<PAGE>
 
                                  FORM 10-QSB


                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549


[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the quarterly period ended September 30, 1996


[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT


Commission file number:  0-4877


                            FRONTIER AIRLINES, INC.
                            -----------------------
            (Exact name of registrant as specified in its charter)

          Colorado                                          84-1256945
-----------------------------                           -------------------
(State or other jurisdiction of                         (I.R.S. Employer
incorporated or organization)                           Identification No.)
 
 
 
12015 E. 46th Avenue, Denver, CO                              80239
----------------------------------------                ------------------
(Address of principal executive offices)                    (Zip Code)
 

Issuer's telephone number, including area code:  (303) 371-7400

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes  X  No__
    ---      

     The number of shares of the Company's Common Stock outstanding as of
November 12, 1996 is 8,765,506.

  Transitional Small Business Disclosure Format Yes:  X; No: __
                                                     ---
<PAGE>
 
                        PART I.  FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS
FRONTIER AIRLINES, INC.
CONDENSED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
 
<TABLE> 
<CAPTION> 
ASSETS
<S>                                          <C>  
Current assets:
    Cash and cash equivalents                $   9,933,264 
    Short-term investments                       9,729,922 
    Restricted investments                       4,265,474 
    Trade receivables                            4,012,801 
    Maintenance deposits                        10,056,361 
    Prepaid expenses and other assets            3,599,968 
    Inventories                                    850,721 
    Deferred lease expenses                        279,570 
    Note receivable - current portion               20,198 
                                              ------------
            Total current assets                42,748,279 
                                                           
Security, maintenance and other deposits         4,981,549 
Property and equipment, net                      2,750,860 
Note receivable - long-term portion                 49,802 
Deferred lease expenses                            862,659 
Restricted investments                             117,878 
                                              ------------
                                             $  51,511,027 
                                              ============ 
                                                           
                                                (continued) 
</TABLE>

                                       2
<PAGE>
 
FRONTIER AIRLINES, INC.
CONDENSED BALANCE SHEET, CONTINUED
SEPTEMBER 30, 1996
(UNAUDITED)
 
<TABLE> 
<CAPTION> 
<S>                                          <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                         $    3,944,299
    Air traffic liability                        10,550,448
    Other accrued expenses                        3,035,995
    Accrued maintenance expense                  12,440,998
    Note payable                                     58,273
    Current portion of obligations                   
     under capital leases                            33,730      
                                              -------------
            Total current liabilities            30,063,743
                                                           
Accrued maintenance expense                         522,861
Other accrued expenses                               16,897
Obligations under capital leases,                    
 excluding current portion                           74,801      
                                              -------------
            Total liabilities                    30,678,302
                                              -------------
                                                           
Stockholders' equity                                       
    Preferred stock, no par value,                         
     authorized 1,000,000 shares;                          
        none issued and outstanding                       -
    Common stock, no par value, stated                     
     value of $.001 per share,                             
        authorized 20,000,000 shares;                      
         8,765,506 shares issued and                       
        outstanding                                   8,766
    Additional paid-in capital                   35,131,075
    Unearned ESOP shares                            249,996
    Accumulated deficit                         (14,557,112)
                                              -------------
            Total stockholders' equity           20,832,725
                                              -------------
                                             $   51,511,027
                                              ============= 
</TABLE> 
 
See accompanying notes to financial statements

                                       3
<PAGE>
 
FRONTIER AIRLINES, INC.
CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
 
<TABLE> 
<CAPTION> 
                                                   1996            1995
                                          -----------------------------
<S>                                       <C>             <C> 
Revenues:
    Passenger                             $  57,087,620   $  26,144,643
    Cargo                                       815,880         570,585
    Other                                       338,440         415,198
                                           ------------    ------------
 
            Total revenues                   58,241,940      27,130,426
                                           ------------    ------------
 
Operating expenses:
    Flight operations                        23,841,024      10,349,896
    Aircraft and traffic servicing           12,702,601       7,483,113
    Maintenance                              10,147,361       5,065,746
    Promotion and sales                      10,248,298       5,403,792
    General and administrative                2,215,908       1,661,528
    Depreciation and amortization               495,311         253,535
                                           ------------    ------------
 
            Total operating expenses         59,650,503      30,217,610
                                           ------------    ------------
 
