Q


(Mark One)


( X )     QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999.


OR


(    )     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM         TO        .
                                                    -------    -------


                Commission File Number 0-27034


                   VANGUARD AIRLINES, INC.
(Exact name of Registrant as specified in its charter)


      Delaware                             48-1149290
(State or other jurisdiction            (I.R.S.  Employer
of incorporation or organization)      Identification Number)


                     533 Mexico City Avenue
                Kansas City International Airport
                     Kansas City, MO  64153
                           (816) 243-2100
   (Address of principal executive offices, including zip code;
          Registrant's telephone number, including area code)


Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.

               Yes     X             No
                    --------            ------

     At September 30, 1999, there were 17,098,526 shares of Common
Stock, par value $.001 per share, issued and outstanding.
<PAGE>

PART I.  - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

<TABLE>
                                 VANGUARD AIRLINES, INC.
                                      BALANCE SHEETS


                                           SEPTEMBER 30,         DECEMBER 31,
                                               1999                  1998
                                           -------------         ------------
<S>                                        <C>                   <C>
ASSETS

Current assets:
Cash and cash equivalents, including
restricted cash and cash equivalents
of $5,000,000 at September 30, 1999         $13,481,452           $ 7,417,048
Accounts receivable, less allowance
of $172,000 at September 30, 1999 and
$303,000 at December 31, 1998                 2,791,572             2,030,309
Inventories                                   1,301,791             1,168,054
Current portion of supplemental
  maintenance deposits                        2,677,467             4,490,281
Prepaid expenses and other current assets     2,068,965             1,022,953
                                              ----------             ----------
Total current assets                         22,321,247             16,128,645


Property and equipment, at cost:
Aircraft improvements and leasehold
  costs                                       7,221,001               4,854,683
Reservation system and communication
  equipment                                   1,872,119               1,867,954
Aircraft engines and rotable inventory        7,244,996               6,243,693
Other property and equipment                  4,165,441               2,624,579
                                             ----------             ----------
                                             20,503,557              15,590,909
Less accumulated depreciation and
  amortization                              (10,256,917)             (7,459,456)
                                            -----------              ----------
                                             10,246,640               8,131,453


Other assets:
Supplemental maintenance deposits,
 less current portion                         8,182,012               5,121,050
Deferred debt issuance costs                    497,440                  83,448
Leased aircraft deposits                      3,400,000               2,299,000
Security deposits                               720,780                 883,610
Other                                         1,610,222                	999,377
                                             ----------              ----------
                                             14,410,454               9,386,485
                                             ----------              ----------

Total assets                                $46,978,341             $33,646,583
                                            ===========             ===========
</TABLE>
<PAGE>

                                VANGUARD AIRLINES, INC.
                               BALANCE SHEETS (CONTINUED)

<TABLE>
                                           SEPTEMBER 30,          DECEMBER 31,
                                               1999                    1998
                                         ---------------          ------------
<S>                                      <C>                      <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable                        $    5,008,204         $   5,848,635
Accrued expenses                             4,594,403             3,062,823
Accrued maintenance                          9,321,766             6,902,847
Air traffic liability                       13,621,885             8,230,222
                                            ----------           -----------
Total current liabilities                   32,546,258            24,044,527

Accrued maintenance, less current portion	   5,698,824             3,818,184

Commitments

Stockholders' equity:
Common stock, $.001 par value:
  Authorized shares - 200,000,000
  Issued and outstanding
   shares - 17,098,526 in 1999
   (17,074,462 in 1998)                        17,099                 17,074
Preferred stock, $.001 par value:
  Authorized shares -  2,000,000
  Issued and outstanding
   shares - 302,362                               302                    302
Liquidation preference - $3,023,620
Additional paid-in capital                 77,701,279             76,954,671
Accumulated deficit                       (68,985,421)           (71,170,997)
                                           -----------            -----------
                                            8,733,259              5,801,050
Deferred stock compensation                        --                (17,178)
                                            ----------             ----------
Total stockholders' equity                  8,733,259              5,783,872
                                           -----------            -----------
Total liabilities and stockholders' equity $46,978,341           $33,646,583
                                           ===========            ===========
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>

                              VANGUARD AIRLINES, INC.
                             STATEMENTS OF OPERATIONS


 <TABLE>
                         THREE MONTHS ENDED           NINE MONTHS ENDED
                            SEPTEMBER 30,                SEPTEMBER 30,
                        -------------------------      -------------------
                           1999           1998            1999          1998
                          ------          ------          -----         -----
<S>                   <C>             <C>            <C>            <C>
Operating revenues:
Passenger revenues     $ 33,806,906   $ 30,671,667   $ 88,776,038   $ 73,712,222
Other                     1,636,641	     1,510,712	  5,170,345	     5,138,388
                        ------------    -----------    -----------   ------------
Total operating revenues 35,443,547     32,182,379     93,946,383     78,850,610

Operating expenses:
Flying operations        6,633,291      4,696,929     17,146,556      13,553,485
Aircraft fuel            5,454,636      3,502,854     13,089,084      10,509,813
Maintenance              7,621,154      6,619,080     19,680,942      15,764,956
Passenger service        2,191,484      1,806,299      5,567,308       5,208,789
Aircraft and traffic
 servicing               5,642,085      4,006,171     14,990,537      13,019,286
Promotion and sales      5,559,196      5,632,189     15,081,787      14,492,486
General and
 administrative          1,072,973      1,179,666      3,000,305       3,154,920
Depreciation and
 amortization            1,144,467	      651,117	 3,155,948	     1,784,467
                       ------------     ----------    -----------    -----------
Total operating
 expenses               35,319,286	   28,094,305 	91,712,467 	    77,488,202
                        ----------      ---------     ----------      -----------

Operating income           124,261	    4,088,074      2,233,916       1,362,408

Other income (expense):
  Deferred debt issuance
   cost amortization      (114,631)      (737,538)      (274,008)     (1,867,847)
Interest expense               ---        (51,104)           ---	      (496,691)
Interest income            162,636	       65,244        371,588          98,433
Other                      (45,531)           ---	   (88,829)          ---
                       -----------      ----------     ----------   -----------
Total other income
  (expense), net             2,474	     (723,398)         8,751	    (2,266,105)
                         ----------      ----------      ----------   -----------
Income (loss) before
  taxes                    126,735       3,364,676     2,242,667        (903,697)

Income tax benefit
  (expense)                 63,159	           ---	   (57,091)            ---
                        ----------      ----------      ----------   -----------

Net income (loss)      $   189,894     $ 3,364,676   $ 2,185,576     $  (903,697)
                       ===========    =============   =============  ============

Net income (loss)
 per share:
  Basic                  $   0.01    $       0.22     $       0.13    $     (0.08)
                       ===========    ============    =============    ==========

  Diluted                $   0.01    $       0.18    	$       0.11    $     (0.08)
                       ===========    ============    =============    ==========

Weighted average shares
 used in per share
 computation:
  Basic                17,091,550       15,353,859       17,083,204     11,847,020
                      ===========     ============     =============    ==========

Diluted                19,583,069       18,827,917   	   19,404,783     11,847,020
                      ===========     ============    =============     ==========

</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>

                                VANGUARD AIRLINES, INC.
                               STATEMENTS OF CASH FLOWS
<TABLE>

                            THREE MONTHS ENDED       NINE MONTHS ENDED
                              SEPTEMBER 30,            SEPTEMBER 30,
                        ------------------------   ---------------------
                             1999          1998              1999             1998
                            -----          -----             -----           -----
<S>                      <C>            <C>             <C>             <C>
OPERATING ACTIVITIES
Net income (loss)        $ 189,894    $ 3,364,676        $ 2,185,576    $  (903,697)
Adjustments to reconcile
  net income (loss) to net
  cash provided by (used in)
  operating activities:
Depreciation               707,317        334,441          1,941,961        839,660
Amortization               437,150        316,676          1,213,987        944,807
Compensation related to
 stock options                 ---          8,595             17,178         25,785
Debt issuance cost
 amortization              114,631        737,538            274,008      1,867,847
Provision for
 uncollectible accounts     62,938         23,549             73,905         48,739
Changes in operating
 assets and liabilities:
Restricted cash          1,033,226        202,862        (5,000,000)       (726,492)
Accounts receivable        407,993         (8,252)          (835,168)      (171,639)
Inventories                 71,739       (406,189)          (133,737)      (606,298)
Prepaid expenses and
 other current assets     (722,489)       273,825         (1,046,012)      (292,486)
Supplemental maintenance
 deposits                 (612,497)      (607,756)        (1,248,148)    (1,471,357)
Accounts payable          (226,021)      (802,697)          (840,431)      (669,710)
Accrued expenses         1,073,683      1,061,054          1,531,580      1,058,361
Accrued maintenance      1,083,918        524,217          2,728,392        759,591
Air traffic
 liability              (1,534,417)       503,361          5,391,663      4,513,071
Deposits and other        (445,132)       255,953         (1,549,015)       (32,080)
                        -----------    -----------      -------------     ----------
Net cash provided by
 (used in) operating
 activities              1,641,933      5,781,853          4,705,739      5,184,102

INVESTING ACTIVITIES
Purchases of property
 and equipment            (862,053)    (1,693,412)        (3,699,968)    (3,625,424)

FINANCING ACTIVITIES
Proceeds from line of
 credit borrowings              ---            ---               ---      1,900,000
Principal payments on
 line of credit                 ---    (1,900,000)               ---     (3,800,000)
Proceeds from issuance
 of notes payable to
 related parties                ---            ---               ---      3,000,000
Proceeds from issuance
 of notes payable               ---            ---               ---        275,000
Principal payments on
 notes payable                  ---       (136,920)              ---       (181,808)
Proceeds from exercise
 of stock options
 and warrants                39,832      5,168,086            58,633      5,191,053
Payment of preferred
 stock offering costs           ---            ---              ---       (101,873)
                       ------------  ---------------       -----------   -------------
Net cash provided by
 financing activities        39,832       3,131,166           58,633      6,282,372
                       ------------   -------------       ------------   -------------

Net increase in cash
 and cash equivalents       819,712       7,219,607        1,064,404      7,841,050
Cash and cash equivalents
 at beginning of period   7,661,740       1,704,155        7,417,048      1,082,712
                       ------------    ------------        -----------    ------------
Cash and cash equivalents
 at end of period (1)   $ 8,481,452    $  8,923,762       $ 8,481,452   $ 8,923,762
                        ===========    ============       ============   =============
</TABLE>
<PAGE>

                                VANGUARD AIRLINES, INC.
                           STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
                                    THREE MONTHS ENDED         NINE MONTHS ENDED
                                       SEPTEMBER 30,              SEPTEMBER 30,
                              1999              1998            1999             1998
                             ------            ------          ------           ------
<S>                          <C>             <C>            <C>              <C>
SUPPLEMENTAL DISCLOSURES OF
 CASH FLOW INFORMATION:
Cash paid during the period
 for interest                $    ---         $ 25,702       $    ---        $ 127,137
                             ========         ========       =========       =========

SUPPLEMENTAL SCHEDULE OF
 NONCASH INVESTING AND
 FINANCING ACTIVITIES:
Aircraft leasehold costs
 associated with accrued
 maintenance                $  721,167        $    ---     $1,571,167        $     ---
                            ==========        ========     ==========        =========
Conversion of notes
 payable to related parties
and accrued interest
 to preferred stock         $      ---        $    ---     $      ---       $3,023,620
                            ==========        ========     ==========       ==========
Conversion of notes payable
 to related parties and
 accrued interest to
 common stock               $      ---        $    ---     $      ---      $10,564,887
                            ==========        ========     ==========      ===========
Deferred debt issuance
 costs recorded in
 conjunction with warrants
 issued                    $   335,000       $  344,000    $  688,000       $  486,000
                            ==========        ========     ==========       ==========
</TABLE>

SEE ACCOMPANYING NOTES.

(1) Excludes restricted cash and cash equivalents of $5,000,000 at
September 30, 1999.
<PAGE>

                     VANGUARD AIRLINES, INC.
   CONDENSED NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

1.  BASIS OF PRESENTATION


     The financial statements of Vanguard Airlines, Inc.  (the "Company")
presented herein, without audit except for balance sheet information at
December 31, 1998, have been properly prepared pursuant to the rules of
the Securities and Exchange Commission for quarterly reports on Form 10-Q
and do not include all of the information and note disclosures required by
generally accepted accounting principles.  These statements should be read
in conjunction with the financial statements and notes thereto for the
year ended December 31, 1998, included in the Company's Form 10-K as
filed with the Securities and Exchange Commission on March 31, 1999.

     The balance sheet as of September 30, 1999, the statements of
operations for the three and nine months ended September 30, 1999 and
1998, and the statements of cash flows for the three and nine
months ended September 30, 1999 and 1998 are unaudited but, in the
opinion of management, include all adjustments (consisting of normal,
recurring adjustments) necessary for a fair presentation of results
for these interim periods.  The results of operations for the three
and nine months ended September 30, 1999 are not necessarily indicative
of the results to be expected for the entire fiscal year ending
December 31, 1999.

2. REVERSE ONE-FOR-FIVE STOCK SPLIT

     On May 18, 1999, the Company's shareholders approved a one-for-five
reverse stock split on all authorized shares of common stock.  The par
value per share remained at $0.001 per share and 200,000,000 common
shares remained authorized.  All convertible warrants, options and
preferred stock agreements were updated to reflect the reverse stock
split.  All historical information presented in this document has been
retroactively restated to reflect the one-for-five reverse stock split.

3. EARNINGS PER SHARE

     The following table sets forth the computation of the adjusted
weighted average shares and assumed conversions used in the calculation
of diluted earnings per share for the three and nine months ended
September 30, 1999 (adjusted to reflect the one-for-five reverse stock
split):

<TABLE>
                             Three-months Ended            Nine-months Ended
                             ------------------            -----------------
                                 September 30,                September 30,
                                 ------------                 -------------
                             1999          1998          1999            1998

<S>                <C>            <C>            <C>            <C>
Numerator:

Numerator for basic
 and diluted earnings
 per share-income
 (loss) available to
 common stockholders
 after assumed
 conversions       $     189,894   $  3,364,676    $  2,185,576  $    (903,697)
                   =============  =============   =============  ==============
DENOMINATOR:

Denominator for
 basic earnings
 per share -
 weighted average
 shares               17,091,550     15,353,859      17,083,204     11,847,020
Effect of dilutive
 securities:
  Employee stock
   options             1,067,130      1,128,321         912,149           ---
Warrants                 214,941      1,136,289         199,982           ---
Convertible preferred
  stock                1,209,448       1,209,448       1,209,448          ---
                     -----------     -----------     -----------      --------
Dilutive potential
  common shares        2,491,519       3,474,058       2,321,579          ---
                     -----------     -----------     -----------      --------
Denominator for
 diluted earnings
 per share - adjusted
 weighted-average
 shares and assumed
 conversions         19,583,069      18,827,917      19,404,783     11,847,020
                     ==========     ===========      ==========    ===========
</TABLE>
<PAGE>
Basic earnings per share for the three and nine months ended September 30,
1999 and 1998 were computed using the weighted average number of
outstanding common shares.  Diluted earnings per share for the three
and nine months ended September 30, 1999, and the three months ended
September 30, 1998 were computed using the weighted average number of
shares and any dilutive potential common shares.  For the nine months
ended September 30, 1998, the computation of diluted net loss per share
was based solely on the weighted average number of outstanding common
shares because the effect of outstanding preferred stock, employee
stock options and warrants was antidilutive.

4.	USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes.  Actual results could differ from
those estimates.

5.    LEASES

During 1999, the Company accepted delivery of five additional aircraft
between February and October. The lease terms are five years from
the date of delivery and, like the other aircraft leases, require
the Company to make supplemental payments to the aircraft lessor
based on the number of cycles/flight hours, as defined by the lease
agreements.  The supplemental payments are recoverable from the
lessor upon the performance of required engine, airframe, landing
gear and auxiliary power unit overhauls.  At September 30, 1999,
the Company had made deposits on these aircraft totaling $1,364,000 and
was required to make an additional deposit totaling $115,000
in October 1999.  In addition, in November 1999, the Company has
signed a letter of intent for the lease and delivery of six
additional aircraft during 2000 and 2001.

Future minimum lease payments under noncancelable operating leases
(excluding supplemental payments but including the lease agreement
related to the aircraft delivery in October 1999) at September 30, 1999
were as follows:

Year ended September 30:
     2000                     $  16,718,083
     2001                        13,629,762
     2002                        12,338,853
     2003                         8,093,667
     2004                         4,732,000
                              -------------
Total minimum lease payments  $  55,512,365
                              =============

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

EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THIS REPORT OF
FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 21E OF THE SECURITIES ACT OF 1934 THAT INVOLVE RISKS AND
UNCERTAINTIES AND INFORMATION THAT IS BASED ON MANAGEMENT'S BELIEFS AS
WELL AS ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE TO
MANAGEMENT.  WHEN USED IN THIS DOCUMENT, THE WORDS "ESTIMATE,"
"ANTICIPATE," "PROJECT" AND SIMILAR EXPRESSIONS ARE INTENDED TO
IDENTIFY "FORWARD-LOOKING STATEMENTS."  THE COMPANY'S ACTUAL RESULTS
MAY DIFFER MATERIALLY FROM THOSE CURRENTLY ANTICIPATED.  FACTORS THAT
COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT
LIMITED TO, AVAILABILITY OF WORKING CAPITAL AND FUTURE FINANCING
RESOURCES, GENERAL ECONOMIC CONDITIONS, THE COST OF JET FUEL, THE
OCCURRENCE OF EVENTS INVOLVING OTHER LOW-FARE CARRIERS, THE CURRENT
SUPPLY OF BOEING 737 JET AIRCRAFT AND THE HIGHER LEASE COSTS ASSOCIATED
WITH SUCH AIRCRAFT, POTENTIAL CHANGES IN GOVERNMENT REGULATION OF
AIRLINES OR AIRCRAFT AND ACTIONS TAKEN BY OTHER AIRLINES PARTICULARLY
WITH RESPECT TO SCHEDULING AND PRICE IN THE COMPANY'S CURRENT OR FUTURE
ROUTES AND UNANTICIPATED YEAR 2000 COMPLIANCE COSTS AND EXPENSES.  FOR
ADDITIONAL DISCUSSION OF SUCH RISKS, SEE "FACTORS THAT MAY AFFECT FUTURE
RESULTS OF OPERATIONS," AS WELL AS THOSE DISCUSSED ELSEWHERE IN THE
COMPANY'S REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>

COMPANY

The Company was incorporated on April 25, 1994 and operates as a
low-fare, short- to medium-haul passenger airline that provides convenient
scheduled jet service to attractive destinations in established markets
in the United States.  The Company's flight operations began on December 4,
1994 with two Boeing 737-200 jet aircraft operating two daily flights each
way between Kansas City and Denver and two daily flights each way between
Denver and Salt Lake City.  The Company currently operates thirteen leased
Boeing 737-200 jet aircraft.  The Company's current schedule provides an
average of 81 daily weekday flights serving Kansas City, Atlanta,
Buffalo/Niagara Falls, Chicago-Midway, Cincinnati, Dallas/Fort Worth,
Denver, Minneapolis/St. Paul, Pittsburgh and Myrtle Beach.  The Company
currently operates a concentration of its daily flights in Chicago-Midway
with 23 daily weekday flights and Kansas City with 21 daily weekday
flights.  The Company also provides limited charter services.

The Company has experienced significant growth since the commencement of
operations in December 1994. The Company's operating revenues are derived
principally from the sale of airline services to passengers and are
recognized when transportation is provided.  Total operating revenues
are primarily a function of fare levels and the number of seats sold
per flight.  The Company's business is characterized, as is true for
the airline industry generally, by high fixed costs relative to operating
revenues and low profit margins.  The Company's principal business
strategy is to provide airline services in established, high
passenger-volume markets that are not served by other low-fare airlines.

OVERVIEW

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1998

Selected Financial and Operational Data:
<TABLE>
	                              THREE MONTHS ENDED SEPTEMBER 30,
                                 ------------------------------------------
			                                         $	      %
	                            1999	  1998	  CHANGE	  CHANGE
                                ------     -------      -------     -------
<S>                            <C>         <C>          <C>         <C>
Revenue passengers carried     554,516     419,362      135,154       32.2  %
Revenue passenger miles -
 RPMs (000s)                   251,518     191,808       59,710       31.1  %
Available seat miles -
 ASMs (000s)                   368,694     267,531      101,163       37.8  %
Load factor                       68.2 %      71.7 %       (3.5)pts.  (4.9)  %
Departures                       6,989       4,933        2,056       41.7  %
Average stage length               454         457           (3)      (0.7) %
Miles flown (000s)               3,063       2,211          852       38.5  %
Block hours flown                9,871       7,191        2,680       37.3  %
Passenger yield                $ 0.134	 $ 0.160     $ (0.026)     (16.3) %
Total revenue per ASM          $ 0.096     $ 0.120     $ (0.024)     (20.0) %
Operating expenses per ASM     $ 0.096     $ 0.105     $ (0.009)      (8.6) %
Operating cost per block hour  $ 3,578     $ 3,907         (329)      (8.4) %
Average fuel cost per gallon   $  0.62     $  0.57     $   0.05        8.8  %
Average size of fleet for
  period                          12.2         9.0          3.2       35.6  %
</TABLE>

OPERATING REVENUES

Total operating revenues increased 10% from $32.2 million for the quarter
ended September 30, 1998 to $35.4 million for the quarter ended September
30, 1999.  This increase was attributable to the additional capacity put
into service during the quarter and the resultant increase in the number
of passengers offset by a decrease in passenger yield.  The reduction in
yield in the third quarter of 1999 as compared to the third quarter of
1998 mainly resulted from a major competitor's pilot strike during the
third quarter of 1998.  ASMs increased 38% from 268 million to 369 million.
The number of passengers increased 32% from 419,362 in the quarter ended
September 30, 1998 to 554,516 in the quarter ended September 30, 1999.
The increase in capacity is the result of an additional aircraft placed
in service in March, April, August and September 1999.  Passenger yield
per RPM decreased 16% from 16.0 cents in the quarter ended September 30,
1998 to 13.4 cents in the quarter ended September 30, 1999 as a result of
factors described above.  RPMs increased 31% from 192 million in the
quarter ended September 30, 1998 to 252 million in the quarter ended
September 30, 1999.  This increase was the result of the 32% increase
in the number of passengers in the quarter ended September 30, 1999 as
compared to 1998.  Load factor decreased from 72% for the quarter ended
September 30, 1998 to 68% for the quarter ended September 30, 1999.
This decrease was the result of a 31% increase in the RPMs coupled with
a 38% increase in capacity in the quarter ended September 30, 1999 as
compared to the quarter ended September 30, 1998.  Management believes
the major competitor's pilot strike during the third quarter of 1998,
specifically in September, contributed to the decrease in load factor.

Other revenues include fees generated as a result of service charges from
passengers who change flight reservations, mail and liquor revenues.
Subject to certain restrictions, a customer may pay a service charge to
use the value of the unused reservation for rebooking transportation for
a period of 180 days subsequent to the flight date.  Service charges were
$1.2 million (approximately 3% of total operating revenues) and $1.2
million (approximately 4% of total operating revenues) in the quarters ended
September 30, 1999 and 1998, respectively.  The decrease in service fee
revenue as a percentage of total operating revenues
is a direct result of less passengers changing their travel
itineraries.

<PAGE>
The Company's strategic plan to continue to improve its product includes
the delivery of a reliable product with a number of amenities found on
larger, better-known airlines that specifically cater to price-sensitive
business travelers.  Those amenities include assigned seating, refundable
tickets, greater legroom, fixed ticket pricing under the Road Warrior sm
Class and greater frequencies between city pairs.  The Company believes
it has improved its brand awareness in each of its markets through its
direct advertising program that was modified in August 1997. The Company,
however, cannot predict future fare levels, which depend to a substantial
extent on actions of competitors and the Company's ability to deliver a
reliable product.  When sale prices or other price changes have been made
by competitors in the Company's markets, the Company believes that it
must, in most cases, match these competitive fares in order to maintain
its market share.  The Company believes that the negative impact of
entering new markets and the use of discounted fares should decrease as
the Company increases its overall revenue base and improves upon its
brand awareness.

OPERATING EXPENSES

Expenses are generally categorized as related to flying operations,
aircraft fuel, maintenance, passenger service, aircraft and traffic
servicing, promotion and sales, general and administrative, depreciation
and amortization and other expense, including interest expense and
amortization of deferred debt issuance costs.  The following table sets
forth the percentage of total operating revenues represented by these
expense categories:
<TABLE>
			                              THREE MONTHS ENDED
                                                ------------------
			                                SEPTEMBER 30,
                                                   --------------
          		                              1999	             1998
                                                ----               ----

                                      PERCENT OF                 PERCENT OF
                                      ----------                 ----------
                                       REVENUES   CENTS PER ASM   REVENUES   CENTS PER ASM
                                       --------   -------------   --------   -------------
<S>                                    <C>        <C>             <C>        <C>
Total operating revenues                100.0 %     9.61 CENTS     100.0 %   12.03 CENTS
                                      =========   =============   ========    ===========
Operating expenses:
Flying operations                      18.7 %     1.80 cents      14.6 %     1.76 cents
Aircraft fuel                          15.4       1.48            10.9       1.31
Maintenance                            21.5       2.07            20.6       2.47
Passenger service                       6.2       0.59             5.6       0.68
Aircraft and traffic servicing         15.9       1.53            12.4       1.50
Promotion and sales                    15.7       1.51            17.5       2.10
General and administrative              3.0       0.29             3.7       0.44
Depreciation and amortization           3.3       0.31             2.0       0.24
                                       --------  -------------   -------    -----------
Total operating expenses               99.7       9.58            87.3      10.50
Total other expense, net                0.0       0.00             2.2       0.27
Income tax benefit                      0.2       0.02             0.0       0.00
                                       --------  -------------   -------    -----------
Net income                              0.5 %     0.05 CENTS      10.5  %    1.26 CENTS
                                       ========  ===========     ========    ===========

Flying operations expenses include aircraft lease expenses, compensation
of pilots, expenses related to flight operations administration, hull
insurance and all other expenses related directly to the operation of
the aircraft other than aircraft fuel and maintenance expenses.  Flying
operations expenses increased 41% from $4.7 million (approximately 15%
of operating revenues) for the quarter ended September 30, 1998 to $6.6
million (approximately 19% of operating revenues) for the quarter ended
September 30, 1999.  The increase in flying operations expenses was
primarily the result of an increase in pilot pay, pilot overnight hotel
and meal per diem costs directly related to the 37% increase in block
hours flown.  Aircraft rent increased as a result of the addition of the
Company's tenth and eleventh aircraft in the first half of 1999 and the
Company's twelfth and thirteenth aircraft in August and September,
respectively.  Finally, the Company continues to incur significant pilot
training costs as a result of the introduction of the additional capacity
during the third quarter of 1999.
<PAGE>
Aircraft fuel expenses include the direct cost of fuel, taxes and the
costs of delivering fuel into the aircraft.  Aircraft fuel expenses
increased 56% from $3.5 million (approximately 11% of operating revenues)
for the quarter ended September 30, 1998 to $5.5 million (approximately
15% of operating revenues) for the quarter ended September 30, 1999.  The
37% increase in block hours flown resulted in approximately $1.3 million
in increased fuel costs.  The average fuel cost per gallon (including
taxes and into-plane costs) increased $0.05 or 9% from $0.57 in the
quarter ended September 30, 1998 to $0.62 in the quarter ended September
30, 1999.  The Company will seek to pass on any significant fuel cost
increases to the Company's customers through fare increases as permitted
by then current market conditions; however, there can be no assurance that
the Company will be successful in passing on increased fuel costs.

Maintenance expenses include all maintenance-related labor, parts,
supplies and other expenses related to the upkeep of aircraft.  Maintenance
expenses increased 15% from $6.6 million (approximately 21% of operating
revenues) for the quarter ended September 30, 1998 to $7.6 million
(approximately 22% of operating revenues) for the quarter ended September
30, 1999.  Maintenance expenses increased by approximately $200,000 for
provisions specifically related to the return of three aircraft during
the third and fourth quarters of 1999.  The Company anticipates it will
be obligated to pay its lessor or overhaul facilities to meet contracted
aircraft return conditions.  In addition, the Company incurred costs for
four unscheduled engine repairs resulting in an additional expense of
$500,000  in the third quarter of 1999.  The Company expenses a rateable
portion of the estimated cost of future major scheduled maintenance for airframes,
engines, landing gears, and APUs each month based on flight hours flown.
As the Company has added additional aircraft and flight hours have
increased approximately 35%, these accrued costs have increased
accordingly.  The costs of routine aircraft and engine maintenance are
charged to maintenance expense as incurred.  Maintenance expenses
decreased on a cents per ASM basis from 2.47 cents for the quarter ended
September 30, 1998 to 2.07 cents for the quarter ended September 30, 1999.
This decrease in cents per ASM was a result of the 38% increase in ASMs
in 1999 and the associated economies of scale within the maintenance
department.

Passenger service expenses include flight attendant wages and benefits,
in-flight service, flight attendant training, uniforms and overnight
expenses, inconvenienced passenger charges and passenger liability
insurance.  Passenger service expenses increased 21% from $1.8 million
(approximately 6% of operating revenues) for the quarter ended September
30, 1998 to $2.2 million (approximately 6% of operating revenues) for the
quarter ended September 30, 1999.  The increase in passenger service
expenses was the result of an increase in flight attendant salaries,
overnight hotel and meal per diem costs and in-flight supplies, food and
beverages.  Flight attendant salaries and associated overhead costs
increased mainly as a result of a 37% increase in block hours flown and
in-flight supplies, food and beverages increased as a result of the 32%
increase in passengers flown.  These increases were offset by cost savings
from the reduction in the Company's passenger liability insurance rates.

Aircraft and traffic servicing expenses include all expenses incurred
at the airports for handling aircraft, passengers and mail, landing fees,
facilities rent, station labor and ground handling expenses.  Aircraft
and traffic servicing expenses increased 41% from $4.0 million
(approximately 12% of operating revenues) for the quarter ended September
30, 1998 to $5.6 million (approximately 16% of operating revenues) for
the quarter ended September 30, 1999.  The increase in aircraft and
traffic servicing expenses is a direct result of the 42% increase in
departures from 4,933 in the third quarter of 1998 to 6,989 in the third
quarter of 1999.  The Company began employing its own under-wing
servicing in Kansas City in July 1998 and Minneapolis/St. Paul during
February 1999, and has realized savings from the decision to bring this
function in-house.  Aircraft and traffic servicing expenses decreased
on a per turn basis from $812 (1.50 cents per ASM) for the quarter ended
September 30, 1998 to $807 (1.53 cents per ASM) for the quarter ended
September 30, 1999 as a result of the strategic moves described above
and the economies of scale from the increase in departures.

Promotion and sales expenses include the costs of the reservations
functions, including all wages and benefits for reservations, rent,
electricity, telecommunication charges, credit card fees, travel agency
commissions, as well as advertising expenses and wages and benefits for
the marketing department.  Promotion and sales expenses decreased 1%
from $5.6 million (approximately 18% of operating revenues) in the quarter
ended September 30, 1998 to $5.6 million (approximately 16% of operating
revenues) in the quarter ended September 30, 1999.  Direct advertising
costs increased approximately $0.7 million, or 56%, for the third quarter
1999 compared with the third quarter 1998.  The addition of two new
destination cities during 1999 contributed to the increase in direct
advertising expenses.  The Company continues to rely on its direct
advertising methods to attract its passengers, and therefore, continues
to incur significant advertising expenses each month.  However, the
Company continues to reduce its promotion and sales cost per passenger
as the Vanguard brand continues to be accepted in its key cities.  The
average promotion and sales cost per passenger decreased $3.40 or 25%
from $13.43 in the quarter ended September 30, 1998 to $10.03 in the
quarter ended September 30, 1999.
<PAGE>

General and administrative expenses include the wages and benefits for
the Company's corporate employees and various other administrative
personnel, the costs for office supplies, office rent, legal, accounting,
insurance, and other miscellaneous expenses.  General and administrative
expenses decreased 9% from $1.2 million (approximately 4% of operating
revenues) in the quarter ended September 30, 1998 to $1.1 million
(approximately 3% of operating revenues) in the quarter ended September
30, 1999.  The decrease in general and administrative expenses in the
third quarter of 1999 as compared to 1998 is the result of decreases in
director and officer and general liability insurance costs and property taxes.

