SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                   FORM 10-QSB

(Mark One)
[ X ] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended September 30, 2001

[   ]    Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from                            to
                               ----------------------                    -----

Commission File Number:  33-84336-LA


                                  JetFleet III
                 (Name of small business issuer in its charter)


           California                                 94-3208983
  (State or other jurisdiction            (I.R.S. Employer Identification No.)
of incorporation or organization)

  1440 Chapin Avenue, Suite 310
     Burlingame, California                             94010
(Address of principal executive offices)             (Zip Code)

Issuer's telephone number, including area code:                 (650) 340-1880
Securities registered pursuant to Section 12(b) of the Act:      None

Securities registered pursuant to Section 12(g) of the Act:      None


Check whether the Issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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
   ----     ----


On November 14, 2001 the aggregate market value of the voting and non voting
Common equity held by non-affiliates (computed by reference to the price at
which the common equity was sold) was $0.


As of November 14, 2001 the Issuer has 815,200 Shares of Common Stock and
195,465 Shares of Series A Preferred Stock outstanding.


Transitional Small Business Disclosure Format (check one):
Yes               No  X__
   -------          ------


<PAGE>



Part I.           Financial Information

Item 1.           Financial Statements

                                  JETFLEET III
                                  Balance Sheet
                               September 30, 2001

                                     ASSETS
<TABLE>
<S>                                                                                          <C>
Current assets:
     Cash                                                                                    $   4,523,130
     Deposits                                                                                    1,378,780
     Accounts receivable                                                                            35,270
     Rent receivable                                                                                28,000
                                                                                             -------------
Total current assets                                                                             5,965,180

Aircraft and aircraft engines under operating leases,
     net of accumulated depreciation of $2,125,890                                               8,355,030
Debt issue costs, net of accumulated
     amortization of $1,185,160                                                                    476,290
Deferred taxes                                                                                     135,460
Prepaid expenses                                                                                     3,710
                                                                                             -------------

Total assets                                                                                 $  14,935,670
                                                                                             =============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                                                        $      32,990
     Payable to affiliate                                                                            3,480
     Interest payable                                                                              152,120
     Prepaid rents                                                                                  38,720
     Security deposits                                                                             166,000
     Maintenance deposits                                                                        1,242,470
     Taxes payable                                                                                     960
                                                                                             -------------
Total current liabilities                                                                        1,636,740

Medium-term secured bonds                                                                       11,076,350
                                                                                             -------------

Total liabilities                                                                               12,713,090
                                                                                             -------------

Preferred stock, no par value,
     300,000 shares authorized, 195,465
     issued and outstanding                                                                      1,661,450
Common stock, no par value,
     1,000,000 shares authorized, 815,200
     issued and outstanding                                                                        815,200
Accumulated deficit                                                                               (254,070)
                                                                                             -------------
Total shareholders' equity                                                                       2,222,580
                                                                                             -------------

Total liabilities and shareholders' equity                                                   $  14,935,670
                                                                                             =============
</TABLE>

See accompanying notes.


<PAGE>





                                  JETFLEET III
                            Statements of Operations

<TABLE>
<CAPTION>

                                           For the Nine Months Ended              For the Three Months Ended
                                                 September 30,                           September 30,
<S>                                     <C>               <C>                   <C>              <C>

                                              2001            2000                   2001              2000
                                              ----            ----                   ----              ----
Revenues:

     Rent income                        $   1,489,690     $   1,703,390         $     452,070    $     567,250
     Gain on sale of aircraft                 494,450                 -               147,750                -
     Interest income                          153,940            93,760                49,000           38,490
                                        -------------     -------------         -------------    -------------

                                            2,138,080         1,797,150               648,820          605,740
                                        -------------     -------------         -------------    -------------


Expenses:

     Depreciation                             402,080           479,140               117,900          162,710
     Provision for impairment in
       value of aircraft                            -           150,700                     -          150,700
     Amortization                             171,470           171,470                57,160           57,160
     Interest                                 684,520           684,520               228,170          228,170
     Maintenance                              288,530           140,730                43,660          112,140
     Professional fees and
        general and administrative             29,090            77,660                 9,490           47,500
     Management fees                          146,600           146,600                48,860           48,860
                                        -------------     -------------         -------------    -------------

                                            1,722,290         1,850,820               505,240          807,240
                                        -------------     -------------         -------------    -------------

Income/(loss) before taxes                    415,790           (53,670)              143,580         (201,500)

Tax provision/(benefit)                       149,800           (20,650)               51,770          (70,220)
                                        -------------     -------------         -------------    -------------

Net income/(loss)                       $     265,990     $     (33,020)         $     91,810    $    (131,280)
                                        =============     =============         =============    =============

Weighted average common
     shares outstanding                       815,200           815,200               815,200          815,200
                                        =============     =============         =============    =============

Basic earnings/(loss) per common share  $        0.33     $       (0.04)         $       0.11    $       (0.16)
                                        =============     =============         =============    =============

</TABLE>

See accompanying notes.