            Operating loss                   (1,408,563)     (3,087,184)
                                           ------------    ------------
 
Nonoperating income:
    Interest income                             592,494         168,589
    Other, net                                  (36,725)         75,966
                                           ------------    ------------
 
            Total nonoperating income,          555,769         244,555
             net
                                           ------------    ------------
 
Net loss                                  $    (852,794)  $  (2,842,629)
                                           ============    ============
 
Loss per common share                     $       (0.11)  $       (0.78)
                                           ============    ============
 
Weighted average shares outstanding           7,481,073       3,659,329
                                           ============    ============
</TABLE> 
 
See accompanying notes to financial statements

                                       4
<PAGE>
 
FRONTIER AIRLINES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)

<TABLE> 
<CAPTION> 
                                                      1996            1995    
                                                ----------------------------- 
<S>                                             <C>             <C>           
Cash flows from operating activities:                                         
    Net income                                  $    (852,794)  $  (2,842,629)
    Adjustments to reconcile net loss                                         
     to net cash                                                              
        used by operating activities:                                         
            Employee stock option plan                
             compensation expense                     249,996         528,738                         
            Issuance of compensatory                        
             comnmon stock options                          -          60,500                   
            Depreciation and                         
             amortization                             606,632         253,535                          
            Loss on sale of equipment                   4,591          20,000 
            Changes in operating assets                                       
             and liabilities:                                                 
                Restricted investments             (2,166,761)       (460,386)
                Trade receivables                   1,859,357         652,715 
                Security and other                
                 deposits                          (5,763,645)     (2,413,178)                            
                Prepaid expenses and                 
                 other assets                        (654,181)       (753,892)                         
                Inventories                          (281,545)        143,910 
                Accounts payable                     (458,163)       (779,706)
                Air traffic liability                (650,112)      1,333,555 
                Other accrued expenses              1,057,886        (925,770)
                Accrued maintenance                 
                 expense                            4,429,824       2,472,191                           
                                                 ------------    ------------ 
                     Net cash used by              
                      operating                                               
                      activities                   (2,618,915)     (2,710,417)                           
                                                 ------------    ------------ 
                                                                              
Cash flows used by investing activities:                                      
    Increase in short-term investments             (8,561,722)              - 
    Acquisition of property and                    
     equipment                                     (1,257,702)       (260,149)                           
    Proceeds from sale of property and                     
     equipment                                              -          19,745                    
                                                 ------------    ------------ 
                     Net cash used in          
                      investing                                               
                      activities                   (9,819,424)       (240,404)                               
                                                 ------------    ------------ 
                                                                              
Cash flows from financing activities:                                         
    Net proceeds from issuance of                 
     common stock                                  16,002,652       6,309,385                             
    Short-term borrowings                              95,911         101,496 
    Principal payments on short-term                  
     borrowings                                       (48,079)        (29,800)                        
    Principal payments on obligations                 
     under capital leases                             (38,136)        (16,698)                        
                                                 ------------    ------------ 
                    Net cash provided             
                     by financing                                             
                     activities                    16,012,348       6,364,383                             
                                                 ------------    ------------ 
                                                                              
                    Net increase in                
                     cash and cash                                            
                     equivalents                    3,574,009       3,413,562                            
                                                                              
Cash and cash equivalents, beginning of            
 period                                             6,359,254       3,834,741                            
                                                 ------------    ------------ 
                                                                              
Cash and cash equivalents, end of period        $   9,933,263   $   7,248,303 
                                                 ============    ============ 
</TABLE> 

See accompanying notes to financial statements

                                       5
<PAGE>
 
FRONTIER AIRLINES, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996

(1)  BASIS OF PRESENTATION

     The accompanying unaudited financial statements have been prepared in
     accordance with generally accepted accounting principles for interim
     financial information and the instructions to Form 10-QSB and Regulation
     S-B. 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 adjustments) considered necessary for a fair
     presentation have been included. The results of operations for the six
     months ended September 30, 1996 are not necessarily indicative of the
     results that will be realized for the full year. For further information,
     refer to the audited financial statements and notes thereto for the year
     ended March 31, 1996 contained in the Form 10-KSB for the fiscal year ended
     March 31, 1996.

(2)  REDEMPTION OF WARRANTS

     The Company issued 2,670,000 warrants to purchase common stock in
     conjunction with a private placement and its initial public offering. