<PAGE>


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

                                     FORM 10-Q



(Mark One)

[XX]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 1998
                               --------------

                                       OR

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

For the transition period from __________________ to _____________________
                             
                               __________________

For Quarter Ended March 31, 1998                    Commission File No. 0-19137


                  AIRFUND II International Limited Partnership
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

        Massachusetts                                  04-3057290
        -------------                                  ----------
(State or other jurisdiction of             (IRS Employer Identification No.)
 incorporation or organization)


88 Broad Street, Boston, MA                               02110
---------------------------                             ---------
(Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code (617) 854-5800
                                                   --------------

__________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report.)

    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
                                             ---   ---

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

    Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court 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   No
                                                     ---  ---
<PAGE>

                  AIRFUND II International Limited Partnership

                                   FORM 10-Q

                                     INDEX

                                                                           Page
                                                                           ----
PART I.  FINANCIAL INFORMATION:

   Item 1.  Financial Statements

      Statement of Financial Position
         at March 31, 1998 and December 31, 1997                             3

      Statement of Operations
         for the three months ended March 31, 1998 and 1997                  4

      Statement of Cash Flows
         for the three months ended March 31, 1998 and 1997                  5

      Notes to the Financial Statements                                    6-9


   Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                             10-13


PART II.  OTHER INFORMATION:

   Items 1 - 6                                                              14

                                       2
<PAGE>


                  AIRFUND II International Limited Partnership

                         STATEMENT OF FINANCIAL POSITION
                      March 31, 1998 and December 31, 1997

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                        March 31,   December 31,
                                                          1998         1997
                                                        --------    -----------

ASSETS
<S>                                                    <C>           <C>
Cash and cash equivalents                              $2,564,794    $2,102,494

Rents receivable                                           44,441        65,120

Accounts receivable - affiliate                           175,821       305,359

Equipment at cost, net of accumulated
   depreciation of $44,179,367 and 
   $43,339,081 at March 31, 1998 and
   December 31, 1997, respectively                      6,451,847     7,292,133
                                                        ---------    ----------

         Total assets                                  $9,236,903    $9,765,106
                                                       ----------    ----------
                                                       ----------    ----------

LIABILITIES AND PARTNERS' CAPITAL

Notes payable                                          $2,508,719    $2,677,520
Accrued interest                                           32,313        29,618
Accrued liabilities                                         7,720         8,250
Accrued liabilities - affiliate                            34,534        42,524
Deferred rental income                                     76,439       167,067
                                                       ----------    ----------

         Total liabilities                              2,659,725     2,924,979
                                                       ----------    ----------


Partners' capital (deficit):
     General Partner                                   (2,666,597)   (2,653,450)
     Limited Partnership Interests
     (2,714,647 Units; initial purchase
      price of $25 each)                                9,243,775     9,493,577
                                                       ----------    ----------

         Total partners' capital                        6,577,178     6,840,127
                                                       ----------    ----------

         Total liabilities and partners' capital       $9,236,903    $9,765,106
                                                       ----------    ----------
                                                       ----------    ----------
</TABLE>

                  The accompanying notes are an integral part
                         of these financial statements.


                                       3
<PAGE>


                  AIRFUND II International Limited Partnership

                             STATEMENT OF OPERATIONS
               for the three months ended March 31, 1998 and 1997

                                   (Unaudited)

<TABLE>
<CAPTION>

                                                    1998           1997
                                                    ----           ----   
<S>                                             <C>            <C>
Income:
   Lease revenue                                $   782,442    $   683,102

   Interest income                                   32,064         30,021
                                                -----------    -----------

      Total income                                  814,506        713,123
                                                -----------    -----------

Expenses:

   Depreciation                                     840,286        844,338

   Interest expense                                  56,803         73,305

   Equipment management fees - affiliate             39,122         34,155

   Operating expenses - affiliate                   141,244         90,783
                                                -----------    -----------


      Total expenses                              1,077,455      1,042,581
                                                -----------    -----------


Net loss                                        $  (262,949)   $  (329,458)
                                                -----------    -----------
                                                -----------    -----------

Net loss
   per limited partnership unit                 $     (0.09)   $     (0.12)
                                                -----------    -----------
                                                -----------    -----------
</TABLE>

                  The accompanying notes are an integral part
                         of these financial statements.

                                       4
<PAGE>


                  AIRFUND II International Limited Partnership

                             STATEMENT OF CASH FLOWS
               for the three months ended March 31, 1998 and 1997

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                            1998        1997
                                                            ----        ----
<S>                                                     <C>          <C>
Cash flows from (used in) operating activities:
Net loss                                                $ (262,949)  $ (329,458)

Adjustments to reconcile net loss to
     net cash from (used in) operating activities:
         Depreciation                                      840,286      844,338

Changes in assets and liabilities 
     Decrease (increase) in:
         rents receivable                                   20,679           --
         accounts receivable - affiliate                   129,538       (4,538)
     Increase (decrease) in:
         accrued interest                                    2,695       13,595
         accrued liabilities                                  (530)    (481,064)
         accrued liabilities - affiliate                    (7,990)    (466,237)
         deferred rental income                            (90,628)     (74,667)
                                                        ----------   ----------

              Net cash from (used in)
              operating activities                         631,101     (498,031)
                                                        ----------   ----------

Cash flows used in financing activities:
     Principal payments - notes payable                   (168,801)    (131,735)
                                                        ----------   ----------

              Net cash used in financing activities       (168,801)    (131,735)
                                                        ----------   ----------

Net increase (decrease) in cash and cash equivalents       462,300     (629,766)

Cash and cash equivalents at beginning of period         2,102,494    2,347,762
                                                        ----------   ----------
Cash and cash equivalents at end of period              $2,564,794   $1,717,996
                                                        ----------   ----------
                                                        ----------   ----------


Supplemental disclosure of cash flow information:
     Cash paid during the period for interest           $   54,108   $   59,710
                                                        ----------   ----------
                                                        ----------   ----------
</TABLE>

                  The accompanying notes are an integral part
                         of these financial statements.

                                       5
<PAGE>


                  AIRFUND II International Limited Partnership

                        Notes to the Financial Statements
                                 March 31, 1998

                                   (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

    The financial statements presented herein are prepared in conformity with
generally accepted accounting principles and the instructions for preparing Form
10-Q under Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission and are unaudited. As such, these financial statements do not include
all information and footnote disclosures required under generally accepted
accounting principles for complete financial statements and, accordingly, the
accompanying financial statements should be read in conjunction with the
footnotes presented in the 1997 Annual Report. Except as disclosed herein, there
has been no material change to the information presented in the footnotes to the
1997 Annual Report.

    In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at March 31, 1998 and December 31, 1997 and results of operations for
the three month periods ended March 31, 1998 and 1997 have been made and are
reflected.


NOTE 2 - CASH

    At March 31, 1998, the Partnership had $2,288,014 invested in federal agency
discount notes and in reverse repurchase agreements secured by U.S. Treasury
Bills or interests in U.S. Government securities.


NOTE 3 - REVENUE RECOGNITION

    Rents are payable to the Partnership monthly and quarterly and no
significant amounts are calculated on factors other than the passage of time.
All leases are accounted for as operating leases and are noncancellable. Rents
received prior to their due dates are deferred. Future minimum rents of
$4,131,051 are due as follows:

<TABLE>
<CAPTION>

<S>                                         <C>
     For the year ending March 31, 1999     $ 3,016,411
                                   2000       1,274,640
                                   2001         800,000
                                            -----------

                                  Total     $ 5,091,051
                                            -----------
                                            -----------
</TABLE>

NOTE 4 - EQUIPMENT

    The following is a summary of equipment owned by the Partnership at March
31, 1998. Remaining Lease Term (Months), as used below, represents the number of
months remaining from March 31, 1998 under contracted lease terms. In the
opinion of Equis Financial Group Limited Partnership ("EFG") the acquisition
cost of the equipment did not exceed its fair market value.