<PAGE>



                                  JETFLEET III
                            Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                 For the Nine Months Ended September 30,
<S>                                                               <C>                   <C>
                                                                       2001                  2000
                                                                       ----                  ----

Net cash provided by operating activities                         $      348,230        $     978,200
                                                                  --------------        -------------

Investing activities:
     Purchase of interests in aircraft                                         -             (456,750)
     Proceeds from sale of aircraft                                    1,386,810                    -
                                                                  --------------        -------------
Net cash provided by investing activities                              1,386,810             (456,750)
                                                                  --------------        -------------

Net increase in cash                                                   1,735,040              521,450

Cash, beginning of period                                              2,788,090              888,240
                                                                  --------------        -------------

Cash, end of period                                               $    4,523,130        $   1,409,690
                                                                  ==============        =============

Supplemental disclosures of cash flow information:
Cash paid during the period for:                                       2001                  2000
                                                                       ----                  ----
     Interest                                                     $      684,520        $     684,520
     Income taxes                                                            500               21,400
</TABLE>

See accompanying notes.


<PAGE>



                                  JETFLEET III
                          Notes to Financial Statements

1.       Summary of Significant Accounting Policies

         Basis of Presentation

         JetFleet III (the "Company") was incorporated in the state of
California in August 1994 ("Inception"). The Company was formed solely for the
purpose of acquiring Income Producing Assets. The Company offered up to
$20,000,000 in $1,000 Series A Units (the "Offering") consisting of $850 of
bonds maturing on November 1, 2003 (the "Bonds") and $150 of preferred stock
(the "Preferred Stock") pursuant to a prospectus dated September 27, 1995 (the
"Prospectus").

         All of the Company's outstanding common stock is owned by JetFleet
Holding Corp. ("JHC"), a California corporation formed in January 1994. In May
1998, JetFleet Management Corp., the sole shareholder of the Company was renamed
JetFleet Holding Corp. The rights and obligations under the management agreement
between the Company and JHC were assigned by JHC to its newly-created
wholly-owned subsidiary named "JetFleet Management Corp." ("JMC"). JMC also
manages AeroCentury Corp., a Delaware corporation, and AeroCentury IV, Inc., a
California corporation, which are affiliates of JHC and which have objectives
similar to the Company's. Neal D. Crispin, the President of the Company, holds
the same position with JHC and JMC and owns a significant amount of the common
stock of JHC.

         Cash and Cash Equivalents/Deposits

         The Company considers highly liquid investments readily convertible
into known amounts of cash, with original maturities of 90 days or less, as cash
equivalents. Deposits represent cash balances held related to maintenance
reserves and security deposits and generally are subject to withdrawal
restrictions. As of September 30, 2001, the Company maintained $5,873,040 of its
cash balances in two money market funds held by regional brokerage firms, which
are not federally insured.

         Aircraft and Aircraft Engines Under Operating Leases

         The Company's interests in aircraft are recorded at cost, which include
acquisition costs (see Note 2). Depreciation is computed using the straight-line
method over each aircraft's estimated economic life to its estimated residual
value.

         Impairment of Long-lived Assets

         In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-lived Assets and Long-lived Assets to Be Disposed Of," assets are reviewed
for impairment whenever events or changes in circumstances indicate that the
book value of the asset may not be recoverable. Periodically, the Company
reviews its long-lived assets for impairment based on estimated future
nondiscounted cash flows attributable to the assets. In the event such cash
flows are not expected to be sufficient to recover the recorded value of the
assets, the assets are written down to their estimated realizable value.

         Organization and Offering Costs

         Pursuant to the terms of the Prospectus, the Company paid an
Organization and Offering Expense Reimbursement to JHC in cash in an amount up
to 2.0% of Aggregate Gross Offering Proceeds for reimbursement of certain costs
incurred in connection with the organization of the Company and the Offering
(the "Reimbursement").




<PAGE>



                                  JETFLEET III
                          Notes to Financial Statements

1.       Summary of Significant Accounting Policies (continued)

         Organization and Offering Costs (continued)

         JHC contributed $450,000 of the total it paid for organization and
offering expenses as a common stock investment in the Company (the "Initial
Contribution"). The Company issued 450,000 shares of common stock to JHC in
return for the Initial Contribution. To the extent that JHC incurred expenses in
excess of the 2.0% cash limit, such excess expenses were repaid to JHC in the
form of Common Stock issued by the Company at a price of $1.00 per share (the
"Excess Stock"). The amount of Excess Stock that the Company issued was limited
according to the amount of Aggregate Gross Offering Proceeds raised by the
Company.

         The Company capitalized the portions of both the Reimbursement paid and
the Initial Contribution related to the Bonds (85%) and amortizes such costs
over the life of the Bonds (approximately eight years). The remainder of any of
the Initial Contribution and Reimbursement is deducted from shareholders'
equity.

         Assets Subject to Lien

         The Company's obligations under the Bonds are secured by a security
interest in all of the Company's right, title and interest in the Income
Producing Assets acquired by the Company.

         Income Taxes

         The Company follows the liability method of accounting for income taxes
as required by the provisions of Statement of Financial Accounting Standards No.
109 - Accounting for Income Taxes.

         Use of Estimates

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.

         Recent Accounting Pronouncements

         SFAS No. 137, which amended the effective date of SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, was issued in June
1999. The Company adopted SFAS No. 133 on January 1, 2001. This statement
establishes accounting and reporting standards requiring that all derivative
instruments are recorded on the balance sheet as either an asset or a liability,
measured at fair value. The statement requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met and such hedge accounting treatment is elected. Because the
Company does not hold any derivatives as defined in SFAS No. 133, its adoption
did not have a material impact on its results of operations or financial
position.