Depreciation and amortization expenses include depreciation and
amortization of aircraft modifications, ground equipment, computer and
reservation equipment, leasehold improvements and rotable parts
inventory.  Depreciation and amortization expenses increased 76% from
$0.65 million (approximately 2% of operating revenues) in the quarter
ended September 30, 1998 to $1.1 million (approximately 3% of operating
revenues) in the quarter ended September 30, 1999.  The increase in
depreciation expense is mainly the result of the increase in depreciable
rotable part inventories of approximately $1.0 million and aircraft
acquisition costs of $2.4 million since September 30, 1998.

Other expense, net, consists primarily of debt issuance cost amortization,
interest income and interest expense.  The Company's renewal of the
letters of credit issued securing the Company's credit card processor
under new terms and the termination of its bank line of credit agreement
in January 1999 significantly reduced the amount of deferred debt issuance
amortization in the second quarter 1999 compared with the second quarter
1998.  Under the previous arrangement, warrants vested quarterly in
amounts dependent upon the Company's exposure under the letter and line
of credit and the Company's stock price on the vesting date, as defined
in the respective agreements.  The warrant's estimated fair value is
recorded as deferred debt issuance costs and related amortization expense
is recorded over the terms of the related guarantees.  The Company's
improved cash position has reduced interest expense for the quarter ended
September 30, 1999 mainly as a result of the payoff of the line of credit
in August 1998 and the conversion of demand notes payable to related
parties to Common Stock during 1998.

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE SIX MONTHS ENDED
SEPTEMBER 30, 1998

Selected Financial and Operational Data:

</TABLE>
<TABLE>

	                             NINE MONTHS ENDED SEPTEMBER 30,
                                   -------------------------------
			                                        $           %
	                            1999	    1998	   CHANGE	 CHANGE
                                  ----        ----      -------    ------
<S>                           <C>          <C>          <C>        <C>
Revenue passengers carried    1,426,297    1,132,844    293,453    25.9  %
Revenue passenger miles -
 RPMs (000s)                    647,972      529,127    118,845    22.5  %
Available seat miles -
 ASMs (000s)                   936,617       775,589    161,028    20.8  %
Load factor                       69.2 %        68.2 %    1.0 pts.  1.5  %
Departures                      17,659        13,988      3,671    26.2  %
Average stage length               454           467        (13)   (2.8) %
Miles flown (000s)               7,757         6,410      1,347    21.0  %
Block hours flown               25,594        20,896      4,698    22.5  %
Passenger yield               $  0.137      $  0.139  $  (0.002)   (1.4) %
Total revenue per ASM         $  0.100      $  0.102  $  (0.002)   (2.0) %
Operating expenses per ASM    $  0.098      $  0.100  $  (0.002)   (2.0) %
Operating cost per block hour $  3,583      $  3,708  $    (125)   (3.4) %
Average fuel cost per gallon  $   0.59      $   0.60  $   (0.01)   (1.7) %
Average size of fleet for
 period                           10.7           9.0        1.7    19.1  %
</TABLE>
<PAGE>

Total operating revenues increased 19% from $78.9 million for the nine
months ended September 30, 1998 to $93.9 million for the nine months ended
September 30, 1999.  This increase was primarily attributable to increases
in capacity and in the number of passengers offset by a reduction in
passenger yield.  ASMs increased 21% from 776 million to 937 million.
The number of passengers increased 26% from 1.1 million during the nine
months ended September 30, 1998 to 1.4 million during the nine months
ended September 30, 1999.  Passenger yield per RPM decreased 1%, from
13.9 cents through the third quarter of 1998 to 13.7 cents through the
third quarter of 1999.  The increase in capacity is the result of
additional aircraft placed in service in March, April, August and
September 1999 offset by a 3% decrease in average stage length.  RPMs
increased 23% from 529 million during the first nine months of 1998 to
648 million during the first nine months of 1999.  This increase in RPM's
was the result of the 26% increase in the number of passengers coupled
with a 3% decrease in average stage length in the nine months ended
September 30, 1999 as compared to 1998.  Load factor increased from 68.2%
for the nine months ended September 30, 1998 to 69.2% for the nine months
ended September 30, 1999.  This increase was primarily the result of an
23% increase in the RPMs coupled with a 21% increase in capacity in the
nine months ended September 30, 1999 as compared to the nine months ended
September 30, 1998.

Other revenues include fees generated as a result of service charges from
passengers who change flight reservations, mail and liquor revenues.
Subject to certain restrictions, a customer may pay a $50 service charge
to use the value of the unused reservation for rebooking transportation
for a period of 180 days subsequent to the flight date.  These service
charges were $3.9 million (approximately 4% of total operating revenues)
and $4.2 million (approximately 5% of operating revenues) for the nine
months ended September 30, 1999 and 1998, respectively.  The decrease in
service fee revenue is a direct result of less passengers changing their
travel itineraries.

OPERATING EXPENSES

The following table sets forth the percentage of total operating revenues
represented by these expense categories:
<TABLE>

                                                NINE MONTHS ENDED
                                                -----------------
               			                                 SEPTEMBER 30,
                                                   -------------
		                                   1999	                       1998
                                     -----                       -----
                          PERCENT OF                    PERCENT OF
                          ----------                    ----------
                           REVENUES     CENTS PER ASM    REVENUES   CENTS PER ASM
                           --------     -------------    ---------  --------------
<S>                        <C>          <C>            <C>        <C>
Total operating revenues    100.0 %      10.03 CENTS   100.0 %    10.17 CENTS
                           =========    =============  =========  ===========
Operating expenses:
Flying operations           18.2 %       1.83 cents     17.2 %     1.75  cents
Aircraft fuel               13.9         1.40           13.3       1.36
Maintenance                 21.0         2.10           20.0       2.03
Passenger service            5.9         0.59            6.6       0.67
Aircraft and traffic
 servicing                  16.0         1.60           16.5       1.68
Promotion and sales         16.0         1.61           18.4       1.87
General and administrative   3.2         0.32            4.0       0.41
Depreciation and
 amortization                3.4         0.34            2.3       0.23
                          ----------     ------------    --------   ------------
Total operating expenses    97.6         9.79           98.3      10.00
Total other expense, net     0.0         0.00            2.9       0.29
Income tax expense           0.1         0.01            0.0       0.00
                          ----------     ------------    --------   ------------
Net income (loss)            2.3 %       0.23 CENTS     (1.2) %   (0.12) CENTS
                          ==========     ============    ========   ============
</TABLE>
<PAGE>
Flying operations expenses increased 27% from $13.6 million (approximately
17% of operating revenues) for the nine months ended September 30, 1998
to $17.1 million (approximately 18% of operating revenues) for the nine
months ended September 30, 1999.  The increase in flying operations
expenses was primarily the result of an increase in pilot salaries and
related overhead costs directly related to the 22% increase in block
hours flown.  In addition, aircraft rent increased as a result of the
1999 additions of the Company's tenth aircraft in March, eleventh
aircraft in April, twelfth aircraft in August, and thirteenth aircraft
in September.  Finally, the Company incurred significant pilot training
costs as a result of the introduction of this additional capacity prior
to actual air service.

Aircraft fuel expenses increased 25% from $10.5 million (approximately
13% of operating revenues) for the nine months ended September 30, 1998
to $13.1 million (approximately 14% of operating revenues) for the nine
months ended September 30, 1999.  The 23% increase in block hours flown
resulted in approximately $2.4 million of the increase in fuel costs.
Fuel cost per gallon (including taxes and into-plane costs) decreased
$0.01 or 2% from $0.60 in the nine months ended September 30, 1998 to
$0.59 in the nine months ended September 30, 1999.  The Company will
seek to pass on any significant fuel cost increases to the Company's
customers through fare increases as permitted by then current market
conditions; however, there can be no assurance that the Company will
be successful in passing on increased fuel costs.

