<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

                                       or

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

                         COMMISSION FILE NUMBER 0-25202

                                KITTY HAWK, INC.
             (Exact name of registrant as specified in its charter)

         Delaware                                       75-2564006
 (State of Incorporation)                  (I.R.S. Employer Identification No.)

                              1515 West 20th Street
                                 P.O. Box 612787
              Dallas/Fort Worth International Airport, Texas 75261
                                 (972) 456-2200
                   (Address, including zip code, and telephone number, including
    area code, of registrant's principal executive offices)

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 [ ]

Number of shares outstanding of the registrant's common stock, $0.01 par value,
as of August 12, 1998: 16,927,942.


<PAGE>   2



                        KITTY HAWK, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                          PAGE NUMBER
<S>                                                                       <C>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

     Condensed Consolidated Balance Sheets
         June 30, 1998 and December 31, 1997 ............................      3

     Condensed Consolidated Statements of Operations
     Three months ended June 30, 1998 and 1997, and
     Six months ended June 30, 1998 and 1997 ............................      4

     Condensed Consolidated Statement of Stockholders' Equity ...........      5
         Six months ended June 30, 1998

     Condensed Consolidated Statements of Cash Flows
         Six months ended June 30, 1998 and 1997 ........................      6

     Notes to Condensed Consolidated Financial Statements ...............      7


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

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings ..............................................     22

Item 2.  Changes in Securities ..........................................     22

Item 3.  Defaults upon Senior Securities ................................     22

Item 4.  Submission of Matters to a Vote of Security Holders ............     22

Item 5.  Other Information ..............................................     22

Item 6.  Reports on Form 8-K and Exhibits ...............................     22
</TABLE>





                                       2
<PAGE>   3
PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

                        KITTY HAWK, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                              JUNE 30,       DECEMBER 31,
                                                               1998             1997
                                                           ------------     ------------
<S>                                                        <C>              <C>
ASSETS

Current assets
     Cash and cash equivalents .......................     $ 14,297,733     $ 17,906,714
     Restricted cash and short-term investments ......       15,966,412       58,629,084
     Trade accounts receivable .......................       70,875,820      122,190,906
     Deferred income taxes ...........................       15,798,161       15,798,161
     Inventory and aircraft supplies .................       63,650,712       37,158,207
     Prepaid expenses and other current assets .......       28,188,478       25,596,064
                                                           ------------     ------------
         Total current assets ........................      208,777,316      277,279,136
                                                           ------------     ------------

Property and equipment, net ..........................      636,039,002      545,496,622
Other assets, net ....................................       15,392,636       13,970,168
                                                           ------------     ------------

Total assets .........................................     $860,208,954     $836,745,926
                                                           ============     ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
     Accounts payable ................................     $ 48,732,106     $ 43,646,806
     Accrued expenses ................................       68,731,523       91,128,193
     Accrued maintenance reserves ....................       19,339,730       19,138,292
     Current maturities of long-term debt ............        9,850,681        2,395,208
                                                           ------------     ------------
         Total current liabilities ...................      146,654,040      156,308,499
                                                           ------------     ------------

Revolving Line of Credit .............................       41,000,000       10,000,000
Long-term debt .......................................      389,235,228      392,248,252
Deferred income taxes ................................       99,153,075       99,153,075

Minority interest ....................................        4,173,004        4,162,689

Commitments and contingencies ........................               --               --

Stockholders' equity Preferred stock, $1 par value:
Authorized shares ....................................               --               --
         -1,000,000; none issued

     Common stock, $.01 par value:  Authorized
        shares -25,000,000; issued and outstanding
        -16,916,881 and 16,750,957, respectively .....          169,169          167,510

     Additional capital ..............................      133,006,113      130,522,885
     Retained earnings ...............................       46,818,325       44,183,016
                                                           ------------     ------------
         Total stockholders' equity ..................      179,993,607      174,873,411
                                                           ------------     ------------

Total liabilities and stockholders' equity ...........     $860,208,954     $836,745,926
                                                           ============     ============
</TABLE>


                             See accompanying notes.



                                       3
<PAGE>   4
                        KITTY HAWK, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED                     SIX MONTHS ENDED
                                                                 JUNE  30,                             JUNE 30,
                                                     --------------------------------      --------------------------------
                                                         1998               1997               1998               1997
                                                     -------------      -------------      -------------      -------------
<S>                                                  <C>                <C>                <C>                <C>
Revenues:
     Air freight carrier .......................     $ 131,762,680      $  18,349,228      $ 255,588,067      $  33,237,034
     Air logistics .............................        14,113,497         14,016,829         28,924,131         27,231,490
     Maintenance and other .....................         9,917,338                 --         18,635,115                 --
                                                     -------------      -------------      -------------      -------------
         Total revenues ........................       155,793,515         32,366,057        303,147,313         60,468,524

Costs of revenues:
     Air freight carrier .......................       109,259,237         11,970,913        220,522,080         22,843,865
     Air logistics .............................        12,808,410         12,944,248         25,195,240         24,818,999
     Maintenance and other .....................         6,811,331                 --         13,596,939                 --
                                                     -------------      -------------      -------------      -------------
         Total costs of revenues ...............       128,878,978         24,915,161        259,314,259         47,662,864
                                                     -------------      -------------      -------------      -------------

Gross profit ...................................        26,914,537          7,450,896         43,833,054         12,805,660

General and administrative expenses ............         9,759,472          2,371,761         19,193,812          4,884,325
Non-qualified employee profit sharing expense ..            51,772            400,571            582,192            671,757
                                                     -------------      -------------      -------------      -------------

Operating income ...............................        17,103,293          4,678,564         24,057,050          7,249,578

Other income (expense):
     Interest expense ..........................        (9,602,362)          (568,057)       (19,301,516)        (1,049,382)
     Other, net ................................           390,997            157,974          1,066,395            424,853
                                                     -------------      -------------      -------------      -------------

Income before minority interest and income
   taxes .......................................         7,891,928          4,268,481          5,821,929          6,625,049

Minority interest ..............................          (618,802)                --         (1,430,315)                --
                                                     -------------      -------------      -------------      -------------

Income before income taxes .....................         7,273,126          4,268,481          4,391,614          6,625,049

Income tax expense .............................         2,908,910          1,707,393          1,756,305          2,650,020
                                                     -------------      -------------      -------------      -------------

Net income .....................................     $   4,364,216      $   2,561,088      $   2,635,309      $   3,975,029
                                                     =============      =============      =============      =============

Basic and diluted earnings per share ...........     $        0.26      $        0.25      $        0.16      $        0.38
                                                     =============      =============      =============      =============

Weighted average common shares outstanding .....        16,775,123         10,451,807         16,767,150         10,451,807
                                                     =============      =============      =============      =============
</TABLE>


                             See accompanying notes.


                                       4
<PAGE>   5
                      KITTY HAWK, INC. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 (unaudited)

<TABLE>
<CAPTION>
                                                     NUMBER OF         COMMON           ADDITIONAL      RETAINED
                                                      SHARES            STOCK            CAPITAL         EARNINGS           TOTAL
                                                    ------------     ------------     ------------     ------------     ------------
<S>                                                 <C>              <C>              <C>              <C>              <C>
Balance at December 31, 1997 ..................       16,750,957     $    167,510     $130,522,885     $ 44,183,016     $174,873,411

Shares issued in connection with
   the Employee Stock Purchase Plan ...........            9,084               91          122,728               --          122,819

Shares issued in connection with
   the Omnibus Securities Plan ................            6,840               68          112,000               --          112,068

Shares issued in connection with
   the acquisition of Longhorn Solutions, Inc.           150,000            1,500        2,248,500               --        2,250,000

Net income ....................................               --               --               --        2,635,309        2,635,309
                                                    ------------     ------------     ------------     ------------     ------------

Balance at June 30, 1998 ......................       16,916,881     $    169,169     $133,006,113     $ 46,818,325     $179,993,607
                                                    ============     ============     ============     ============     ============
</TABLE>


                             See accompanying notes.



                                       5
<PAGE>   6
                        KITTY HAWK, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                 SIX MONTHS ENDED
                                                                    JUNE 30,
                                                        --------------------------------
                                                            1998               1997
                                                        -------------      -------------
<S>                                                     <C>                <C>
Operating activities:
   Net income .....................................     $   2,635,309      $   3,975,029
   Adjustments to reconcile net income to net
   cash provided by operating activities:
     Depreciation and amortization ................        23,571,622          4,459,773
     Gain on sale of assets .......................          (713,496)                --
     Minority interest ............................         1,430,315                 --
     Changes in operating assets and liabilities:
       Trade accounts receivable ..................        50,031,593         22,705,608
       Inventory and aircraft supplies ............       (26,342,505)        (1,644,485)
       Prepaid expenses and other current assets ..       (11,864,643)         1,324,210
       Accounts payable and accrued expenses ......       (17,668,283)       (19,153,587)
       Accrued maintenance reserves ...............          (103,274)           225,405
       Other ......................................            41,208                 --
                                                        -------------      -------------

Net cash provided by operating activities .........        21,017,846         11,891,953

Investing activities:
   Capital expenditures ...........................      (109,378,464)       (39,543,531)
   Redemption of short term investments ...........        46,506,738                 --
   Proceeds from sale of assets ...................         4,222,450                 --
                                                        -------------      -------------
Net cash used in investing activities .............       (58,649,276)       (39,543,531)

Financing activities:
   Proceeds from issuance of long-term debt .......         5,880,000         11,112,999
   Repayments of long-term debt ...................        (1,437,551)        (1,829,681)
   Net borrowings on Revolving Credit Facility ....        31,000,000                 --
   Distributions to minority interest .............        (1,420,000)                --
                                                        -------------      -------------
Net cash provided by financing activities .........        34,022,449          9,283,318
                                                        -------------      -------------

Net decrease in cash and cash equivalents .........        (3,608,981)       (18,368,260)

Cash and cash equivalents at beginning of period ..        17,906,714         27,320,402
                                                        -------------      -------------

Cash and cash equivalents at end of period ........     $  14,297,733      $   8,952,142
                                                        =============      =============
</TABLE>



                             See accompanying notes.




                                       6
<PAGE>   7
                        KITTY HAWK, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.       BASIS OF PRESENTATION

    The accompanying condensed consolidated financial statements, which should
be read in conjunction with the consolidated financial statements and footnotes
included in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission for the year ended December 31, 1997, are unaudited
(except for the December 31, 1997 condensed consolidated balance sheet which was
derived from the Company's audited consolidated balance sheet included in the
aforementioned Form 10-K), but have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been included.

    Operating results for the three month and six month periods ended June 30,
1998 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1998.

2.       ACQUISITION OF THE KALITTA COMPANIES

     On November 19, 1997, the Company acquired by merger all of the outstanding
common stock of American International Airways, Inc. ("AIA"), including a 60%
interest in American International Cargo ("AIC"), Kalitta Flying Service, Inc.
("KFS"), Flight One Logistics, Inc. ("FOL"), O. K. Turbines, Inc. ("OKT") and
American International Travel, Inc. ("AIT") (collectively, the "Kalitta
Companies") in exchange for 4,099,150 shares of the Company's common stock
(valued by an independent appraisal at approximately $60.3 million) and $20
million in cash. The transaction has been accounted for as a purchase.

    Concurrently with the consummation of the acquisition, the Company closed a
3,000,000 share common stock offering and a $340 million senior secured note
offering. Of the 3,000,000 shares sold in the common stock offering, the Company
sold 2,200,000 shares and certain stockholders of the Company (the "Selling
Stockholders") sold 800,000 shares. Net proceeds to the Company from the common
stock offering were approximately $38.3 million. The Company did not receive any
of the net proceeds from the sale of shares by the Selling Stockholders.

3.       ACQUISITION OF LONGHORN SOLUTIONS

    During June 1998, the Company acquired all the outstanding stock of Longhorn
Solutions, Inc. ("LSI") in exchange for 150,000 shares of the Company's common
stock. LSI has developed and markets an aircraft maintenance software package.

4.       LEGAL PROCEEDINGS

    The Company is subject to various legal proceedings and claims, either
asserted or unasserted, which arise in the ordinary course of business. While
the outcome of these claims cannot be predicted with certainty, management does
not believe that the outcome of any of these legal matters will have a material
adverse effect on the Company's financial position and results of operations.





                                       7
<PAGE>   8
5.    NEW ACCOUNTING PRONOUNCEMENTS

    In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") and Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" ("SFAS 131"), both
effective for years beginning after December 15, 1997. SFAS 130 establishes
standards for reporting and displaying comprehensive income and its components 
in a full set of financial statements. During the three and six months periods
ended June 30, 1998, the Company's comprehensive income was equal to net
income. SFAS 131 establishes standards for the manner that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports. Management has not
completed its review of SFAS 131 and, therefore, has not yet determined the
impact, if any, this statement will have on the Company's financial reporting.

6.    EARNINGS PER SHARE

     The following table sets forth the computation of basic and diluted
earnings per share:

<TABLE>
<CAPTION>
                                         Three Months ended June 30,      Six Months ended June 30,
                                         ---------------------------     ---------------------------
                                            1998            1997            1998            1997
                                         -----------     -----------     -----------     -----------
<S>                                      <C>             <C>             <C>             <C>
Numerator for basic and diluted
  earnings per share:                    $ 4,364,216     $ 2,561,088     $ 2,635,309     $ 3,975,029
                                         ===========     ===========     ===========     ===========

Denominator:

Denominator for basic earnings per
  share - weighted-average shares         16,775,123      10,451,807      16,767,150      10,451,807

Effect of dilutive employee stock
  options                                      6,659              --           7,141              --
                                         -----------     -----------     -----------     -----------
Denominator for diluted earnings per
  share - adjusted weighted-average
  shares                                  16,781,782      10,451,807      16,774,291      10,451,807
                                         ===========     ===========     ===========     ===========

Basic earnings per share                 $      0.26     $      0.25     $      0.16     $      0.38
                                         ===========     ===========     ===========     ===========

Diluted earnings per share               $      0.26     $      0.25     $      0.16     $      0.38
                                         ===========     ===========     ===========     ===========
</TABLE>

7.       SUPPLEMENTAL GUARANTOR INFORMATION

    In November 1997, the Company sold $340 million of 9.95% Senior Secured
Notes due 2004 (the "Notes"). Each of the Company's subsidiaries, with the
exception of AIC, (collectively, the "Guarantors") have fully and
unconditionally and jointly and severally guaranteed (the "Guarantees") on a
senior basis, the full and prompt performance of the Company's obligations under
the Notes. The Guarantees are limited to the largest amount that would not
render such Guarantees subject to avoidance under any applicable federal or
state fraudulent conveyance or similar law. The Guarantees rank senior in right
of payment to any subordinated indebtedness and, except with respect to
collateral, pari passu with all existing and future unsubordinated indebtedness
of the Guarantors. Each of the Guarantors is a wholly-owned subsidiary of the
Company.

    Supplemental financial information is presented as of June 30, 1998 and for
the three months and six months ended June 30, 1998. The Company has not
presented separate financial statements and other disclosures concerning the
Guarantors because the Company's management has determined that such information
is not material to investors.




                                       8
<PAGE>   9
                                Kitty Hawk, Inc.
       Notes to Condensed Consolidated Financial Statements - (Continued)
                      Supplemental Combining Balance Sheets
                         Condensed Financial Information

                                  June 30, 1998

<TABLE>
<CAPTION>
                                     ASSETS

                                                 Kitty Hawk,     The Company        AIC
                                                    Inc.        excluding AIC      (Non-
                                                  (Parent)       (Guarantors)     Guarantor)   Eliminations        Total
                                                -------------   -------------   -------------  -------------   -------------
<S>                                             <C>             <C>             <C>            <C>             <C>
Cash and cash equivalents                       $  13,008,299   $    (875,132)  $   2,164,566  $          --   $  14,297,733
Restricted cash and short-term
     investments                                   10,308,623       5,657,789              --             --      15,966,412
Trade accounts receivable                                  --      61,831,265       9,196,955       (152,400)     70,875,820
Deferred income taxes                                      --      15,798,161              --             --      15,798,161
Inventory and aircraft supplies                            --      63,650,712              --             --      63,650,712
Prepaid expenses and other current
     assets                                           800,860      26,898,818         488,800             --      28,188,478
                                                -------------   -------------   -------------  -------------   -------------
   Total current assets                            24,117,782     172,961,613      11,850,321       (152,400)    208,777,316
Property and equipment, net                                --     635,505,183         533,819                    636,039,002
Intercompany receivable                           372,177,912       5,159,714              --   (377,337,636)             --
Investment in Guarantors                           81,879,062              --              --    (81,879,062)             --
Investment in AIC                                          --       6,259,506              --     (6,259,506)             --
Other assets, net                                  14,793,523         599,113              --             --      15,392,636
                                                -------------   -------------   -------------  -------------   -------------
   Total assets                                 $ 492,968,279   $ 820,485,129   $  12,384,140  $(465,628,594)  $ 860,208,954
                                                =============   =============   =============  =============   =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable                                $      82,900   $  47,338,983   $   1,462,623  $    (152,400)  $  48,732,106
Accrued expenses                                    5,464,775      62,777,741         489,007             --      68,731,523
Intercompany payables                               5,159,714     372,177,912              --   (377,337,626)             --
Accrued maintenance reserves                               --      19,339,730              --                     19,339,730
Current maturities of long-term debt                       --      9,850,681               --             --       9,850,681
                                                -------------   -------------   -------------  -------------   -------------
   Total current liabilities                       10,707,389     511,485,047       1,951,630   (377,490,026)    146,654,040
Revolving Line of Credit                           41,000,000              --              --             --      41,000,000
Long-term debt                                    340,000,000      49,235,228              --             --     392,235,228
Deferred income taxes                                      --      99,153,075              --             --      99,153,075
                                                -------------   -------------   -------------  -------------   -------------
   Total liabilities                              391,707,389     659,873,350       1,951,630   (377,490,026)    676,042,343
Minority interest in AIC                                   --              --                      4,173,004       4,173,004
Stockholders' equity
   Preferred stock                                         --              --              --             --              --
   Common stock                                       169,169              --              --             --         169,169
   Additional capital                             133,006,113      81,879,062       6,856,722    (88,735,784)    133,006,113
   Retained earnings                              (31,914,392)     78,732,717       3,575,788     (3,575,788)     46,818,325
                                                -------------   -------------   -------------  -------------   -------------
       Total stockholders' equity                 101,260,890     160,611,779      10,432,510    (92,311,572)    179,993,607
                                                -------------   -------------   -------------  -------------   -------------
   Total liabilities and stockholders'
        equity                                  $ 492,968,279   $ 820,485,129   $  12,384,140  $(465,628,594)  $ 860,208,954
                                                =============   =============   =============  =============   =============
</TABLE>




                                       9
<PAGE>   10
                                Kitty Hawk, Inc.
       Notes to Consolidated Condensed Financial Statements - (Continued)
                 Supplemental Combining Statements of Operations
                         Condensed Financial Information

                    For the three months ended June 30, 1998

<TABLE>
<CAPTION>
                                          Kitty Hawk,    The Company        AIC
                                             Inc.        excluding AIC      (Non-
                                           (Parent)      (Guarantors)      Guarantor)     Eliminations        Total
                                        -------------   -------------   -------------   -------------   -------------
<S>                                     <C>             <C>             <C>             <C>             <C>
Revenue
   Air freight carrier                  $          --   $ 123,340,071   $  15,097,234   $  (6,674,625)  $ 131,762,680
   Air logistics                                   --      14,113,497              --              --      14,113,497
   Maintenance                                     --       9,917,338              --              --       9,917,338
                                        -------------   -------------   -------------   -------------   -------------
       Total revenues                              --     147,370,906      15,097,234      (6,674,625)    155,793,515
Costs of revenues
   Air freight carrier                             --     102,751,147      13,182,715      (6,674,625)    109,259,237
   Air logistics                                   --      12,808,410              --              --      12,808,410
   Maintenance                                     --       6,811,331              --              --       6,811,331
                                        -------------   -------------   -------------   -------------   -------------
       Total costs of revenues                     --     122,370,888      13,182,715      (6,674,625)    128,878,978
                                        -------------   -------------   -------------   -------------   -------------
Gross profit                                       --      25,000,018       1,914,519              --      26,914,537
General and administrative expenses          (160,821)      9,544,241         376,052              --       9,759,472
Non-qualified employee profit
   sharing expense                             51,772              --              --              --          51,772
                                        -------------   -------------   -------------   -------------   -------------
Operating income                              109,049      15,455,777       1,538,467              --      17,103,293
Other income (expense):
   Interest expense                           (74,826)     (9,527,536)             --              --      (9,602,362)
   Other, net                                 (10,113)        392,572           8,538              --         390,997
                                        -------------   -------------   -------------   -------------   -------------
Income before minority interest and
   income taxes                                24,110       6,320,813       1,547,005              --       7,891,928
Minority interest in AIC                           --              --              --        (618,802)       (618,802)
                                        -------------   -------------   -------------   -------------   -------------
Income (loss) before income taxes              24,110       6,320,813       1,547,005        (618,802)      7,273,126
Income tax expense                              9,644       2,899,266              --              --       2,908,910
                                        -------------   -------------   -------------   -------------   -------------
Net income (loss)                       $      14,466   $   3,421,547   $   1,547,005   $    (618,802)  $   4,364,216
                                        =============   =============   =============   =============   =============
</TABLE>




                                       10
<PAGE>   11



                                Kitty Hawk, Inc.
       Notes to Consolidated Condensed Financial Statements - (Continued)
                 Supplemental Combining Statements of Operations
                         Condensed Financial Information

                     For the six months ended June 30, 1998

<TABLE>
<CAPTION>
                                         Kitty Hawk,      The Company       AIC
                                            Inc.         excluding AIC     (Non-
                                          (Parent)        (Guarantors)   Guarantor)    Eliminations        Total
                                        -------------   -------------   -------------  -------------   -------------
<S>                                     <C>             <C>             <C>            <C>             <C>
Revenue
   Air freight carrier                  $          --   $ 239,885,920   $  29,443,141  $ (13,740,994)  $ 255,588,067
   Air logistics                                   --      28,924,131              --             --      28,924,131
   Maintenance                                     --      18,635,115              --              --     18,635,115
                                        -------------   -------------   -------------  -------------   -------------
       Total revenues                              --     287,445,166      29,443,141    (13,740,994)    303,147,313
Costs of revenues
   Air freight carrier                             --     209,114,219      25,148,855    (13,740,994)    220,522,080
   Air logistics                                   --      25,195,240              --             --      25,195,240
   Maintenance                                     --      13,596,939              --             --      13,596,939
                                        -------------   -------------   -------------  -------------   -------------
       Total costs of revenues                     --     247,906,398      25,148,855    (13,740,994)    259,314,259
                                        -------------   -------------   -------------  -------------   -------------
Gross profit                                       --      39,538,768       4,294,286             --      43,833,054
General and administrative expenses
                                             (474,615)     18,902,933         765,494             --      19,193,812
Non-qualified employee profit
   sharing expense                            582,192              --              --             --         582,192
                                        -------------   -------------   -------------  -------------   -------------
Operating income (loss)                      (107,577)     20,635,835       3,528,792             --      24,057,050
Other income (expense):
   Interest expense                          (233,534)    (19,067,982)             --             --     (19,301,516)
   Other, net                                  88,761         930,639          46,995             --       1,066,395
                                        -------------   -------------   -------------  -------------   -------------
Income (loss) before minority
   interest and income taxes                 (252,350)      2,498,492       3,575,787             --       5,821,929
Minority interest in AIC                           --              --              --     (1,430,315)     (1,430,315)
                                        -------------   -------------   -------------  -------------   -------------
Income (loss) before income taxes            (252,350)      2,498,492       3,575,787     (1,430,315)      4,391,614
Income tax benefit                           (100,940)      1,857,245              --             --       1,756,305
                                        -------------   -------------   -------------  -------------   -------------
Net income (loss)                       $    (151,410)  $     641,247   $   3,575,787  $  (1,430,315)  $   2,635,309
                                        =============   =============   =============  =============   =============
</TABLE>




                                       11
<PAGE>   12
                                Kitty Hawk, Inc.
       Notes to Consolidated Condensed Financial Statements - (Continued)
                 Supplemental Combining Statement of Cash Flows
                         Condensed Financial Information

                     For the six months ended June 30, 1998

<TABLE>
<CAPTION>
                                            Kitty Hawk,    The Company        AIC
                                               Inc.       excluding AIC      (Non-
                                             (Parent)       (Guarantors)   Guarantor)     Eliminations       Total
                                          -------------   -------------   -------------   -------------   -------------
<S>                                       <C>             <C>             <C>             <C>             <C>
Cash provided by (used in) operating
   activities                             $ (70,303,128)  $  85,416,094   $   4,474,565   $   1,430,315   $  21,017,846

Investing Activities:
   Capital expenditures                              --    (109,336,336)        (42,128)             --    (109,378,464)
   Redemption of short term
    investments                              45,691,377         815,361              --              --      46,506,738
   Investment in AIC                                 --       3,560,315              --      (3,560,315)             --
   Proceeds from sale of assets                      --       4,222,450              --              --       4,222,450
                                          -------------   -------------   -------------   -------------   -------------
        Net cash provided by (used
         in) investing activities            45,691,377    (100,738,210)        (42,128)     (3,560,315)    (58,649,276)

Financing Activities
   Repayments of debt                                --      (1,437,551)             --              --      (1,437,551)
   Net borrowings                            31,000,000       5,880,000              --              --      36,880,000
   Net partner withdrawals                           --              --      (3,550,000)      3,550,000              --
   Distributions to minority interest                --              --              --      (1,420,000)     (1,420,000)
                                          -------------   -------------   -------------   -------------   -------------
        Net cash provided by (used
        by) investing activities             31,000,000       4,442,449      (3,550,000)      2,130,000      34,022,449
                                          -------------   -------------   -------------   -------------   -------------
Increase (decrease) in cash                   6,388,249     (10,879,667)        882,437              --      (3,608,981)
Cash and cash equivalents, beginning
   of period                                  6,620,050      10,004,535       1,282,129              --      17,906,714
                                          -------------   -------------   -------------   -------------   -------------
Cash and cash equivalents, end of
   period                                 $  13,008,299   $    (875,132)  $   2,164,566   $          --   $  14,297,733
                                          =============   =============   =============   =============   =============
</TABLE>





                                       12
<PAGE>   13



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

OVERVIEW

    Acquisition of the Kalitta Companies. On November 19, 1997, the Company
acquired all of the outstanding common stock of American International Airways,
Inc., including a 60% interest in American International Cargo ("AIC"), Kalitta
Flying Service, Inc., Flight One Logistics, Inc., O. K. Turbines, Inc. and
American International Travel, Inc. (collectively, the "Kalitta Companies"). The
results of operations for the three months and six months ended June 30, 1998
include the results of operations of the Kalitta Companies. The pro forma
results of operations for the three months and six months ended June 30, 1997
include the results of the Kalitta Companies as if they had been acquired as of
January 1, 1997. The historical results of operations for the three months and
six months ended June 30, 1997 do not include the results of operations of the
Kalitta Companies.

    Revenues. The Company's revenues are derived from three related businesses:
(i) air freight carrier, (ii) air logistics and (iii) maintenance. Air freight
carrier revenues are derived substantially from aircraft, crew, maintenance, and
insurance ("ACMI") contracts and on-demand charters flown with the Company's
aircraft. In addition, revenues from the Company's scheduled overnight freight
service and passenger charter services are also included in air freight carrier
revenues. Air logistics revenues are derived substantially from on-demand air
freight charters arranged by the Company for its customers utilizing the flight
services of third party air freight carriers. With respect to on-demand charters
that are arranged by the Company and flown with its aircraft, charges to the
customer for air transportation are accounted for as air freight carrier
revenues and charges for ground handling and transportation are accounted for as
air logistics revenues. Maintenance revenues are generated through maintenance
performed on engines, airframes and other accessories owned by third parties.

    The principal factors that have contributed to revenue growth over the past
several years have been (i) increases in the Company's fleet through purchases
of aircraft and the acquisition of the Kalitta Companies in November 1997, (ii)
the general U.S. economic expansion and (iii) increased global demand for time
sensitive air freight services.

    Costs of Revenues. The principal components of the costs of revenues
attributable to the air freight carrier business consist of the costs for the
maintenance and operation of aircraft, including the salaries of pilots and
maintenance personnel, charges for fuel, insurance and maintenance and
depreciation of engines and airframes. Generally, charges for fuel are only
applicable for the on-demand charters flown by the air freight carrier because
fuel for ACMI contract charters is generally provided by the customer or billed
to the customer on a direct pass-through basis, although the Company bears the
cost of fuel in its scheduled freight operations. The principal components of
the costs of revenues attributable to air logistics consist of sub-charter costs
paid to third party air freight carriers and costs paid for ground handling and
transportation. With respect to on-demand charters that are flown on the
Company's aircraft, all related air transportation expenses are allocated to the
air freight carrier business and all related cargo ground handling and
transportation expenses are allocated to the air logistics business. The
principal components of the costs of revenues for maintenance consist of
maintenance personnel salaries and aircraft and engine parts and supplies.

    The Company's gross margins have been substantially higher in its air
freight carrier business (which uses Company aircraft) than in its air logistics
business (which principally uses third party aircraft). In addition, the air
freight carrier business historically has provided a more predictable revenue
base. Accordingly, the Company is continuing to shift its aircraft from
on-demand service to ACMI contracts.

         Pro Forma Results of Operations. The following sets forth the unaudited
pro forma consolidated statement of operations for the three months and six
months ended June 30, 1997, giving effect to (i) the November 1997 acquisition
of the Kalitta Companies, (ii) the issuance of the Company's 9.95% Senior
Secured Notes due 2004 (the "Notes"), (iii) the incurrence of a $45.9 million
term loan and (iv) the September 1997 acquisition of 16 Boeing 727s from the
Kalitta Companies, each as if they occurred on January 1, 1997. This information
is presented for




                                       13
<PAGE>   14

illustrative purposes only and does not purport to present the results of
operations of the Company had these transactions occurred on the dates
indicated, nor are they necessarily indicative of the consolidated results of
operations which may be expected to occur in the future.

         No pro forma adjustments have been applied to reflect (i) revenues or
operating costs expected to be generated from two Boeing 747s purchased in
February 1998 and currently being modified with approximately $56 million of the
net proceeds from the sale of the Notes or (ii) operating efficiencies or cost
savings (other than approximately $1.5 million of insurance savings) resulting
from the acquisition of the Kalitta Companies. In addition, pro forma results
have not been adjusted to eliminate (i) abnormally high engine maintenance
expenses previously incurred in response to certain Federal Aviation
Administration ("FAA") Airworthiness Directives ("Directives"), (ii) costs
previously incurred to add and maintain flight crews in anticipation of
increased air freight carrier business which had not yet materialized in part
due to delays in acquiring aircraft and (iii) start-up costs previously incurred
to establish the Company's wide-body passenger charter business.

<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED     SIX MONTHS ENDED
                                               ------------------     ----------------
                                                  JUNE 30, 1997         JUNE 30, 1997
                                                  -------------         -------------
                                                    PRO FORMA            PRO FORMA
<S>                                               <C>                  <C>
Revenues:
     Air freight carrier .......................  $ 113,579,054        $ 214,000,207
     Air logistics .............................     14,016,829           27,231,490
     Maintenance and other .....................      8,078,460           14,489,259
                                                  -------------        -------------
         Total revenues ........................    135,674,343          255,720,956

Costs of revenues:
     Air freight carrier .......................     95,711,052          201,621,568
     Air logistics .............................     12,944,248           24,818,999
     Maintenance and other .....................      5,687,236           10,200,438
                                                  -------------        -------------
         Total costs of revenues ...............    114,342,536          236,641,005
                                                  -------------        -------------

Gross profit ...................................     21,331,807           19,079,951

General and administrative expenses ............      8,457,694           16,852,432
Non-qualified employee profit sharing expense ..        400,571              671,757
                                                  -------------        -------------

Operating income ...............................     12,473,542            1,555,762

Other income (expense):
     Interest expense ..........................     (9,992,795)         (20,139,875)
     Other, net ................................        123,112            1,915,658
                                                  -------------        -------------

Income (loss) before minority interest and
   income taxes ................................      2,603,859          (16,668,455)

Minority interest ..............................       (554,585)            (892,524)
                                                  -------------        -------------

Income (loss) before income taxes ..............      2,049,274          (17,560,979)

Income tax expense (benefit) ...................        819,710           (6,640,257)
                                                  -------------        -------------

Net income (loss) ..............................  $   1,229,564        $ (10,920,722)
                                                  =============        =============

Basic and diluted income (loss) per share ......  $        0.07        $       (0.65)
                                                  =============        =============

Weighted average common shares outstanding .....     16,750,957           16,750,957
                                                  =============        =============
</TABLE>



                                       14
<PAGE>   15
RESULTS OF OPERATIONS

    The following table sets forth, on a comparative basis for the periods
indicated, the components of the Company's gross profit (in thousands) and the
gross profit margin by revenue type:

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED JUNE 30,
                            ------------------------------------------------------------
                                   1998             PRO FORMA 1997     HISTORICAL 1997
                            ------------------   -------------------  ------------------
<S>                         <C>        <C>       <C>       <C>        <C>       <C>
Air freight carrier:
      Revenues ...........  $131,763     100.0%  $113,579     100.0%  $ 18,349     100.0%
      Costs of revenues ..   109,259      82.9     95,711      84.3     11,971      65.2
                            --------  --------   --------  --------   --------  --------

      Gross profit .......  $ 22,504      17.1%  $ 17,868      15.7%  $  6,378      34.8%
                            ========  ========   ========  ========   ========  ========

Air logistics:
      Revenues ...........  $ 14,113     100.0%  $ 14,017     100.0%  $ 14,017     100.0%
      Costs of revenues ..    12,808      90.8     12,944      92.3     12,944      92.3
                            --------  --------   --------  --------   --------  --------

      Gross profit .......  $  1,305       9.2%  $  1,073       7.7%  $  1,073       7.7%
                            ========  ========   ========  ========   ========  ========

Maintenance and other:
      Revenues ...........  $  9,917     100.0%  $  8,078     100.0%        --        --
      Costs of revenues ..     6,811      68.7      5,687      70.0         --        --
                            --------  --------   --------  --------   --------  --------

      Gross profit .......  $  3,106      31.3%  $  2,391      30.0%        --        --
                            ========  ========   ========  ========   ========  ========
</TABLE>

<TABLE>
<CAPTION>
                                                SIX MONTHS ENDED JUNE 30,
                            ------------------------------------------------------------------
                                   1998               PRO FORMA 1997        HISTORICAL 1997
                            --------------------   --------------------   --------------------
<S>                         <C>        <C>         <C>        <C>         <C>        <C>
Air freight carrier:
      Revenues ...........  $ 255,588      100.0%  $ 214,000      100.0%  $  33,237      100.0%
      Costs of revenues ..    220,522       86.3     201,622       94.2      22,844       68.7
                            ---------  ---------   ---------  ---------   ---------  ---------

      Gross profit .......  $  35,066       13.7%  $  12,378        5.8%  $  10,393       31.3%
                            =========  =========   =========  =========   =========  =========

Air logistics:
      Revenues ...........  $  28,924      100.0%  $  27,232      100.0%  $  27,231      100.0%
      Costs of revenues ..     25,195       87.1      24,819       91.1      24,819       91.1
                            ---------  ---------   ---------  ---------   ---------  ---------
      Gross profit .......  $   3,729       12.9%  $   2,413        8.9%  $   2,412        8.9%
                            =========  =========   =========  =========   =========  =========

Maintenance and other:
      Revenues ...........  $  18,635      100.0%  $  14,489      100.0%         --         --
      Costs of revenues ..     13,597       73.0      10,200       70.4          --         --
                            ---------  ---------   ---------  ---------   ---------  ---------
      Gross profit .......  $   5,038       27.0%  $   4,289       29.6%         --         --
                            =========  =========   =========  =========   =========  =========
</TABLE>


    The following table presents, for the periods indicated, condensed
consolidated statement of operations data expressed as a percentage of total
revenues:

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED JUNE 30,          SIX MONTHS ENDED JUNE 30,
                                        --------------------------------    --------------------------------
                                                    PRO FORMA   HISTORICAL             PRO FORMA   HISTORICAL
                                        --------    --------    --------    --------    --------    --------
                                          1998       1997         1998       1997         1997        1997
                                        --------    --------    --------    --------    --------    --------
<S>                                     <C>         <C>         <C>         <C>         <C>         <C>  
Revenues:
     Air freight carrier .............      84.6%       83.7%       56.7%       84.3%       83.7%       55.0%
     Air logistics ...................       9.1        10.3        43.3         9.5        10.6        45.0
     Maintenance and other ...........       6.3         6.0          --         6.2         5.7          --
                                        --------    --------    --------    --------    --------    --------
         Total revenues ..............     100.0       100.0       100.0       100.0       100.0       100.0
Total costs of revenues ..............      82.7        84.3        77.0        85.5        92.5        78.8
                                        --------    --------    --------    --------    --------    --------
Gross profit .........................      17.3        15.7        23.0        14.5         7.5        21.2
General and administrative expenses ..       6.3         6.2         7.3         6.3         6.6         8.1
Non-qualified employee profit
          sharing expense ............        --         0.3         1.2         0.2         0.3         1.1
                                        --------    --------    --------    --------    --------    --------
Operating income .....................      11.0         9.2        14.5         8.0         0.6        12.0
Interest expense .....................      (6.2)       (7.4)       (1.8)       (6.4)       (7.9)       (1.7)
Other income .........................       0.3         0.1         0.5         0.4         0.8         0.7
                                        --------    --------    --------    --------    --------    --------
Income (loss) before minority
  interest and income taxes ..........       5.1         1.9        13.2         2.0        (6.5)       11.0
Minority interest ....................      (0.4)       (0.4)         --        (0.5)       (0.4)         --
                                        --------    --------    --------    --------    --------    --------
Income (loss) before income taxes ....       4.7         1.5        13.2         1.5        (6.9)       11.0
Income taxes expense (benefit) .......       1.9         0.6         5.3         0.6        (2.6)        4.4
                                        --------    --------    --------    --------    --------    --------
Net income (loss) ....................       2.8%        0.9%        7.9%        0.9%       (4.3)%       6.6%
                                        ========    ========    ========    ========    ========    ========
</TABLE>




                                       15
<PAGE>   16

     Due to the impact the acquisition of the Kalitta Companies and related
transactions have had on the financial statements and results of operations of
the Company, management has determined that the historical results of operations
for the quarter and six months ended June 30, 1997 lack meaningful comparibility
to the results of operations for the quarter and six months ended June 30, 1998.
As a result, the Company has provided a comparison of the pro forma quarter and
six months ended June 30, 1997 to the quarter and six months ended June 30,
1998, which the Company believes provides the most relevant and useful
information to investors. Other than the information provided above, no further
comparison of the historical results of operations for the quarter and six
months ended June 30, 1997 to the quarter and six months ended June 30, 1998 is
provided herein.

QUARTER ENDED JUNE 30, 1998 COMPARED TO PRO FORMA QUARTER ENDED JUNE 30, 1997

    Revenues - Air Freight Carrier. Air freight carrier revenues increased $18.2
million, or 16%, to $131.8 million in the quarter ended June 30, 1998, from
$113.6 million in the pro forma quarter ended June 30, 1997. This increase was
primarily attributable to an increase in the jet aircraft fleet from 65 aircraft
at June 30, 1997 to 72 aircraft at June 30, 1998 which permitted an increase in
ACMI contract charters. Air freight carrier on-demand charters, ACMI contract
charters and scheduled operations revenues were $15 million, $75.6 million and
$40.5 million, or 11.4%, 57.4% and 30.7%, respectively, of total air freight
carrier revenues for the quarter ended June 30, 1998, as compared to $21.8
million, $50.7 million and $40.5 million, or 19.2%, 44.6% and 35.6%,
respectively, for the pro forma quarter ended June 30, 1997. Revenues from
on-demand charters flown by Company aircraft for the quarter ended June 30, 1998
decreased 31.4% from the pro forma prior year period due to aircraft being
shifted from on-demand to ACMI contract charter service, consistent with the
Company's strategy of using more of its fleet in ACMI business which produces
relatively stable revenues. Revenue from the Company's scheduled operations
remained flat for the quarter ended June 30, 1998 as compared to the pro forma
quarter ended June 30, 1997. The Company has also implemented selective price
increases for its ACMI contract charters.

    Revenues - Air Logistics. Air logistics revenues remained flat at $14
million for the quarter ended June 30, 1998 and the pro forma quarter ended June
30, 1997 despite the strike at certain General Motors facilities. The number of
trips managed increased slightly from 3,449 in the pro forma quarter ended June
30, 1997 to 3,743 for the period ended June 30, 1998. Prices for the Company's
air logistics services remained relatively constant.

     Revenues - Maintenance and Other. Maintenance and other revenues increased
$1.8 million, or 22.8%, to $9.9 million in the quarter ended June 30, 1998, from
$8.1 million in the pro forma quarter ended June 30, 1997. This increase was
primarily due to increased third party engine maintenance revenue and to
additional revenues from heavy maintenance performed for a third party.