                                       6

<PAGE>

                  AIRFUND II International Limited Partnership

                        Notes to the Financial Statements

                                  (Continued)

                                    Remaining
                                      Lease

<TABLE>
<CAPTION>
                                             Term             Equipment
         Equipment Type                     (Months)           at Cost
-------------------------------------       -------          -----------
<S>                                           <C>            <C>
One Lockheed L-1011-100 (Classic)             34             $15,879,518
One Boeing 727-208 ADV (ATA)                  10              12,928,710
One Boeing 727-251 ADV (Transmeridian)         7               9,732,714
One Lockheed L-1011-50 (Aer Lease)             1               6,013,492
Two McDonnell-Douglas MD-82 (Finnair)         13               4,157,280
Three Boeing 737-2H4 (Southwest)              21               1,919,500
                                                              ----------

                  Total equipment cost                        50,631,214

              Accumulated depreciation                       (44,179,367)
                                                              ----------
  Equipment, net of accumulated 
   depreciation                                               $ 6,451,847
                                                              ----------
                                                              ----------
</TABLE>

    The costs of the Lockheed L-1011-50 aircraft, the two McDonnell-Douglas
MD-82 aircraft, and the three Boeing 737-2H4 aircraft represent proportionate
ownership interests. The remaining interests are owned by other affiliated
partnerships sponsored by EFG. All Partnerships individually report, in
proportion to their respective ownership interests, their respective shares of
assets, liabilities, revenues, and expenses associated with the aircraft.

    See Note 8 regarding the sale of the Partnership's interest in the Lockheed
L-1011-50 aircraft subsequent to March 31, 1998.

NOTE 5 - RELATED PARTY TRANSACTIONS

    All operating expenses incurred by the Partnership are paid by EFG on behalf
of the Partnership and EFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during each of the three month
periods ended March 31, 1998 and 1997, which were paid or accrued by the
Partnership to EFG or its Affiliates, are as follows:

<TABLE>
<CAPTION>
                                          1998           1997
                                          ----           ----
<S>                                    <C>            <C>
   Equipment management fees           $  39,122      $  34,155
   Administrative charges                 13,419          7,173
   Reimbursable operating expenses
       due to third parties              127,825         83,610
                                       ---------      ---------

                        Total          $ 180,366      $ 124,938
                                       ---------      ---------
                                       ---------      ---------
</TABLE>

    All rents and proceeds from the sale of equipment are paid directly to EFG.
EFG temporarily deposits collected funds in a separate interest-bearing escrow
account prior to remittance to the Partnership. At March 31, 1998, the
Partnership was owed $175,821 by EFG for such funds and the interest thereon.
These funds were remitted to the Partnership in April 1998.

NOTE 6 - NOTES PAYABLE

    Notes payable at March 31, 1998 consisted of installment notes payable to
banks of $2,508,719. All of the installment notes are non-recourse, with
interest rates ranging between 8.65% and 8.89% and are collateralized


                                       7
<PAGE>
                  AIRFUND II International Limited Partnership

                        Notes to the Financial Statements

                                  (Continued)

by the equipment and assignment of the related lease payments. The installment
notes related to the Southwest Aircraft will be fully amortized by
noncancellable rents. The Partnership has a balloon payment obligation at the
expiration of the primary lease term related to the Finnair Aircraft of
$1,411,035. The carrying amount of notes payable approximates fair value at
March 31, 1998.


    The annual maturities of the installment notes payable are as follows:

<TABLE>
<CAPTION>
<S>                                         <C>
    For the year ending March 31, 1999      $   825,131
                                  2000        1,683,588
                                            -----------
                                 Total      $ 2,508,719
                                            -----------
                                            -----------
</TABLE>

NOTE 7 - LEGAL PROCEEDINGS

    On or about January 15, 1998, certain plaintiffs (the "Plaintiffs") filed a
class and derivative action, captioned Leonard Rosenblum, et al. v. Equis
Financial Group Limited Partnership, et al., in the United States District Court
for the Southern District of Florida (the "Court") on behalf of a proposed class
of investors in 28 equipment leasing programs sponsored by EFG, including the
Partnership (collectively, the "Nominal Defendants"), against EFG and a number
of its affiliates, including the General Partner, as defendants (collectively,
the "Defendants"). Certain of the Plaintiffs, on or about June 24, 1997, had
filed an earlier derivative action, captioned Leonard Rosenblum, et al. v. Equis
Financial Group Limited Partnership, et al., in the Superior Court of the
Commonwealth of Massachusetts on behalf of the Nominal Defendants against the
Defendants. Both actions are referred to herein collectively as the "Class
Action Lawsuit."

    The Plaintiffs have asserted, among other things, claims against the
Defendants on behalf of the Nominal Defendants for violations of the Securities
Exchange Act of 1934, common law fraud, breach of contract, breach of fiduciary
duty, and violations of the partnership or trust agreements that govern each of
the Nominal Defendants. The Defendants have denied, and continue to deny, that
any of them have committed or threatened to commit any violations of law or
breached any fiduciary duties to the Plaintiffs or the Nominal Defendants.

    On March 9, 1998, counsel for the Defendants and the Plaintiffs entered into
a Memorandum of Understanding setting forth the terms pursuant to which a
settlement of the Class Action Lawsuit is intended to be achieved and which,
among other things, is expected to reduce the burdens and expenses attendant to
continuing litigation. The Memorandum of Understanding represents a preliminary
step towards a comprehensive Stipulation of Settlement between the parties that
must be presented to and approved by the Court as a condition precedent to
effecting a settlement. The Memorandum of Understanding (i) prescribes a number
of conditions necessary to achieving a settlement, including providing the
partners (or beneficiaries, as applicable) of the Nominal Defendants with the
opportunity to vote on any settlement and (ii) contemplates various changes
that, if effected, would alter the future operations of the Nominal Defendants.
With respect to the Partnership and 10 affiliated partnerships (hereafter
referred to as the "Exchange Partnerships"), the Memorandum of Understanding
provides for the restructuring of their respective business operations into a
single successor company whose securities would be listed and traded on a
national stock exchange. The partners of the Exchange Partnerships would receive
both common stock in the new company and a cash distribution in exchange for
their existing partnership interests. Such a transaction would, among other
things, allow for the consolidation of the Partnership's operating expenses with
other similarly-organized equipment leasing programs. To the extent that the
parties agree upon a Stipulation of Settlement that is approved by the Court,
the complete terms thereof will be communicated to all of the partners (or
beneficiaries) of the Nominal Defendants to enable them to vote thereon.

    There can be no assurance that the parties will agree upon a Stipulation of
Settlement, or that it will be approved by the Court, or that the outcome of the
voting by the partners (or beneficiaries) of the Nominal Defendants, including
the Partnership, will result in a settlement finally being effected or in the
Partnership being included in any such settlement. The General Partner and its
affiliates, in consultation with counsel, concur that

                                       8
<PAGE>
                  AIRFUND II International Limited Partnership

                        Notes to the Financial Statements

                                  (Continued)

there is a reasonable basis to believe that a Stipulation of Settlement will be
agreed upon by the parties and approved by the Court. In the absence of a
Stipulation of Settlement approved by the Court, the Defendants intend to defend
vigorously against the claims asserted in the Class Action Lawsuit. The General
Partner and its affiliates cannot predict with any degree of certainty the
ultimate outcome of such litigation.


NOTE 8 - SUBSEQUENT EVENT

    On April 29, 1998, at the expiration of the aircraft's lease term, the
Partnership sold its proportional interest in a Lockheed L-1011-50 aircraft,
previously leased to Aer Lease Limited, to the lessee for net proceeds of
$553,700. The Partnership's interest in the aircraft had a net book of $426,085
at March 31, 1998.


                                       9
<PAGE>


                  AIRFUND II International Limited Partnership

                                    FORM 10-Q

                          PART I. FINANCIAL INFORMATION


Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

    Certain statements in this quarterly report of AIRFUND II International
Limited Partnership (the "Partnership") that are not historical fact constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and are subject to a variety of risks and
uncertainties. There are a number of important factors that could cause actual
results to differ materially from those expressed in any forward-looking
statements made herein. These factors include, but are not limited to, the
outcome of the Class Action Lawsuit described in Note 7 to the accompanying
financial statements, and the ability of Equis Financial Group Limited
Partnership (formerly American Finance Group) ("EFG") to collect all rents due
under the attendant lease agreements and successfully remarket the Partnership's
equipment upon the expiration of such leases.

    The Year 2000 Issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. The computer
programs of EFG were designed and written using four digits to define the
applicable year. As a result, EFG does not anticipate system failure or
miscalculations causing disruptions of operations. Based on recent assessments,
EFG determined that minimal modification of software is required so that its
network operating system will function properly with respect to dates in the
year 2000 and thereafter. EFG believes that with these modifications to the
existing operating system, the Year 2000 Issue will not pose significant
operational problems for its computer systems. EFG will utilize internal
resources to upgrade software for Year 2000 modifications and anticipates
completing the Year 2000 project by December 31, 1998, which is prior to any
anticipated impact on its operating system. The total cost of the Year 2000
project is expected to be insignificant and have no effect on the results of
operations of the Partnership.