Maintenance expenses increased 25% from $15.8 million (approximately 20%
of operating revenues) for the nine months ended September 30, 1998 to
$19.7 million (approximately 21% of operating revenues) for the nine
months ended September 30, 1999.  Maintenance expenses increased as a
result of accelerating aircraft input dates for scheduled required major
maintenance, providing for costs overruns during three aircraft heavy
checks, providing for the return of three aircraft to a lessor in 1999 and
providing for unscheduled engine maintenance costs. As discussed in the
quarterly commentary, the Company experienced four unscheduled engine
repairs in the most recent quarter, which resulted in additional expenses
of $500,000.  In addition, the Company provided approximately $400,000 to
meet aircraft return conditions of three leased aircraft.  The cost
overruns during three scheduled airframe heavy checks mainly related to
unanticipated structural work performed by the Company's third party
vendor.  The Company expenses a portion of the estimated cost of future
major scheduled maintenance for airframes, engines, landing gears, and
APUs each month based on flight hours flown.  As flight hours have
increased approximately 24%, these accrued costs have increased
accordingly.  The costs of routine aircraft and engine maintenance are
charged to maintenance expense as incurred.  Maintenance expenses
increased on a cents per ASM basis from 2.03 cents for the nine months
ended September 30, 1998 to 2.10 cents for the nine months ended September
30, 1999.  This increase in cents per ASM mainly resulted from the
increases in maintenance expense as described above.

Passenger service expenses increased 7% from $5.2 million (approximately
7% of operating revenues) for the nine months ended September 30, 1998 to
$5.6 million (approximately 6% of operating revenues) for the nine months
ended September 30, 1999.  The increase in passenger service expenses was
the result of an increase in flight attendant salaries and related
overhead costs and in-flight supplies, food and beverages.  Flight
attendant salaries and related overhead costs increased mainly as a
result of a 23% increase in block hours flown and in-flight supplies,
food and beverages increased as a result of the 26% increase in passengers
flown.

Aircraft and traffic servicing expenses increased 15% from $13.0 million
(approximately 17% of operating revenues) for the nine months ended
September 30, 1998 to $15.0 million (approximately 16% of operating
revenues) for the nine months ended September 30, 1999.  The increase
in aircraft and traffic servicing expenses is the direct result of the
increase in departures from 13,988 for the nine months ended September
30, 1998 to 17,659 for the nine months ended September 30, 1999.  The
Company began employing its own under-wing servicing in Kansas City in
July 1998 and Minneapolis/St. Paul during February 1999, and has realized
significant savings.  Aircraft and traffic servicing expenses decreased on
a per turn basis from $931 (1.68 cents per ASM) for the nine months ended
September 30, 1998 to $849 (1.60 cents per ASM) for the nine months ended
September 30, 1999 as a result of the management decision described above
and the economies of scale from the increase in departures.

Promotion and sales expenses increased 4% from $14.5 million
(approximately 18% of operating revenues) in the nine months ended
September 30, 1998 to $15.1 million (approximately 16% of operating
revenues) in the nine months ended September 30, 1999.  The Company
brought its outside reservation system in-house in April of 1998.  The
<PAGE>
ongoing savings realized from this move were offset by increases in
advertising expenses through the nine months ended September 30, 1999 as
compared to the nine months ended September 30, 1998.  The addition of two
new destination cities during 1999 increased direct advertising expenses.
The Company continues to rely on its direct advertising methods to attract
its passengers, and therefore, continues to incur significant advertising
expenses each month.  However, the Company continues to reduce its
promotion and sales costs per passenger as the Vanguard brand continues
to be accepted in all of its cities.  The average promotion and sales cost
per passenger decreased $2.22 or 17% from $12.79 in the nine months ended
September 30, 1998 to $10.57 in the nine months ended September 30, 1999.

General and administrative expenses decreased 5% from $3.2 million
(approximately 4% of operating revenues) in the nine months ended
September 30, 1998 to $3.0 million (approximately 3% of operating
revenues) in the nine months ended September 30, 1999.  The decrease
in general and administrative expenses in 1999 as compared to 1998 is
the result of decreases in director and officer and general liability
insurance costs and property taxes.

Depreciation and amortization expenses increased 77% from $1.8 million
(approximately 2% of operating revenues) in the nine months ended
September 30, 1998 to $3.2 million (approximately 3% of operating
revenues) in the nine months ended September 30, 1999.  The increase
in depreciation expense is mainly the result of the increase in
depreciable rotable part inventories of approximately $1.0 million
and aircraft acquisition costs of $2.4 million since September 30, 1998.

The Company's renewal of the letters of credit issued securing the
Company's credit card processor under new terms and the termination
of its bank line of credit agreement in January 1999 significantly
reduced the amount of deferred debt issuance amortization in 1999
compared with 1998.  The warrant's estimated fair value is recorded as
deferred debt issuance costs and related amortization expense is
recorded over the terms of the related guarantees.  The Company's
improved cash position has reduced interest expense for the nine months
ended September 30, 1999 mainly as a result of the payoff of the line
of credit in August 1998 and the conversion of demand notes payable to
related parties to Common Stock during 1998.

LIQUIDITY AND CAPITAL RESOURCES

During 1999, the Company generated sufficient cash flows from operating
activities to support its operations and meet its capital expenditure
requirements.  Prior to March 1998 and since inception, the Company has
primarily financed its operations and met its capital expenditure
requirements with proceeds from sales of equity securities and the
issuance of debt primarily to its principal stockholders.
As of September 30, 1999, the Company has received net proceeds
from the sale of its equity securities aggregating
approximately $70.2 million.

During 1999, the Company has continued to experience a significant
increase over the previous year in advanced ticket sales, resulting in
an increase to its air traffic liability for unflown ticket sales.  As a
result of the increased advanced bookings and the Company's
continued growth, the Company continues to show a
working capital deficit of $10.2 million as of September 30, 1999.  In
January 1999, two principal stockholders of the Company agreed to renew
the two-year $4.0 million letter of credit facility in order to secure a
portion of the Company's exposure to its credit card processor.  The
letters of credit expire in January 2001.

Currently, the Company must deposit cash into a restricted cash account to
provide for the Company's credit card exposure in excess of $4.0 million.
To the extent that exposure exceeds $4.0 million, the Company must deposit
cash from ticket sales as collateral to secure the Company's credit card
processor.  As of November 5, 1999 the Company's
credit card exposure was approximately $10.3 million.  The
Company funded the credit card exposure in excess of $4.0 million with
available cash on hand.  The Company estimates that its credit card
exposure will range between $8.0 to $12.0 million through the end of the
year when the balance should decrease due to expected seasonality.  The
Company's existing credit card facility limits its ability to utilize
cash generated from operations.  For example, during the nine months ended
September 30, 1999, $5.0 million of cash generated from operating
activities was withheld by the Company's credit card processing bank to
provide additional collateral against the Company's increased advance
<PAGE>
ticket sales.  The Company would have increased cash flows from operations
by approximately $5.0 million had this restrictive credit card collateral
facility not been required during the nine months ended September 30, 1999.
As a result, the Company plans to renegotiate its collateral requirements
during the fourth quarter of 1999.  There can be no assurance that the
Company will be successful with these negotiations or that the Company
will be able to reduce its collateral requirements.  Currently, any cash
utilized as collateral is refunded by the credit card processor, on a
daily basis, when the Company's exposure falls below the previously
calculated exposure or $4.0 million, whichever is greater.

The Company estimates that scheduled heavy maintenance of its existing
aircraft fleet through September 30, 2000 will cost $10.6 million, of
which $2.7 million has been funded from existing supplemental rent
payments recoverable from aircraft lessors.  The Company will fund a
significant portion of this future scheduled heavy maintenance obligations
in the form of supplemental rent payments to be paid over the next 12
months as required by the respective lease agreements.  In addition, the
Company expects to expend $4.7 million on various capital expenditures in
the next year, which are primarily related to improvements for existing or
future aircraft, increased aircraft parts inventory levels and continued
improvements to its in-house computer systems.

The Company continues to review its financing alternatives in order to
purchase or lease additional aircraft under suitable terms.  The Company
accepted delivery on its twelfth and thirteenth aircraft in September 1999 and
October 1999, respectively.  In addition, in November 1999, the Company
signed a letter of intent for six additional Boeing 737-200 advanced
aircraft for replacement and growth purposes to be delivered
over the next fourteen months.  The Company must deposit with the
lessor an aggregate amount of approximately $1.3 million for these six
aircraft.  In addition, the Company is currently
in discussion with various aircraft lessors regarding the placement of
additional aircraft for the years 2000 and 2001.  The Company's current
cash balance is sufficient to provide for the lease deposit
requirements for these six additional aircraft and for the additional deposit
requirements for anticipated fleet growth in 2000 and 2001.
Historically, the Company has been required to deposit between $140,000
and $300,000 per aircraft depending on the specific terms
negotiated in the lease.

In March 1999, the Company recognized the Vanguard Airline Pilots
Association as the bargaining unit on behalf of
its pilots.  The resulting financial impact of union representation is not
known at this time as a final agreement has not been reached.

The Company has generally generated positive cash flows from operations
since March 1998 and expects that its existing cash balances along with
the improved operating results will be sufficient cash to support its
operations through September 30, 2000.  The Company plans to continue to
implement certain actions designed
to achieve long-term profitability and improve its capital resources.
Management's plans to achieve long - term profitability
include increased focus on the price-sensitive business
traveler, pricing strategies designed to maximize passenger revenue and
continued focus on cost savings programs.  There can be no assurance that
its efforts will be successful.

The Company is evaluating options on raising additional capital or issuing
debt during late 1999 and 2000.  The Company's success in implementing
actions designed to achieve long-term profitability and its ability to
operate at profitable levels will determine if the Company will be able
to raise additional capital or secure debt financing.  There can be no
assurance that the Company's necessary working capital requirements to
expand operations will be available on acceptable terms, or at all.

OTHER MATTERS

YEAR 2000 COMPLIANCE

Older computers were programmed to use a two-digit code for the date
entry rather than a four-digit code.  For example, the date November
17, 1970 would be entered as "11/17/70" rather than "11/17/1970." The
decision to use two digits instead of four was based largely on cost-
reduction considerations and the belief that the code would no longer
be used at the millennium.  Nevertheless, coding conventions have not
changed, and on January 1, 2000, computers may read the digits "00" as
denoting the year 1900 rather than 2000.  At the least, this could result
in massive quantities of incorrect data.  At worst, it could result in
the total or partial failure of time sensitive computer systems and
software.

<PAGE>
THE COMPANY'S YEAR 2000 ISSUES.  The Company began operations in December
1994; its operations depend predominantly on third party computer
systems.  Because of the Company's limited resources during its start-up,
the most cost-effective way to establish its computer systems was to
outsource or to use manual systems.  Internal systems developed and any
software acquired are limited and were designed or purchased with the
Year 2000 taken into consideration.

Management has neared the completion of the modification of the Company's
information technology to recognize the Year 2000 and the conversion or
purchase of critical data process systems.  The Company's new reservations
software installed in the third quarter of 1997 is Year 2000 compliant.
In addition, the Company purchased a new revenue management system in
February 1998 that is Year 2000 compliant.  The Company's current
financial reporting software is Year 2000 compliant.  The Company has
purchased a new financial software system and expects to begin the
financial software conversion during early 2000.  The Company believes
these three systems are critical data processing systems.

Secondary systems that the Company has completed its Year 2000 assessment
on include, but are not limited to, the Company's telephone switch
software and equipment at its Reservations Center and corporate
headquarters, intranet network systems, flight operations and tracking
software and maintenance inventory tracking system.  Management has
completed the modification on these systems and all are Year 2000
compliant.  In July and October 1999, the Company completed the
installation of Year 2000 compliant telephone switch software and
equipment at its Reservation Center and Corporate Headquarters.

The Company relies on third parties that provide goods and services that
are imperative to the Company's operations including, but not limited to,
the FAA, the DOT, local airport authorities, utilities, communication
providers, credit card processors and fuel suppliers.  The Company
continues to monitor each of these entities, and has initiated formal
communications with these third party service providers to determine
their Year 2000 readiness.  There can be no assurance that the systems
of such third parties on which the Company's business relies (including
those of the FAA) will be modified on a timely basis.  The Company's
business, financial condition and results of operations could be
materially affected by the failure of its equipment or systems or those
operated by other parties to operate properly beyond 1999.

While the Company believes it is taking all appropriate steps to assure
Year 2000 compliance, it is dependent on key third party business and
governmental partners' compliance to some extent.  The Year 2000 problem
is pervasive and complex, as virtually every computer operation will be
affected in some way.  Consequently, no assurance can be given that Year
2000 compliance can be achieved without a material cost by these outside
parties.  The Company has utilized existing resources and has not incurred
any significant costs to implement its Year 2000 project to date and
the total remaining cost of the Year 2000 project is expected to be
immaterial and will be funded through cash from operations.  The costs
and the dates on which the Company anticipates it will complete the
Year 2000 project are based on management's best estimates and estimates
received in writing from applicable third parties.  There can be no
guarantee that these estimates will be achieved and actual results could
differ materially from those anticipated.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS

The risk inherent in the Company's market risk sensitive position is the
potential loss arising from an adverse change in the price of fuel as
described below.  The sensitivity analysis presented does not consider
either the effects that such an adverse change may have on overall
economic activity or additional actions management may take to mitigate
its exposure to such a change.  At the present time, management does not
utilize fuel price hedging instruments to reduce the Company's exposure to
fluctuations in fuel prices.  Actual results may differ.

The Company's earnings are affected by changes in the price and
availability of aircraft fuel.  Market risk is estimated as a hypothetical
10 percent increase in the average cost per gallon of fuel over the past
twelve months.  Based on actual fuel usage over the past twelve months,
such an increase would have resulted in an increase to aircraft fuel
expense of approximately $1.6 million over the past twelve months.
Comparatively, based on projected fuel usage over the next twelve months,
such an increase would result in an increase to aircraft fuel expense of
approximately $2.4 million over the next twelve months.  The increase in
exposure to fuel price fluctuations during the next twelve months is due
to the Company's plan to fly its increased aircraft fleet, resulting in
additional gallons consumed.
<PAGE>

FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

Vanguard's business operations and financial results are subject to
various uncertainties and future developments that cannot be predicted.
Certain of the principal risks and uncertainties that may affect
Vanguard's operations and financial results are identified below.

LIMITED OPERATING HISTORY; HISTORY OF SIGNIFICANT LOSSES.  The Company has
a limited history of operations, beginning flight operations on December
4, 1994.  Since the Company's inception on April 25, 1994 and until 1997
the Company incurred significant losses from operations.  In 1998, the
Company recorded income from operations of $1.5 million and generated
positive cash flow from operations of $6.0 million.  As of September 30,
1999 the Company had an accumulated deficit of $69.0 million, a working
capital deficit of $10.2 million and a positive stockholders' equity of
$8.7 million.  The Company's limited
operating history makes the prediction of future operating results
difficult.  There can be no assurance that the Company will be able to
sustain profitable operations.

AVAILABILITY OF WORKING CAPITAL AND FUTURE FINANCING RESOURCES.  The
airline business is extremely capital intensive, including, but not
limited to, lease payment obligations and related maintenance requirements
for existing or additional aircraft.  Historically, the Company's
continued operations have been dependent upon equity and debt financing
from its principal stockholders.  There can be no assurance that the
Company's principal stockholders will provide working capital for the
Company's operations if the Company is unable to continue to generate
positive cash flow from its operations.  Any inability to obtain
additional financing when needed could require the Company to cease or
significantly curtail operations and would have a material adverse effect
on the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources."

INTENSE COMPETITION;AIRPORT ACCESS.  The Company is subject to
intense competition on all of its routes.  Under the Deregulation Act,
domestic certificated airlines may enter and exit domestic markets and
set fares without regulatory approval.  All city-pair domestic airline
markets, except for those thap are slot-controlled, are generally open
to any domestic certificated airline.  The Company operates in various
congested airports, such as Chicago-Midway, where there is a limited gate
space; this may limit the Company's ability to expand or maintain
certain levels of service at particular cities.  Airlines compete primarily
with respect to fares, schedules (frequency and flight times), destinations,
frequent flyer programs and type (jet or propeller) and size of aircraft.
The Company competes with various other airlines on its routes and expects
to compete with other airlines on any future routes.  Most of the
Company's competitors are larger and have greater name recognition and
financial resources than the Company.  In response to the Company's
commencement of service in a particular market, competing airlines have,
at times, added flights and capacity and lowered their fares in the
market, making it more difficult for the Company to achieve profitable
operations in such markets.  In the future, other airlines may set their
prices at or below the Company's fares or introduce new non-stop service
between cities served by the Company in attempts to prevent the Company
from achieving or maintaining profitable operations in that market, in addition
to restricting its ability to obtain adequate gate space at certain airports.

CONSUMER CONCERN ABOUT OPERATING SAFETY AT NEW-ENTRANT CARRIERS OR TYPE OF
AIRCRAFT.  Aircraft accidents or other safety-related issues involving
any carrier may have an adverse effect on airline passengers' perceptions
regarding the safety of new-entrant, low-fare carriers.  As a result, any
such future event could have a material adverse effect on the Company's
business, financial condition and results of operations, even if such
events do not include the Company's operations or personnel.  Similarly,
publicized accounts of mechanical problems or accidents involving Boeing
737s or other aging aircraft could have a material adverse effect on the
Company's business, financial condition and results of operations, even
though the Company itself may not experience any such problems with its
jet aircraft.

FUEL COSTS.  The cost of jet fuel is one of the largest operating expenses
for an airline and particularly for the Company due to the relative fuel
inefficiency of its aircraft.  Jet fuel costs, including taxes and the
cost of delivering fuel into the aircraft, accounted for approximately
15.4% of the Company's operating expenses for the quarter ended September
<PAGE>
30, 1999.  The Company's average cost per gallon for the past three years
have been $0.79 per gallon in the year ended December 31, 1996, $0.74 per
gallon in the year ended December 31, 1997, $0.58 per gallon in the year
ended December 31, 1998, and $0.59 for the nine months ended September 30,
1999.  Jet fuel costs are subject to wide fluctuations as a result of
sudden disruptions in supply.  The Company cannot predict the effect on
the future availability and cost of jet fuel.  The Boeing 737-200 jet
aircraft is relatively fuel inefficient compared to newer aircraft.
Accordingly, a significant increase in the price of jet fuel will result
in a disproportionately higher increase in the Company's fuel expenses as
compared with many of its competitors who have, on average, newer and thus
more fuel-efficient aircraft.  The Company has not entered into any
agreements that fix the price of jet fuel over any period of time.
Therefore, an increase in the cost of jet fuel will be immediately passed
through to the Company by suppliers.  The Company has experienced reduced
margins at times when the Company has been unable to increase fares to
compensate for such higher fuel costs.  Even at times when the Company is
able to raise selected fares, the Company has experienced reduced margins
on sales prior to such fare increases.  In addition to increases in fuel
prices, a shortage of supply will also have a material adverse effect on
the Company's business, financial condition and results of operations.

SEASONALITY AND CYCLICALITY.  The Company's operations are dependent upon
passenger travel demand.  Airlines typically experience reduced demand at
various times during the fall and winter and increased demand for service
during the spring and summer.  Within these periods, the Company
experiences variations in passenger demand based on its particular routes
and passenger demographics.  The Company has experienced reduced demand
during the fall and winter with adverse effects on revenues, operating
results and cash flow.  In addition, passenger travel in the airline
industry, particularly leisure travel, is highly sensitive to adverse
changes in general economic conditions.  A worsening of current economic
conditions, or an extended period of recession nationally or in the
regions served by the Company, would have a material adverse effect of the
Company's business, financial condition and results of operations.

LIMITED NUMBER OF AIRCRAFT; AIRCRAFT ACQUISITIONS.  The Company's fleet
consists of thirteen aircraft and if one or more of its aircraft were not
in service, the Company would experience a proportionally greater loss of
capacity than would be the case for an airline utilizing a larger fleet.
Any interruption of aircraft service as a result of scheduled or
unscheduled maintenance could materially and adversely affect the
Company's service, reputation and financial performance.  The market for
leased aircraft fluctuates based on certain worldwide macroeconomic
factors.  On November 9, 1999, the Company annouched that it signed
a Letter of Intent to lease six Boeing 737-200 aircraft.  The Company
expects to take delivery of four of the six in the first quarter of Year 2000.
There can be no assurance that the Company will be able to
lease additional aircraft on satisfactory terms or at the times needed.
The inability to obtain suitable lease terms or delivery delays could cause
the Company to temporarily reduce its fleet size, which would have an
adverse effect on the Company's business, financial condition and results
of operations.

GOVERNMENT REGULATION.  The Company is subject to the Aviation Act, under
which the DOT and the FAA exercise regulatory authority over airlines.
This regulatory authority includes, but is not limited to: (i) the initial
determination and continuing review of the fitness of air carriers
(including financial, managerial, compliance-disposition and citizenship
fitness); (ii) the certification and regulation of aircraft and other
flight equipment; (iii) the certification and approval of personnel who
engage in flight, maintenance and operations activities; and (iv) the
establishment and enforcement of safety standards and requirements with
respect to the operation and maintenance of aircraft, all as set forth in
the Aviation Act and the Federal Aviation Regulations.  The FAA has
promulgated a number of maintenance regulations and directives relating
to, among other things, retirement of aging aircraft, increased
inspections and maintenance procedures to be conducted on aging aircraft,
collision avoidance systems, aircraft corrosion, airborne windshear
avoidance systems and noise abatement.  As a result of recent incidents
involving airlines, the FAA has increased its review of commercial
airlines generally and particularly with respect to small and new-entrant
airlines, such as the Company.  The Company's operations are subject to
constant review by the FAA.

Additional rules and regulations have been proposed from time to time in
the last several years and that, if enacted, could significantly increase
the cost of airline operations by imposing substantial additional
requirements or restrictions on airline operations.  There can be no
assurances that any of these rules or regulations would not have a
material adverse effect on the Company's business, financial condition
and results of operations.
<PAGE>

The DOT and FAA also enforce federal law with respect to aircraft noise
compliance requirements.  The Company's current fleet meets the current,
Stage III noise compliance requirements.  The Company plans to return
its two remaining Stage II aircraft in mid-December 1999 upon the
expiration of their leases and will then meet the 100% Stage III
requirements.

The Company has obtained the necessary authority to perform airline
operations, including a Certificate of Public Convenience and Necessity
issued by the DOT pursuant to 49 U.S.C. Section 41102 and an air carrier
operating certificate issued by the FAA under Part 121 of the Federal
Aviation Regulations.  The continuation of such authority is subject to
continued compliance with applicable rules, regulations and laws
pertaining to or affecting the airline industry, including any rules and
regulations that may be adopted by the DOT and FAA in the future.  No
assurance can be given that the Company will be able to continue to comply
with all present or future rules, regulations and laws or that such rules,
regulations and laws would not materially and adversely affect the
Company's business, financial condition and results of operations.

PART II - OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS

The Company is not involved in any material litigation or legal
proceedings at this time and is not aware of any material litigation or
legal proceedings threatened against it.


ITEM 2.	CHANGES IN SECURITIES

     a.  None.

     b.  None.

     c.  None

     d.  None.

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

      None.

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None.

ITEM 5.	OTHER INFORMATION

	None.
<PAGE>

ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K

(a)	Exhibits.

     10.20	Employment Agreement, dated June 15, 1999 between the Registrant
            and Robert J. Spane.

     10.36	Aircraft Lease Agreement (MSN 22121), dated as of July 22, 1999
            between Aircraft 22121, Inc. and the Registrant.

     10.37	Aircraft Lease Agreement (MSN 22120), dated as of August 25, 1999
            between Aircraft 22120, Inc. and the Registrant.

27	Financial Data Schedule

(b)	Reports on Form 8-K

None.

SIGNATURES

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

Signature and Title	                            Date


\S\ ROBERT J. SPANE	                     November 12, 1999
--------------------
Robert J. Spane, President and Chief Executive
	Officer


\S\ WILLIAM A. GARRETT	                     November 12, 1999
----------------------
William A. Garrett, Vice President - Finance
	and Chief Financial Officer
	(Principal Financial and Accounting Officer)

<PAGE>