Costs of Revenues - Air Freight Carrier. Air freight carrier costs of revenues
increased $13.5 million, or 14.2%, to $109.3 million in the quarter ended June
30, 1998, from $95.7 million in the pro forma quarter ended June 30, 1997. This
increase was primarily due to increased fleet size and operating additional ACMI
contract charters. The gross profit margin from the air freight carrier
increased to 17.1% in the quarter ended June 30, 1998, from a gross margin of
15.7% in the pro forma quarter ended June 30, 1997. This increase in gross
margin was a result of (i) lower maintenance expenses during the period ended
June 30, 1998 as compared to the pro forma quarter ended June 30, 1997 when
higher component repairs were required by several engine-related Directives and
(ii) lower average fuel prices applicable to on-demand and scheduled freight
service in the quarter ended June 30, 1998 as compared to the quarter ended June
30, 1997.

    Costs of Revenues - Air Logistics. Air logistics costs of revenues decreased
$0.1 million, or 1.0%, to $12.8 million in the quarter ended June 30, 1998, from
$12.9 million in the pro forma quarter ended June 30, 1997. The gross profit
margin from air logistics increased to 9.2% in the quarter ended June 30, 1998
from 7.7% in the pro forma quarter ended June 30, 1997. The increase in gross
margin is a result of directing a larger percentage of on-demand charters to the
Company's aircraft (including aircraft acquired from the Kalitta Companies)
rather than to third party aircraft, which results in a higher gross margin to
the Company.

     Costs of Revenues - Maintenance and Other. Maintenance and other costs of
revenues increased $1.1 million, or 19.8%, to $6.8 million in the quarter ended
June 30, 1998, from $5.7 million in the pro forma quarter ended June 30, 1997,
reflecting an increase in third party maintenance revenues. The gross profit
margin from maintenance increased to 31.3% in the quarter ended June 30, 1998
from 30% in the pro forma quarter ended June 30, 1997 as a result of greater
cost efficiencies from third party maintenance.




                                       16
<PAGE>   17


    General and Administrative Expenses. General and administrative expenses
increased $1.3 million, or 15.4%, to $9.8 million in the quarter ended June 30,
1998, from $8.5 million in the pro forma quarter ended June 30, 1997. This
increase was primarily due to an increase in support functions and
administrative costs associated with the growth in the aircraft fleet and the
increased volume of business of the air freight carrier in the quarter ended
June 30, 1998. As a percentage of total revenues, general and administrative
expenses remained flat at approximately 6.3% in the quarter ended June 30, 1998,
as compared to the pro forma quarter ended June 30, 1997.

    Operating Income. As a result of the above, operating income increased $4.6
million to $17.1 million in the quarter ended June 30, 1998, from $12.5 million
in the pro forma quarter ended June 30, 1997. Operating income margin increased
to 11% in the quarter ended June 30, 1998, from 9.2% in the pro forma quarter
ended June 30, 1997.

    Income Taxes. Income tax expense as a percentage of income before income
taxes remained at 40% for the quarter ended June 30, 1998, as compared to the
pro forma prior year period.

    Net Income. As a result of the above, the Company's net income increased to
$4.4 million in the quarter ended June 30, 1998, compared to $1.2 million in the
pro forma quarter ended June 30, 1997. Net income as a percentage of total
revenues increased to 2.8% in the quarter ended June 30, 1998, from 0.9% in the
pro forma prior year period.

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO PRO FORMA SIX MONTHS ENDED JUNE 30,
1997

    Revenues - Air Freight Carrier. Air freight carrier revenues increased $41.6
million, or 19.4%, to $255.6 million in the six months ended June 30, 1998, from
$214 million in the pro forma six months ended June 30, 1997. This increase was
primarily attributable to an increase in the jet aircraft fleet from 65 aircraft
at June 30, 1997 to 72 aircraft at June 30, 1998 which permitted an increase in
ACMI contract charters. Air freight carrier on-demand charters, ACMI contract
charters and scheduled operations revenues were $29.7 million, $148 million and
$76.7 million, or 11.6%, 57.9% and 30%, respectively, of total air freight
carrier revenues for the six months ended June 30, 1998, as compared to $39.1
million, $96.5 million and $76.8 million, or 18.2%, 45.1% and 35.9%,
respectively, for the pro forma six months ended June 30, 1997. Revenues from
on-demand charters flown by Company aircraft for the six months ended June 30,
1998 decreased 23.9% from the pro forma prior year period due to aircraft being
shifted from on-demand to ACMI contract charter service, consistent with the
Company's strategy of using more of its fleet in ACMI business which produces
relatively stable revenues. Revenue from the Company's scheduled operations
remained flat for the six months ended June 30, 1998 as compared to the pro
forma six months ended June 30, 1997. The Company has also implemented selective
price increases for its ACMI contract charters and scheduled operations.

    Revenues - Air Logistics. Air logistics revenues increased $1.7 million, or
6.2%, to $28.9 million in the six months ended June 30, 1998, from $27.2 million
in the pro forma six months ended June 30, 1997 despite the strike at certain
General Motors facilities. This increase was primarily due to increased demand
for charters that require large aircraft, which generate greater revenues. The
number of trips managed increased slightly from 6,640 in the pro forma six
months ended June 30, 1997 to 6,962 for the period ended June 30, 1998. Prices
for the Company's air logistics services remained relatively constant.

     Revenues - Maintenance and Other. Maintenance and other revenues increased
$4.1 million, or 28.9%, to $18.6 million in the six months ended June 30, 1998,
from $14.5 million in the pro forma six months ended June 30, 1997. This
increase was primarily due to increased third party engine maintenance revenue
and to additional revenues from heavy maintenance performed for a third party.

    Costs of Revenues - Air Freight Carrier. Air freight carrier costs of
revenues increased $18.9 million, or 9.4%, to $220.5 million in the six months
ended June 30, 1998, from $201.6 million in the pro forma six months ended 



                                       17
<PAGE>   18

June 30, 1997. This increase was primarily due to increased fleet size and
operating additional ACMI contract charters. The gross profit margin from the
air freight carrier increased to 13.7% in the six months ended June 30, 1998,
from a gross margin of 5.8% in the pro forma six months ended June 30, 1997.
This increase in gross margin was a result of (i) lower maintenance expenses
during the six month period ended June 30, 1998 as compared to the pro forma six
months ended June 30, 1997 when higher component repairs were required by
several engine-related Directives and (ii) lower average fuel prices applicable
to on-demand and scheduled freight service in the six months ended June 30, 1998
as compared to the six months ended June 30, 1997.

    Costs of Revenues - Air Logistics. Air logistics costs of revenues increased
$0.4 million, or 1.5%, to $25.2 million in the six months ended June 30, 1998,
from $24.8 million in the pro forma six months ended June 30, 1997, reflecting
an increased volume of business. The gross profit margin from air logistics
increased to 12.9% in the six months ended June 30, 1998 from 8.9% in the pro
forma six months ended June 30, 1997. The increase in gross margin is a result
of directing a larger percentage of on-demand charters to the Company's aircraft
(including aircraft acquired from the Kalitta Companies) rather than to third
party aircraft, which results in a higher gross margin to the Company.

     Costs of Revenues - Maintenance and Other. Maintenance and other costs of
revenues increased $3.4 million, or 33.3%, to $13.6 million in the six months
ended June 30, 1998, from $10.2 million in the pro forma six months ended June
30, 1997, reflecting an increase in third party maintenance. The gross profit
margin from maintenance decreased to 27% in the six months ended June 30, 1998
from 29.6% in the pro forma six months ended June 30, 1997. The decrease in
gross margin is a result of higher costs incurred, which the Company was unable
to pass on to customers based on negotiated pricing.

    General and Administrative Expenses. General and administrative expenses
increased $2.3 million, or 13.9%, to $19.2 million in the six months ended June
30, 1998, from $16.9 million in the pro forma six months ended June 30, 1997.
This increase was primarily due to an increase in support functions and
administrative costs associated with the growth in the aircraft fleet and the
increased volume of business of the air freight carrier in the six months ended
June 30, 1998. As a percentage of total revenues, general and administrative
expenses decreased to 6.3% in the six months ended June 30, 1998, as compared to
6.6% for the pro forma six months ended June 30, 1997.

    Operating Income. As a result of the above, operating income increased $22.5
million to $24.1 million in the six months ended June 30, 1998, from $1.6
million in the pro forma six months ended June 30, 1997. Operating income margin
increased to 8% in the six months ended June 30, 1998, from 0.6% in the pro
forma six months ended June 30, 1997.

    Income Taxes. Income tax expense as a percentage of income before income
taxes increased to 40% for the six months ended June 30, 1998, as compared to an
income tax benefit of 37.8% for the pro forma prior year period. The increase
was primarily due to the pro forma results not reflecting the full tax benefit
of the net operating loss carryforwards of the Kalitta Companies due to the
uncertainty of the Kalitta Companies' future ability to realize such net
operating loss carry forwards prior to the Company's acquisition of the Kalitta
Companies.

    Net Income. As a result of the above, the Company's reported net income
increased to $2.6 million in the six months ended June 30, 1998, as compared to
a net loss of $10.9 million in the pro forma six months ended June 30, 1997. Net
income as a percentage of total revenues increased to 0.9% in the six months
ended June 30, 1998, from a loss margin of 4.3% in the pro forma prior year
period.

LIQUIDITY AND CAPITAL RESOURCES

    The Company's capital requirements are primarily for the acquisition and
modification of aircraft, working capital and the expansion and improvement of
maintenance and support facilities. In addition, the Company has, and will
continue to have, capital requirements for the requisite periodic and major
overhaul maintenance checks for its fleet and for debt service. The Company also
has seasonal working capital needs, because it generates higher revenue and cash
flow in the fourth calendar quarter and lower revenue and cash flow in the first
calendar quarter. 





                                       18
<PAGE>   19

The Company's cash requirements for maintenance and working capital
(particularly its seasonal requirements) have increased substantially due to the
acquisition of the Kalitta Companies. Funding requirements have historically
been met through internally generated funds, bank borrowings and aircraft sales
and from public and private offerings of equity and debt securities. From time
to time, the Company has entered into sale/leaseback transactions to acquire
aircraft and may do so in the future.

    In connection with the acquisition of the Kalitta Companies, the Company
sold 2,200,000 shares of Common Stock resulting in net proceeds to the Company
of approximately $38.3 million. In addition, the Company issued the Notes,
resulting in net proceeds to the Company of approximately $329.1 million. Of the
approximately $367.4 million of net proceeds, the Company used approximately
$249.8 million to pay off substantially all of the Kalitta Companies'
pre-acquisition indebtedness, $33 million to refinance Kitty Hawk's
indebtedness, $39.6 million to acquire two Boeing 747s, $20 million to pay the
cash portion of the consideration for the Kalitta Companies, $16.4 million to
fund a portion of the costs to modify two Boeing 747s from passenger to cargo
configuration, $6 million for working capital purposes and $2.6 million to pay
expenses incurred in connection with the acquisition, a new credit facility and
a new term loan.

    The Notes provide for semi-annual interest payments of approximately $16.9
million on each May 15 and November 15 and mature in November 2004. The Notes
are secured by a fleet of 30 aircraft, including nine Boeing 747s, eight
Lockheed L-1011s and 13 Boeing 727s. The Notes are guaranteed by all of the
Company's subsidiaries, other than AIC.

    The Company has a $45.9 million outstanding Term Loan. The Term Loan is due
in quarterly installments of $2.25 million commencing in March 1999, with the
balance of $12.15 million due upon maturity in September 2002. Interest on the
Term Loan accrues at LIBOR plus 3% or a Base Rate plus 1.5%, subject to
reduction. The Base Rate is the higher of the Prime Rate of Wells Fargo Bank,
N.A. ("WFB") or the Federal Funds Rate plus .5%. As of June 30, 1998, the
interest rate was 7.95%. The Term Loan is secured by accounts receivable, all
spare parts (including rotables), inventory, intangibles and contract rights,
cash, 16 Boeing 727s and related engines, the stock of each of the Company's
subsidiaries and the Company's 60% interest in AIC. The Term Loan is guaranteed
by all of the Company's subsidiaries, other than AIC.

    In addition, to fund ongoing capital requirements, including possible
acquisitions, the Company has entered into a Credit Facility with WFB,
individually and as agent for various lenders. The Credit Facility provides the
Company with up to $100 million in revolving loans (subject to a current
borrowing base limitation of approximately $61.2 million) and is secured by the
same collateral as the Term Loan. The Credit Facility initially bears interest
at LIBOR plus 2.75% or a Base Rate plus 1.25%, subject to adjustment. The Base
Rate is the higher of WFB's Prime Rate or the Federal Funds Rate plus .5%.
Borrowings under the Credit Facility are subject to borrowing base limitations
based on eligible inventory and accounts receivable. The Credit Facility matures
in November 2002. As of June 30, 1998, the Company had a balance of $41 million
outstanding under the Credit Facility bearing interest at 9.25% and available
borrowings under the Credit Facility of approximately $19 million. Borrowings
under the Credit Facility and Term Loan are subject to certain financial
covenants.

    Capital expenditures were $109.4 million and $39.5 million for the six
months ended June 30, 1998 and 1997, respectively. Capital expenditures for the
six months ended June 30, 1998 were primarily for (i) the purchase of two Boeing
747s, (ii) cargo modifications to two Boeing 747s and one Boeing 727, (iii)
heavy maintenance checks on three Boeing 727s, (iv) noise abatement
modifications for seven Boeing 727s, (v) purchase of 3 JT8D engines, three JT9D
engines, one JT3D engine and five GE CJ 610-6 engines, (vi) engine overhauls,
(vii) improvements to new office space at Dallas/Fort Worth International
Airport and (viii) purchase of rotable aircraft parts. Capital expenditures for
the six months ended June 30, 1997 were primarily for the purchase of (i) two
Boeing 727 aircraft, (ii) cargo and noise abatement modifications for two Boeing
727 aircraft and one DC9-15F aircraft, (iii) six reconditioned JT8D jet engines,
(iv) leasehold improvements to Boeing 727-200 aircraft, (v) the lease of the
Company's 40,000 square foot headquarters facility, (vi) major maintenance
checks, (vii) ground service equipment, and (viii) the overhaul of two JT8D-7
engines.

    During the remainder of 1998, the Company estimates that capital
expenditures will aggregate approximately 




                                       19
<PAGE>   20

$46.1 million and that it will make substantial capital expenditures thereafter.
The Company has acquired two Boeing 747s for approximately $39.6 million (net of
deposits) and began modifying these aircraft to cargo configuration and having
other work performed at an aggregate cost of approximately $33.8 million, of
which $8.3 million has been spent as of June 30, 1998. The acquisition of the
Boeing 747s was funded with approximately $39.6 million of the net proceeds from
the Company's November 1997 Note offering. The cargo conversion will be funded
with approximately $16.4 million of the net proceeds from the Note offering and
approximately $17.4 million of internally generated funds or borrowings under
the Credit Facility. Additionally, during July the Company had completed the
conversion of one Boeing 747 aircraft and one Boeing 727 aircraft from passenger
to freighter configuration at costs of approximately $14.8 and $3.7 million,
respectively, including noise abatement modifications for the Boeing 727.

    During the remainder of 1998, the Company anticipates capital expenditures
of approximately $8 million for noise abatement modifications to one Douglas
DC-9 and four Boeing 727 aircraft currently owned. To bring the remainder of the
Company's existing fleet of owned and leased aircraft into Stage III noise
control compliance by the year 2000, the Company estimates that total capital
expenditures between $60 million and $70 million would be required. The entire
fleet must be Stage III compliant by the year 2000. In the event more aircraft
are acquired, anticipated capital expenditures for noise abatement modifications
could materially increase. These estimates include 13 Douglas DC-8 aircraft
which the Company does not expect to modify because the anticipated cost of
approximately $3.5 million per aircraft (not including aircraft downtime)
exceeds the economic benefits of such modifications. The Company expects to
replace up to 13 Douglas DC-8-50 and DC-8-60 series aircraft in 1999 with Boeing
727 freighters it intends to acquire through operating leases which fund the
costs of freighter conversions, transition maintenance and noise abatement
modifications. The Company is currently negotiating such a program and believes
sufficient and satisfactory aircraft are or will be available for such a
program. Three Boeing 727 aircraft acquired through leases and recently placed
in service will operate under in place, assigned contracts until early 1999 and
then become available to satisfy the Douglas DC-8 replacement requirements.

    Service Bulletins and Directives issued under the FAA's "Aging Aircraft"
program or issued on an ad hoc basis cause certain of the Company's aircraft to
be subject to extensive aircraft examinations and require certain of the
Company's aircraft to undergo structural inspections and modifications to
address problems of corrosion and structural fatigue among other things, at
specified times.

    The Company operates a fleet of 29 Boeing 727s, all of which were previously
converted from passenger configuration to cargo configuration by the
installation of a large cargo door and numerous interior modifications related
to the installation of cargo container handling systems. The FAA has issued a
proposed Directive, which if adopted, would limit the cargo capacity of 28 of
these Boeing 727s until certain modifications are made. The costs to make such
modifications and the amount of revenue that could be lost cannot currently be
estimated. However, the Company believes this Directive will not have a material
adverse effect of the Company. It is possible that additional Service Bulletins
or Directives applicable to the Company's fleet could be issued in the future.
The cost of compliance with such Directives and Service Bulletins cannot
currently be estimated, but could be substantial.

    In late July 1998, the FAA approved the cargo conversion of a Boeing 747-200
aircraft (the "Modified Aircraft") that American International Airways, Inc.
("AIA") purchased from Middle East Airlines ("MEA") in September 1997 and
modified to cargo configuration at AIA's Oscoda, Michigan maintenance facility.
The FAA, however, limited the maximum payload of the Modified Aircraft to
200,000 pounds rather than the 240,000-pound maximum payload that the Company
anticipated because the FAA determined that the wingbox structure of the
Modified Aircraft required changes that were not included in the Supplemental
Type Certificate used by AIA in the conversion process. The payload limit may
decrease the hourly revenue rate for the Modified Aircraft by as much as 6% from
the amount previously anticipated by the Company. The FAA also has recently
asked whether the Company would voluntarily reduce the maximum payload of two
other Boeing 747-200s that AIA earlier converted, which appear to have a similar
issue. Former management of AIA did not disclose the wingbox issue to the
Company's current management, who did not know of the issue until the FAA raised
it. The Company is now evaluating the feasibility of further modifying all three
aircraft, but is not yet able to predict the cost and time required for further
modification. Two additional Boeing 747-200 aircraft purchased by the Company
from MEA in 1998 are being converted to cargo configuration by The Boeing
Company and are expected to be approved to operate at maximum payload capacity
later this year.

    The Company believes that available funds, bank borrowings and cash flows
expected to be generated by operations will be sufficient to meet its
anticipated cash needs for working capital, debt service and capital
expenditures for at least the next 12 months. Thereafter, if cash generated by
operations is insufficient to satisfy the Company's liquidity requirements, the
Company may sell additional equity or debt securities or obtain additional
credit facilities. However, there can be no assurance that the Company will be
able to sell any additional equity or debt securities or obtain additional
credit facilities. Notwithstanding the foregoing, the Company may sell
additional equity or debt securities or obtain additional credit facilities at
any time.

YEAR 2000

    The Company believes that its computer systems are generally year 2000
compliant. The Company does not yet know whether the computer systems of the FAA
or its customers, suppliers, vendors and air logistics service providers are
generally year 2000 compliant. The Company has begun discussions with its
significant suppliers, customers and financial institutions to ensure that those
parties have appropriate plans to remediate year 2000 issues 




                                       20
<PAGE>   21

where their systems interface with the Company's systems or otherwise impact its
operations and assess the extent to which its operations are vulnerable should
those organizations fail to remediate properly their computer systems.

    The Company's comprehensive year 2000 initiative is being managed by a team
of internal staff and outside consultants reporting directly to the Company's
Audit Committee. The team's activities are designed to ensure that there is no
adverse effect on the Company's core business operations and that transactions
with customers, suppliers and financial institutions are fully supported. While
the Company believes its planning efforts will be adequate to address its year
2000 concerns, there can be no guarantee that the systems of other companies
will be converted on a timely basis and will not have a material adverse effect
on the Company's financial position and results of operations. The Company
expects to complete its planning efforts by the end of the fourth quarter of
1998, with remediation to be complete by the second quarter of 1999. The cost of
the Company's year 2000 initiatives is not expected to have a material adverse
effect on the Company's financial position and results of operations.

SEASONALITY

    Certain of the Company's customers engage in seasonal businesses, especially
the U.S. Postal Service and customers in the automotive industry. As a result,
the Company's air freight charter logistics business has historically
experienced its highest quarterly revenues and profitability during the fourth
quarter of the calendar year due to the peak Christmas season activity of the
U.S. Postal Service and during the period from June 1 to November 30 when
production schedules of the automotive industry typically increase.
Consequently, the Company experiences its lowest quarterly revenue and
profitability during the first quarter of the calendar year.





                                       21
<PAGE>   22
PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Not applicable.

ITEM 2.  CHANGES IN SECURITIES

Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

     On May 29, 1998, the Company held its 1998 Annual Meeting of Stockholders.
The only matters voted upon were (i) the election of two Class I directors, each
for a three-year term expiring at the Company's 2001 Annual Meeting of
Stockholders and (ii) the ratification of the appointment of Ernst & Young LLP
as the Company's independent public accountants for 1998. With respect to the
election of Ted J. Coonfield as a Class I director, 15,176,569 shares were voted
for the proposal and 18,275 shares were voted against. With respect to the
election of Richard R. Wadsworth as a Class I director, 15,184,844 shares were
voted for the proposal and 10,000 were voted against. With respect to the
ratification of Ernst & Young LLP, 15,188,094 shares were voted for the
proposal, 2,600 shares were voted against and 4,150 shares abstained from
voting. 

ITEM 5.  OTHER INFORMATION

Not applicable.

ITEM 6.  REPORTS ON FORM 8-K AND EXHIBITS

(a)    Reports on Form 8-K:

Not applicable.

(b)    Exhibits:

The following exhibits are filed herewith or are incorporated by reference from
previous filings with the Securities and Exchange Commission.

      EXHIBIT NO.                              DESCRIPTION
      -----------                              -----------

          3.1       - Certificate of Incorporation of the Company.(1)

          3.2       - Amended and Restated Bylaws of the Company.(2)

          3.3       - Amendment No. 1 to the Certificate of Incorporation of 
                      the Company.(1)

          4.1       - Specimen Common Stock Certificate.(3)

         21.1       - Subsidiaries of the Registrant.(4)

         27.1       - Financial Data Schedule.(5)

----------

(1)  Previously filed as an exhibit to the Company's Registration Statement on
     Form S-1 (Reg. No. 33-85698) dated as of December 1994, and incorporated
     herein by reference.

(2)  Previously filed as an exhibit to the Company's Quarterly Report on Form
     10-Q for the quarter ended March 31, 1998 and incorporated herein by
     reference.



                                       22
<PAGE>   23
(3)  Previously filed as an exhibit to the Company's Registration Statement on
     Form S-1 (Reg. No. 333-8307) dated as of October 1996, and incorporated
     herein by reference.

(4)  Previously filed as an exhibit to the Company's Registration Statement on
     Form S-4 (Reg. No. 333-43645) dated as of February 1998, and incorporated
     herein by reference.

(5)  Filed herewith




                                       23
<PAGE>   24
SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 14, 1998.

                                KITTY HAWK, INC.


                                By: /s/ RICHARD R. WADSWORTH, JR.
                                   -----------------------------------
                                    Richard R. Wadsworth, Jr.
                                    Senior Vice President - Finance,
                                    Chief Financial Officer, and Secretary






                                       24
<PAGE>   25
                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
      EXHIBIT NO.             DESCRIPTION
      -----------     ---------------------------------------------------------
<S>       <C>                                                     
          3.1       - Certificate of Incorporation of the Company.(1)

          3.2       - Amended and Restated Bylaws of the Company.(2)

          3.3       - Amendment No. 1 to the Certificate of Incorporation of 
                      the Company.(1)

          4.1       - Specimen Common Stock Certificate.(3)

         21.1       - Subsidiaries of the Registrant.(4)

         27.1       - Financial Data Schedule.(5)
</TABLE>

----------

(1)  Previously filed as an exhibit to the Company's Registration Statement on
     Form S-1 (Reg. No. 33-85698) dated as of December 1994, and incorporated
     herein by reference.

(2)  Previously filed as an exhibit to the Company's Quarterly Report on Form
     10-Q for the quarter ended March 31, 1998 and incorporated herein by
     reference.

(3)  Previously filed as an exhibit to the Company's Registration Statement on
     Form S-1 (Reg. No. 333-8307) dated as of October 1996, and incorporated
     herein by reference.

(4)  Previously filed as an exhibit to the Company's Registration Statement on
     Form S-4 (Reg. No. 333-43645) dated as of February 1998, and incorporated
     herein by reference.

(5)  Filed herewith