Three months ended March 31, 1998 compared to the three months ended March 31, 
1997:

Overview

    As an equipment leasing partnership, the Partnership was organized to
acquire and lease a portfolio of commercial jet aircraft subject to lease
agreements with third parties. During 1990 and 1991, the Partnership purchased
four commercial jet aircraft and a proportionate interest in two additional
aircraft which were leased by major carriers engaged in passenger
transportation. Initially, each aircraft generated rental revenue pursuant to
primary-term lease agreements. Subsequently, all of the aircraft in the
Partnership's original portfolio have been re-leased, renewed, exchanged for
other aircraft or sold. At March 31, 1998 the Partnership owned three aircraft
and proportionate interests in six additional aircraft, all of which were on
lease. Upon expiration of the current lease agreements, each aircraft will be
re-leased or sold depending on prevailing market conditions and the assessment
of such conditions by EFG to obtain the most advantageous economic benefit.
Presently, the Partnership is a Nominal Defendant in a Class Action Lawsuit. The
outcome of the Class Action Lawsuit could alter the nature of the Partnership's
organization and its future business operations. See Note 7 to the accompanying
financial statements.

Results of Operations

    For the three months ended March 31, 1998, the Partnership recognized lease
revenue of $782,442 compared to $683,102 for the same period in 1997. The
increase in lease revenue from 1997 to 1998 resulted primarily from a 1-year
lease agreement which the Partnership entered into with Aer Lease Limited ("Aer
Lease") related to its interest in a Lockheed L-1011-50 aircraft. The lease
agreement provided for base rent to the Partnership of $39,550 per month
beginning April 27, 1997. During the first quarter of 1997, this aircraft was
undergoing heavy maintenance and was not on lease. See Note 8 to the
accompanying financial statements regarding the sale of the Partnership's
interest in this aircraft subsequent to March 31, 1998.

    The three Boeing 737-2H4 aircraft in which the Partnership holds a
proportionate interest are currently on lease to Southwest Airlines, Inc. These
leases are scheduled to expire on December 31, 1999 and provide lease revenue of
$31,464 per month to the Partnership. Additionally, the two McDonnell-Douglas
MD-82 aircraft, in


                                       10
<PAGE>
                  AIRFUND II International Limited Partnership

                                    FORM 10-Q

                          PART I. FINANCIAL INFORMATION


which the Partnership holds a proportionate interest, are currently on lease to
Finnair OY. These leases are scheduled to expire on April 28, 1999 and provide
lease revenue of $159,981 per quarter to the Partnership.

    The Partnership entered into an agreement with Classic Airways Limited
("Classic") to lease the Partnership's Lockheed L1011-100 aircraft for a period
of three years with a base rent of $80,000 per month, effective November 1,
1997. Due to certain refurbishments required to be performed by Classic, the
Partnership agreed to defer rents required under the attendant lease agreement
for a three month period. The lease agreement was therefore extended three
months through January 31, 2001. Accordingly, the Partnership did not recognize
any lease revenue related to this aircraft during the three months ended March
31, 1998. During the first quarter of 1997, this aircraft was off lease,
undergoing certain maintenance prior to being placed in storage until it was
re-leased to Classic.

    The Partnership's Boeing 727-208 ADV aircraft is under a two year renewal
agreement with American Trans Air, Inc. The renewal agreement, scheduled to
expire in January 1999, provides lease revenue of $63,500 per month to the
Partnership. The Partnership recognized lease revenue of $190,500 from this
aircraft for each of the three month periods ended March 31, 1997 and 1998. The
Partnership's Boeing 727-251 ADV aircraft, is under a 26 month re-lease
agreement with Transmeridian Airlines, Inc. which commenced on September 11,
1996. The re-lease agreement, scheduled to expire on November 10, 1998, provides
aggregate lease revenue over the lease term of $1,967,419. The Partnership
recognized lease revenue from this aircraft of $223,333 for the three months
ended March 31, 1998 and $240,000 for the same period in 1997. In the future,
lease revenue is scheduled to decline due to the sale of the Aer Lease aircraft
and the expiration of the lease terms related to the Partnership's remaining
aircraft.

    At March 31, 1998, the Partnership held a proportionate ownership interest
in the Aer Lease, Southwest and Finnair aircraft (see Note 4 to the financial
statements). The remaining interests are owned by other affiliated partnerships
sponsored by EFG. All partnerships individually report, in proportion to their
respective ownership interests, their respective shares of assets, liabilities,
revenues and expenses associated with the aircraft.

    The ultimate realization of residual value for aircraft is dependent upon
many factors, including EFG's ability to sell and re-lease the aircraft.
Changing market conditions, industry trends, technological advances, and many
other events can converge to enhance or detract from asset values at any given
time. EFG attempts to monitor these changes in the airline industry in order to
identify opportunities which may be advantageous to the Partnership and which
will maximize total cash returns for each aircraft.

    The total economic value realized upon final disposition of each aircraft is
comprised of all primary lease term revenue generated from that aircraft,
together with its residual value. The latter consists of cash proceeds realized
upon the aircraft's sale in addition to all other cash receipts obtained from
renting the aircraft on a re-lease, renewal or month-to-month basis.
Consequently, the amount of any future gain or loss reported in the financial
statements will not necessarily be indicative of the total residual value the
Partnership achieved from leasing the aircraft.

    Interest income for the three months ended March 31, 1998 was $32,064
compared to $30,021 for the same period in 1997. Interest income is typically
generated from temporary investments of rental receipts and equipment sale
proceeds in short-term instruments.

    For the three months ending March 31, 1998 and 1997 the Partnership incurred
interest expense of $56,803 and $73,305, respectively. Interest expense in
future periods will continue to decline as the principal balance of notes
payable is reduced through the application of rent receipts to outstanding debt.

    Management fees were 5% of lease revenue during each of the periods ended
March 31, 1998 and 1997, and will not change as a percentage of lease revenue in
future periods.

    Operating expenses consist principally of administrative charges,
professional service costs, such as audit and legal fees, as well as insurance,
printing, distribution and remarketing expenses. The increase in operating

                                       11
<PAGE>

                  AIRFUND II International Limited Partnership

                                    FORM 10-Q

                          PART I. FINANCIAL INFORMATION

expenses from 1997 to 1998 was primarily due to legal costs incurred in
connection with the proceedings with Northwest Airlines, Inc. and Transmeridian
Airlines, Inc. (refer to Note 7 in the 1997 Annual Report) and certain
remarketing costs. In 1997, significant operating expenses were incurred in
connection with the refurbishment on the Partnership's interest in the L-1011-50
aircraft to meet the needs of Aer Lease. The amount of future operating expenses
cannot be predicted with certainty; however, such expenses are usually higher
during the acquisition and liquidation phases of a partnership. Other
fluctuations will occur in relation to the volume and timing of aircraft
remarketing activities. Depreciation expense was $840,286 for the three months
ended March 31, 1998 compared to $844,338 for the same period in 1997.


Liquidity and Capital Resources and Discussion of Cash Flows

    The Partnership by its nature is a limited life entity which was established
for specific purposes described in the preceding "Overview". As an equipment
leasing program, the Partnership's principal operating activities derive from
aircraft rental transactions. Accordingly, the Partnership's principal source of
cash from operations is provided by the collection of periodic rents. These cash
inflows are used to satisfy debt service obligations associated with leveraged
leases, and to pay management fees and operating costs. Operating activities
generated a net cash inflow of $631,101 for the three months ended March 31,
1998 compared to a net cash outflow of $498,031 for the same period in 1997. The
cash outflow in 1997 reflected the expiration of the leases related to the
Partnership's Lockheed L-1011-100 aircraft and its interest in the L-1011-50
aircraft and related remarketing costs. Overall, expenses associated with rental
activities, such as management fees, and net cash flow from operating activities
decline as the Partnership remarkets its aircraft. Conversely, the Partnership
may incur increased costs to insure the successful remarketing of these
aircraft. Ultimately, the Partnership will dispose of all aircraft under lease.
This will occur principally through sale transactions whereby each aircraft will
be sold to the existing lessee or to a third party. Generally, this will occur
upon expiration of each aircraft's primary or renewal/re-lease term.

    The Partnership obtained long-term financing in connection with like-kind
exchange transactions involving the Southwest Aircraft and the Finnair Aircraft.
The corresponding note agreements are recourse only to the specific equipment
financed and to the minimum rental payments contracted to be received during the
debt amortization period. As rental payments are collected, a portion or all of
the rental payment will be used to repay principal and interest. The Partnership
also has a balloon payment obligation at the expiration of the primary lease
term related to the Finnair Aircraft of $1,411,035.

    Cash distributions paid to the Recognized Owners consist of both a return of
and a return on capital. To the extent that cash distributions consist of Cash
From Sales or Refinancings, substantially all of such cash distributions should
be viewed as a return of capital. Cash distributions do not represent and are
not indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Partnership and will be
dependent upon the collection of all future contracted rents, the generation of
renewal and/or re-lease rents, and the residual value realized for each aircraft
at its disposal date. Future market conditions, technological changes, the
ability of EFG to manage and remarket the aircraft, and many other events and
circumstances, could enhance or detract from individual asset yields and the
collective performance of the Partnership's aircraft portfolio.

    Overall, the future liquidity of the Partnership will be influenced by the
outcome of the Class Action Lawsuit described in Note 7 to the accompanying
financial statements. The General Partner anticipates that cash proceeds
resulting from upon the collection of contractual rents and the outcome of
residual activities will satisfy the Partnership's future expense obligations.
However, the amount of cash available for distribution in future periods is
expected to fluctuate widely as the General Partner attempts to remarket the
Partnership's aircraft and possibly upgrade certain aircraft to meet the
standards of potential successor lessees.

    The Partnership has incurred significant heavy maintenance costs in recent
years in connection with its remarketing efforts related to the two L-1011
aircraft and the Boeing 727-251 aircraft. The Partnership also expects to incur
additional costs in future years as the Partnership's remaining aircraft are
remarketed. The


                                       12
<PAGE>

                  AIRFUND II International Limited Partnership

                                    FORM 10-Q

                          PART I. FINANCIAL INFORMATION

amount of such costs will depend upon the extent of upgrades or refurbishments
necessary to prepare these aircraft for sale or re-lease. These costs have
presented, and will continue to present, demands on the Partnership's cash
position. Accordingly, the General Partner will continue to reserve a
significant portion of the Partnership's cash for such purposes. The General
Partner anticipates that future cash distributions will be contingent primarily
upon the realization of sale proceeds generated from remarketing the
Partnership's remaining aircraft and the extent of the Partnership's cash
reserve requirements. Accordingly, the General Partner expects to continue to
suspend the declaration of quarterly cash distributions between the periods
corresponding to major remarketing events.


                                       13
<PAGE>


                  AIRFUND II International Limited Partnership

                                    FORM 10-Q

                           PART II. OTHER INFORMATION



Item 1.                 Legal Proceedings
                        Response:

                        Refer to Note 7 to the financial statements herein.

Item 2.                 Changes in Securities
                        Response:  None

Item 3.                 Defaults upon Senior Securities
                        Response:  None

Item 4.                 Submission of Matters to a Vote of Security Holders
                        Response:  None

Item 5.                 Other Information
                        Response:  None

Item 6(a).              Exhibits
                        Response:  None

Item 6(b).              Reports on Form 8-K
                        Response:  None


                                       14
<PAGE>


                                 SIGNATURE PAGE



    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacity and
on the date indicated.



                    AIRFUND II International Limited Partnership


             By:   AFG Aircraft Management Corporation, a
                   Massachusetts corporation and the General Partner of
                   the Registrant.


             By:   /s/  Michael J. Butterfield
                   ---------------------------
                   Michael J. Butterfield
                   Treasurer of AFG Aircraft Management Corporation
                   (Duly Authorized Officer and
                   Principal Accounting Officer)


             Date: May 15, 1998
                   ------------


             By:   /s/  Gary Romano
                   ----------------
                   Gary M. Romano
                   Clerk of AFG Aircraft Management Corporation
                   (Duly Authorized Officer and
                   Principal Financial Officer)


             Date: May 15, 1998
                   ------------


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