         In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
("SAB 101"). SAB 101, as amended, summarizes certain of the SEC's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. SAB 101 was adopted by the Company in 2000. The adoption
of the provisions of SAB 101 did not have a material effect on the Company's
consolidated operating results, statement of financial position or cash flow.





<PAGE>



                                  JETFLEET III
                          Notes to Financial Statements

2.       Aircraft and Aircraft Engines Under Operating Leases

         Aircraft and Aircraft Engines

         The Company owns a deHavilland DHC-8-100, serial number 13 ("S/N 13"),
a Pratt & Whitney JT8D-9A aircraft engine, serial number 674267 ("S/N 674267"),
three deHavilland DHC-6-300 aircraft ("S/Ns 640, 751 and 696") and a Saab 340A,
serial number 24 ("S/N 24"). During January 2001, the Company sold its 50%
interest in a Shorts SD 3-60, serial number S/N 3676 ("S/N 3676"). As discussed
below, it also received, during June and July 2001, insurance and sales proceeds
for its other Shorts SD 3-60, serial number S/N 3656 ("S/N 3656"). The Company
did not purchase any aircraft during the first nine months of 2001.

         S/N 13 was re-leased in June 2000 to the same sub-lessee, an Australian
carrier, for a one-year term. In May 2001, the lease was extended through August
14, 2001 and, at that time, was extended through October 31, 2001. It has since
been extended through December 31, 2001 at reduced rent. The Company is
currently discussing the terms of the lessee's continued use of the aircraft.

         S/N 674267 is used on a McDonnell Douglas DC-9 and is subject to a
60-month sublease, expiring in November 2001, between the seller and a Mexican
based regional carrier. The Company is currently discussing remarketing terms
with the lessee.

         S/Ns 640 and 751 are subject to similar 36-month leases, originally
expiring in July 2001, with a U.S. regional carrier. Both leases were extended
from their expiration dates to their pre-return inspection completion. S/N 751
was returned during August and, as discussed in Note 6, was re-leased during
October. The Company is currently seeking re-lease opportunities for S/N 640,
which the Company expects to be ready for return by year end. During June 2000,
the Company and the lessee for S/N 696, which had been leased to the same
carrier as S/Ns 640 and 751, agreed to an early termination of the lease for S/N
696. S/N 696 was returned by the lessee and, after undergoing certain
maintenance and upgrade work, was re-leased to a regional carrier in the United
Kingdom for a term expiring in April 2003.

         S/N 3656 was subject to a three-year lease, expiring in May 2003 with a
regional carrier in Ireland. In February 2001, S/N 3656 sustained significant
damage while landing. During June 2001, the Company received a settlement of
$545,000 from the insurer and sold one of the aircraft's engines. The remaining
components of the aircraft were sold during July 2001. The Company also retained
$184,340 of maintenance reserves. The Company recorded a total gain of $382,960,
as a result of the insurance settlement, the various sales proceeds, including
those received during July, and the reserves retained, of which $147,750 was
recognized during the third quarter of 2001.

         At the time of purchase, S/N 3676 (owned 50% by the Company) was
subject to a 48-month lease, expiring in July 2001, with a British regional
airline. The original lease, entered into in 1997, did not require that the
lessee pay maintenance reserves based on usage because, at the time, the lessee
was considered creditworthy. Subsequent to the Company's purchase of the
aircraft, the airline's management pursued a policy of rapid expansion, which
led to a financial crisis and, on February 24, 2000, the lessee filed for
reorganization. The lessee continued to operate, and, under the reorganization
plan, the lessee paid rentals on a month to month basis at the same rent as
under the original lease on S/N 3676. Under the plan, the lessee also began
paying monthly maintenance reserves based on the hours flown. Under British law,
the owners were precluded from repossessing the aircraft so long as the lessee
was operating it and paying rent and maintenance reserves under its
reorganization plan. The lessee notified the owners that the aircraft would be
returned to them during late 2000. The owners agreed that they would realize a
greater benefit if they sold the aircraft "as is" rather than fund the
maintenance work necessary to return the aircraft to a condition which would
allow it to possibly be re-leased to a new lessee. Therefore, the Company
reduced the carrying value of the aircraft to $170,000 and recognized a
provision for impairment of $245,350 during 2000. The aircraft was returned to
the Company and, in January 2001, it was sold. At that time, the Company
received net



<PAGE>



                                   JETFLEET III
                          Notes to Financial Statements

2.       Aircraft and Aircraft Engines Under Operating Leases (continued)

proceeds of $167,450 and recognized a gain of $34,470. During the second quarter
of 2001, the lessee paid all amounts owed to the Company and, since the aircraft
had been sold, the Company recognized an additional gain of $77,020,
representing maintenance reserves retained.

         S/N 24 is subject to a lease, expiring in October 2002, with a regional
carrier in North America.

         As a result of the sale of aircraft during the fourth quarter of 2000
and 2001 and the excess cash flow generated by the Company's income producing
assets, at September 30, 2001, the Company has approximately $4,000,000 to
invest in additional assets. As discussed in Note 6, during October 2001, the
Company signed a purchase agreement for a deHavilland DHC-8 aircraft. The
Company has deposited the purchase price of the aircraft in an escrow account
and expects to complete the purchase of the aircraft no later than November 30,
2001. The Company and a regional carrier in the Caribbean are currently
negotiating lease terms for the aircraft. If the Company and the lessee are
unable to reach an agreement regarding the lease terms, however, the Company has
the right to cancel its purchase of the aircraft and retain the proceeds
deposited in the escrow account.

         As of September 30, 2001, minimum future lease rent payments receivable
under noncancelable leases were as follows:

                  Year                   Amount

                  2001              $     284,500
                  2002                    656,250
                  2003                     75,000
                                    -------------

                                    $   1,015,750
                                    =============
3.       Medium-Term Secured Bonds

         The Company raised $13,031,000 through the Offering from November 1995
to June 1997. Each $1,000 Unit subscribed in the offering included an $850
medium-term secured bond maturing on November 1, 2003. The Bonds bore interest
at an annual rate of 12.94% through October 31, 1998 and, thereafter, a variable
rate, adjusted annually on November 1, equal to the one-year United States
Treasury bill rate plus 2%, but not less than 8.24%. Based on the one-year
Treasury Bill rate at the measurement dates, the Bonds have borne interest at
the rate of 8.24% per annum for the periods November 1, 1998 through October 31,
2000. The rate will remain at 8.24% through October 31, 2002. The carrying
amount of the Bonds approximates fair value.



<PAGE>

                                  JETFLEET III
                          Notes to Financial Statements

4.       Income Taxes

         The items comprising income tax expense are as follows:
<TABLE>
<CAPTION>

                                                                                      For the Nine Months Ended
                                                                                             September 30,
<S>                                                                                 <C>              <C>
                                                                                          2001             2000
                                                                                          ----             ----
         Current tax provision
              Federal                                                               $           -    $            -
              State                                                                         2,040             8,820
                                                                                    -------------    --------------
              Current provision                                                             2,040             8,820
                                                                                    -------------    --------------

         Deferred tax provision/(benefit)
              Federal                                                                     139,010           (23,270)
              State                                                                         8,760            (6,200)
                                                                                    -------------    --------------
              Deferred tax provision                                                      147,770           (29,470)
                                                                                    -------------    --------------

         Total provision/(benefit) for income taxes                                 $     149,810    $      (20,650)
                                                                                    =============    ==============

         The total provision/(benefit) for income taxes differs from the amount
which would be provided by applying the statutory federal income tax rate to
pretax earnings as illustrated below:

                                                                                      For the Nine Months Ended
                                                                                             September 30,
                                                                                          2001             2000
                                                                                          ----             ----

         Income tax expense/(benefit) at statutory federal income tax rate          $     141,370    $      (18,250)
         State taxes net of federal benefit                                                 5,760            (1,020)
         Tax rate differences                                                               2,680            (1,380)
                                                                                    -------------    --------------
         Total provision/(benefit) for income taxes                                 $     149,810    $      (20,650)
                                                                                    =============    ==============

         Temporary differences and carryforwards which gave rise to a
significant portion of deferred tax assets and liabilities as of September 30,
2001 are as follows:

         Deferred tax assets:
              Net operating loss                                                    $     222,950
              Maintenance deposits                                                        397,190
              Prepaid rent and other                                                       13,970
                                                                                    -------------
                  Subtotal                                                                634,110
                  Valuation allowance                                                           -
                                                                                    -------------
                  Net deferred tax assets                                                 646,010
         Deferred tax liability -
              Depreciation of aircraft                                                   (498,650)
                                                                                    -------------
                                                                                    $     135,460
                                                                                    =============
</TABLE>

         The Company expects to generate adequate future taxable income to
realize the benefits of the remaining deferred tax assets on the balance sheet.
The Company's net operating losses may be carried forward for fifteen or twenty
years, depending on when they were created, and begin to expire in 2012.

<PAGE>



                                  JETFLEET III
                          Notes to Financial Statements

5.       Related Party Transactions

         The Company's Income Producing Asset portfolio is managed and
administered under the terms of a management agreement with JMC. Under this
agreement, on the last day of each calendar quarter, JMC receives a quarterly
management fee equal to 0.375% of the Company's Aggregate Gross Proceeds
received through the last day of such quarter. In the first nine months of 2001
and 2000, the Company accrued a total of $146,600 and $146,600, respectively, in
management fees.

         JMC may receive an acquisition fee for locating assets for the Company
and a remarketing fee in connection with the sale of the Company's assets,
provided that such fees are not more than the customary and usual fees that
would be paid to an unaffiliated party for such a transaction. The total of the
Aggregate Purchase Price plus the acquisition fee cannot exceed the fair market
value of the asset based on appraisal. JMC may also receive reimbursement of
Chargeable Acquisition Expenses incurred in connection with a transaction which
are payable to third parties. Because the Company did not purchase aircraft
during the first nine months of 2001 or 2000, it did not pay any acquisition
fees or Chargeable Acquisitions Expenses to JMC. During the first nine months of
2001, remarketing fees of $16,580 were accrued to JMC in connection with the
sale of aircraft. No remarketing fees were accrued during the first nine months
of 2000.

         As discussed in Note 1, the Company reimbursed JHC for certain costs
incurred in connection with the organization of the Company and the Offering.
The Company made no such payments during 2001 or 2000.

6.       Subsequent Events

         During October 2001, the Company re-leased S/N 751 for a three-year
term to a regional airline in the Maldives.

         During October 2001, the Company signed a purchase agreement for a
deHavilland DHC-8 aircraft. The Company has deposited the purchase price of the
aircraft in an escrow account and expects to complete the purchase of the
aircraft no later than November 30, 2001. The Company and a regional carrier in
the Caribbean are currently negotiating lease terms for the aircraft. If the
Company and the lessee are unable to reach an agreement regarding the lease
terms, however, the Company has the right to cancel its purchase of the aircraft
and retain the proceeds deposited in the escrow account.





<PAGE>



Item 2.           Management's Discussion and Analysis or Plan of Operation.

Forward-Looking Statements

Certain statements contained in this report and, in particular, the discussion
regarding the Company's beliefs, plans, objectives, expectations and intentions
regarding: the re-lease or remarketing of S/N 13 and S/N 674267, the purchase of
a DHC-8 aircraft by November 30, 2001, the generation of future taxable income
to realize the benefit of the remaining deferred tax asset, use of excess cash
flow and sales proceeds to purchase assets in the third quarter of 2001, the
Company's lack of significant operating expenses in connection with assets that
remain on lease, the adequacy of the Company's reserves to meet its immediate
cash requirements, the effect of interest rate changes on the Company's lease
revenue, possible attempts by the Company's lessees to revise payment terms, the
effect of rental reductions, rental collections and aircraft valuation changes
on future results, the impact of the September 11, 2001 attacks on the Company's
results; are forward looking statements. While the Company believes that such
statements are accurate, actual results may differ due to further defaults or
terminations by lessees, general economic conditions, particularly those that
affect the demand for turboprop aircraft and engines, including competition for
turboprop and other aircraft, air travel industry health, and future trends and
results that cannot be predicted with certainty. The Company's actual results
could differ materially from those discussed in such forward looking statements.
Factors that could cause or contribute to such differences include those
discussed below in the section entitled "Factors that May Affect Future
Results." The cautionary statements made in this Report should be read as being
applicable to all related forward-looking statements wherever they appear in
this Report.

Results of Operations

The Company recorded net income of $265,990 and a net loss of ($33,020) or $0.33
and ($0.04) per share for the nine months ended September 30, 2001 and 2000,
respectively. The Company recorded net income of $91,810 and a net loss of
($131,280) or $0.11 and ($0.16) per share for the three months ended September
30, 2001 and 2000, respectively.

Rent income was approximately $214,000 and $115,000 lower in the nine months and
three months, respectively, ended September 30, 2001 than 2000, due to the sale
of aircraft during the fourth quarter of 2000 and January 2001 and the
disposition of S/N 3656 during the second quarter of 2001. Gain on sale of
aircraft was approximately $494,000 and $148,000 higher in the same periods of
2001 versus 2000 due to the dispositions of S/N 3676 and S/N 3656. Interest
income was higher in the nine month and three month periods of 2001 by
approximately $60,000 and $11,000 respectively, due to higher cash balances as a
result of asset sales and excess cash flow from leases.

Depreciation decreased approximately $77,000 and $45,000 during the nine month
and three month periods, respectively, of 2001 due to the asset dispositions
noted above. Maintenance expense was approximately $148,000 higher in the nine
month period of 2001 than in 2000, primarily because of the purchase of a
replacement engine for S/N 3656 in January 2001. The replacement was necessary
because of hours flown by the previous lessee, which filed for reorganization
and returned the aircraft during late 2000. Rather than overhaul the original
engine, the Company determined that it was more cost-effective to purchase a
replacement, which purchase was partially funded by maintenance reserves
collected from the new lessee. Maintenance expense was approximately $68,000
lower in the three month period of 2001 because of work performed on S/N 3656
during 2000 in order to prepare it for re-lease and because of the accrual of
estimated maintenance to be performed on a second aircraft which was sold later
in 2000. During 2000, the Company recorded a provision for impairment in value
for an aircraft sold during the fourth quarter of 2000. No such provisions have
been recorded during 2001.

Capital Resources and Liquidity

Since Inception, the Company's funds have come primarily in the form of an
initial contribution from JHC, proceeds from the Offering and rental revenue
from the Income Producing Assets purchased using those proceeds. The Company's
liquidity varies, increasing to the extent cash flows from operations exceed
expenses, and decreasing as interest payments are made to the Unitholders and to
the extent expenses exceed cash flows from leases.

The Company's primary use of its operating cash flow is interest payments to its
Unitholders. Excess cash flow, after payment of interest and operating expenses
has been held for investment in additional Income Producing Assets. Since the
Company has acquired Income Producing Assets which are subject to triple net
leases (the lessee pays operating and maintenance expenses, insurance and
taxes), the Company has not incurred and does not anticipate that it will incur
significant operating expenses in connection with ownership of its Income
Producing Assets while they remain on lease.

The Company currently has available adequate reserves to meet its immediate cash
requirements. The leases for the Company's aircraft expire at varying times
between November 2001 and April 2003. During January 2001, the Company sold its
50% interest in S/N 3676 and received net proceeds of $204,490, including
maintenance reserves retained. During June 2001, the Company received an
insurance settlement of $545,000 from the insurer of S/N 3656 and sold one of
the aircraft's engines. The remaining components of the aircraft were sold
during July 2001. The Company received net proceeds of $1,182,340, including
maintenance reserves retained. The net proceeds from sales of aircraft during
the fourth quarter of 2000 and during 2001 will be used, along with excess cash
flow, to purchase an additional income-producing asset for approximately
$3,600,000. During October 2001, the Company signed a purchase agreement for a
deHavilland DHC-8 aircraft. The Company has deposited the purchase price of the
aircraft in an escrow account and expects to complete the purchase of the
aircraft no later than November 30, 2001. The Company and a regional carrier in
the Caribbean are currently negotiating lease terms for the aircraft. If the
Company and the lessee are unable to reach an agreement regarding the lease
terms, however, the Company has the right to cancel its purchase of the aircraft
and retain the proceeds deposited in the escrow account.

As discussed in Item 1, on February 13, 2001, the majority of the creditors of
one of the Company's lessees approved a reorganization plan, which provided that
unsecured creditors, like the Company, would not receive any recovery of
pre-reorganization claims. In projecting its cash reserves, the Company has
always anticipated that these claims would not be collected.

As discussed in Item 1, the interest rate on the Bonds was 12.94% through
October 31, 1998 and is a variable rate thereafter, calculated annually on
November 1. The variable rate is equal to the higher of (i) 2% plus the annual
yield rate on one-year U.S. Treasury Bills on the last business day of October
of that year or (ii) 8.24%. Based on the one-year Treasury Bill rate at the
measurement dates, the Bonds have borne interest at the rate of 8.24% per annum
for the periods November 1, 1998 through October 31, 2001. The rate will remain
at 8.24% through October 31, 2002.

The Company's decrease in cash flow from operations was due primarily to lower
net income, excluding the gain on sale of aircraft, during 2001 versus 2000 and
by the effect of the change in rent receivable, accounts payable, payable to
affiliates, prepaid rent, security deposits and maintenance deposits from year
to year. The effect of these changes was partially offset by the effect of the
change in deposits, accounts receivable and deferred taxes.

The increase in cash flow provided by investing activities from year to year was
due to the Company's disposition of two aircraft during 2001. There were no cash
flows from financing activities during 2001 or 2000 because the Offering
terminated during June 1997.

Outlook

As discussed in "Results of Operations", four of the Company's aircraft were
sold or disposed of during the fourth quarter of 2000 and the first half of
2001. The proceeds of these sales were combined with existing excess cash flow
available for reinvestment to purchase an additional asset, for which the
Company signed a purchase agreement during October 2001. The Company has
deposited the purchase price of the aircraft in an escrow account and expects to
complete the purchase of the aircraft no later than November 30, 2001. The
Company and a regional carrier in the Caribbean are currently negotiating lease
terms for the aircraft. If the Company and the lessee are unable to reach an
agreement regarding the lease terms, however, the Company has the right to
cancel its purchase of the aircraft and retain the proceeds deposited in the
escrow account.

In accordance with the Trust Indenture, from November 1, 2001 through the
maturity date of the Bonds on November 1, 2003, the Company will place all
excess cash flow in a sinking fund account to be used solely to repay the Bonds
at maturity.

Because aircraft owners seeking financing generally can obtain financing through
either leasing transactions or traditional secured debt financings, prevailing
interest rates are a significant factor in determining market lease rates, and
market lease rates generally move up or down with prevailing interest rates,
assuming supply and demand of the desired equipment remains constant.
 However, because lease rates for the Company's assets typically are fixed under
existing leases, the Company typically does not experience any positive or
negative impact in revenue from changes in market lease rates due to interest
rate changes until such leases have terminated. Although the lease rates the
Company receives on its assets continue to exceed the interest rate paid on the
Bonds, the Company is currently paying interest at a rate greater than market
interest rates.

In addition, while the Company leases primarily to regional airlines that
operate outside the U.S., management recognizes that some customers may be
adversely impacted by the September 11, 2001 terrorist attacks in the U.S. It is
possible that some of the Company's lessees may approach the Company to discuss
revised payment terms in light of these events. The Company is reviewing its
asset valuations in light of the worldwide economic downturn. Future results
could be negatively affected by rental reduction concessions, rent collections
and possible reductions in aircraft values. However, management believes it is
too soon to assess accurately the significance of any impact on the Company.

Factors that May Affect Future Results

General Economic Conditions; Recent Events. The Company's business is dependent
upon general economic conditions and the strength of the travel and
transportation industry. The industry appeared to be experiencing the beginnings
of cyclical downturn earlier in the third quarter, and this downturn was
exacerbated greatly by the terrorist attacks of September 11, 2001 and their
aftermath. As a result, there has been a severe reduction in air travel, and
less revenue and less demand for aircraft capacity by the major air carriers,
particularly those that serve U.S. markets.

The Company's lessees and targeted potential lessees have been primarily outside
the U.S. It is not clear whether and to what extent the current downturn will
have on the non-U.S. regional carriers that are the Company's primary lessees,
and the consequent overall impact on the Company's results. It is possible that
in certain instances, current economic circumstances may favor the Company, in
that planned aircraft replacements for the Company's leased aircraft by its
lessees may be cancelled or postponed, resulting in greater likelihood of
renewals by existing lessees. Further, demand for more economically operated
turboprop aircraft (which make up most of the Company's portfolio), relative to
the more expensive new regional jets, may increase (see "Leasing Risks", below).

At this time, it appears that large, international carriers have been most
affected by these adverse events. To the extent that the Company's regional
lessees depend on passenger traffic from the international carriers, they may
also be adversely affected. Those regional carriers that are less dependent on
the major carriers, however, may be less affected. Nevertheless, since regional
carriers are not as well-capitalized as major air carriers, the downturn may
result in the increased possibility of an economic failure of one or more of the
Company's lessees (see "Risks Related to Regional Air Carriers", below). The
combined effect of all or any of decreased air travel, an increase in the price
of jet fuel due to fears of hostilities in the Middle East and increased costs
and reduced operations by air carriers due to new security directives, depending
on their scope and duration, could have a material adverse impact on the
Company's lessees and thus the Company's results. Further, if there is
substantial excess capacity for regional air carriers, the supply of regional
aircraft may become out of balance with demand. If this were to occur, the
Company's off-lease periods for its aircraft may significantly increase, and the
value of its portfolio of aircraft could be adversely impacted.

Leasing Risks. The Company's successful negotiation of lease extensions,
re-leases and sales may be critical to its ability to achieve its financial
objectives, and will involve a number of risks. Demand for lease or
purchase of the assets depends on the economic condition of the airline industry
which is in turn sensitive to general economic conditions. Ability to
remarket equipment at acceptable rates may depend on the demand and market
values at the time of remarketing. The market for used aircraft is cyclical, and
generally, but not always, reflects economic conditions and the strength of the
travel and transportation industry. The demand for and value of many types of
older aircraft in the recent past has been depressed by such factors as airline
financial difficulties, increased fuel costs, the number of new aircraft on
order and the number of older aircraft coming off lease. The Company's
concentration in a limited number of airframe and aircraft engine types
(generally, turboprop equipment) subjects the Company to economic risks if those
airframe or engine types should decline in value. The recent introduction of
"regional jets" to serve on short routes previously thought to be economical
only for turboprop aircraft operation could decrease the demand for turboprop
aircraft, while at the same time increasing the supply of used turboprop
aircraft. This could result in lower lease rates and values for the Company's
turboprop aircraft.

Ownership Risks. All of the Company's portfolio is leased under operating
leases, where the terms of the leases do not take up the entire useful life of
an asset. The Company's ability to recover its purchase investment in an asset
subject to an operating lease is dependent upon the Company's ability to
profitably re-lease or sell the asset after the expiration of the initial lease
term. Some of the factors that have an impact on the Company's ability to
re-lease or sell include worldwide economic conditions, general aircraft market
conditions, regulatory changes that may make an asset's use more expensive or
preclude use unless the asset is modified, changes in the supply or cost of
aircraft equipment and technological developments which cause the asset to
become obsolete. In addition, a successful investment in an asset subject to an
operating lease depends in part upon having the asset returned by the lessee in
serviceable condition as required under the lease. If the Company is unable to
remarket its aircraft equipment on favorable terms when the operating lease for
such equipment expires, the Company's business, financial condition, cash flow,
ability to service debt and results of operation could be adversely affected.

Ability to Repay Bonds. Beginning November 1, 2001, all excess cash flow of the
Company will be placed in a sinking fund, where the funds will accumulate until
maturity of the Bonds on November 30, 2003. The Company's ability to repay the
Bonds will therefore depend upon continued receipt of revenues from its assets
either from lease rentals or sales proceeds in an amount, when combined with the
sale of the remaining assets at maturity, sufficient to repay the Bond
principal. To the extent that the Company realizes less than anticipated lease
rentals due to lessee rental defaults, early termination of leases, or lower
than expected remarketing proceeds during the term of the Bonds or realizes
significant unexpected expenses due to lessee defaults in rent or other
obligations, this may result in lower than expected excess cash flow into the
sinking fund. As a result, the Company's ability to repay the Bonds in full at
maturity may be negatively affected by such events even if the Company is able
to meet its scheduled interest payments. During the sinking fund period, all
sales proceeds are required to be put in the sinking fund account, which will be
invested at money market rates. The yield on funds invested in the account is
significantly lower than would generally be available if the funds were
reinvested in a leased asset. Thus, the ability of the Company to repay the Bond
obligations will likely be strengthened if the Company can maintain its assets
on lease. If an asset is unexpectedly returned to the Company during the sinking
fund period, the Company may determine that it cannot re-lease the asset and/or
that proceeds would be maximized by sale of the asset rather than re-lease of
the asset. However, this will likely lead to less than anticipated funds
available at maturity to repay the debt, due to the difference between expected
lease rental revenues on the asset and money market yields on the sales
proceeds.

The Company's ability to repay the Bonds at their maturity date is dependent in
part upon its ability to refinance the Bonds or sell its aircraft portfolio at a
price sufficient to retire the outstanding Bond principal. If, due to the risks
described below under "Ownership Risks" and "Leasing Risks", the values of the
Company's aircraft portfolio are in a depressed state at the maturity date of
the Bonds, the Company may be unable to repay the entire Bond indebtedness on
the maturity date.

Risks Related to Regional Air Carriers. Because the Company's leases are all
with regional air carriers, it will be subject to certain risks. First, lessees
in the regional air carrier market include a number of companies that are
start-up, low capital, low margin operations. Often, the success of such
carriers is dependent upon arrangements with major trunk carriers, which may be
subject to termination or cancellation by such major carrier. This market
segment is also characterized by low entry costs, and thus, there is strong
competition in this industry segment from start-ups as well as major airlines.
Thus, leasing transactions with these types of lessees results in a generally
higher lease rate on aircraft, but may entail higher risk of default or lessee
bankruptcy.

Reliance on JMC. All management of the Company is performed by JMC pursuant to a
management agreement between JMC and the Company. The Board of Directors does,
however, have ultimate control and supervisory responsibility over all aspects
of the Company and does owe fiduciary duties to the Company and its
stockholders. In addition, while JMC may not owe any fiduciary duties to the
Company by virtue of the management agreement, the officers of the Company are
also officers or employees of JMC, and in that capacity owe fiduciary duties to
the Company and the stockholders by virtue of holding such offices. Although the
Company has taken steps to prevent such conflicts, such conflicts of interest
arising from such dual roles may still occur.

Lessee Credit Risk. If a lessee defaults upon its obligations under a lease, the
Company may be limited in its ability to enforce remedies. Most of the Company's
lessees are small domestic and foreign regional passenger airlines, which may be
even more sensitive to airline industry market conditions than the major
airlines. As a result, the Company's inability to collect rent under a
significant lease or to repossess equipment in the event of a default by a
lessee could have a material adverse effect on the Company's revenue. If a
lessee that is a certified U.S. airline is in default under the lease and seeks
protection under Chapter 11 of the United States Bankruptcy Code, under Section
1110 of the Bankruptcy Code, the Company would be automatically prevented from
exercising any remedies for a period of 60 days. By the end of the 60 day
period, the lessee must agree to perform the obligations and cure any defaults,
or the Company would have the right to repossess the equipment. This procedure
under the Bankruptcy Code has been subject to significant recent litigation,
however, and it is possible that the Company's enforcement rights may still be
further adversely affected by a declaration of bankruptcy by a defaulting
lessee. Even if an aircraft can be repossessed, the Company may be unable to
recover damages from the lessee if the condition of the aircraft when
repossessed was worse than that required by the lease.

International Risks. The Company's portfolio includes leases with foreign air
carriers. Leases with foreign lessees may present somewhat different credit
risks than those with domestic lessees.

Foreign laws, regulations and judicial procedures may be more or less protective
of lessor rights as those which apply in the United States. The Company could
experience collection problems related to the enforcement of its lease
agreements under foreign local laws and the remedies in foreign jurisdictions.
The protections potentially offered by Section 1110 of the Bankruptcy Code would
not apply to non-U.S. carriers, and applicable local law may not offer similar
protections. Certain countries do not have a central registration or recording
system with which to locally establish the Company's interest in equipment and
related leases. This could add difficulty in recovering an aircraft in the event
that a foreign lessee defaults.

Leases with foreign lessees are subject to risks related to the economy of the
country or region in which such lessee is located even if the U.S. economy
remains strong. On the other hand, a foreign economy may remain strong even
though the domestic U.S. economy does not. A foreign economic downturn may occur
and impact a foreign lessee's ability to make lease payments, even though the
U.S. and other economies remain stable. Furthermore, foreign lessees are subject
to risks related to currency conversion fluctuations. Although the Company's
current leases are all payable in U.S. dollars, in the future, the Company may
agree to leases that permit payment in foreign currency, which would subject
such lease revenue to monetary risk due to currency fluctuations. Even with
dollar-denominated lease payment provisions, the Company could still be affected
by a devaluation of the lessee's local currency which would make it more
difficult for a lessee to meet its dollar-denominated lease payments, increasing
the risk of default of that lessee, particularly if that carrier's revenue is
primarily derived in the local currency.

Competition. The Company has many competitors in the aircraft leasing industry,
including leasing companies, banks and other financial institutions and aircraft
leasing partnerships. The market is highly competitive. Most of the Company's
competitors have substantially greater financial and other resources than the
Company.

Casualties, Insurance Coverage. The Company, as owner of transportation
equipment, could be held liable for injuries or damage to property caused by its
assets. Though some protection may be provided by the United States Aviation Act
with respect to its aircraft assets, it is not clear to what extent such
statutory protection would be available to the Company and such act may not
apply to aircraft operated in foreign countries. Though the Company may carry
insurance or require a lessee to insure against a risk, some risks of loss may
not be insurable. An uninsured loss with respect to the Equipment or an insured
loss for which insurance proceeds are inadequate, would result in a possible
loss of invested capital in and any profits anticipated from such equipment.

As a result of the terrorist attacks of September 11, 2001, certain insurance
carriers have instituted a new $50 million limitation on war risk liability
coverage. To the extent that the $50 million coverage is not sufficient to
comply with lease obligations, the Company will require that its lessees acquire
additional insurance, to bring coverage up to the required limits. To date, the
Company believes that all of its lessees who have received notices of the new
limitation have either obtained the additional coverage required or will do so
before the limitation takes effect. If the additional insurance or government
indemnity is not acquired in time, then the Company may ground any aircraft
until it is adequately insured.



<PAGE>



                                   SIGNATURES


In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                         JETFLEET III
                                         (Registrant)



Date: November 14, 2001              By: /s/ Neal D. Crispin
                                         -------------------------------
                                         Neal D. Crispin
                                 Title:  President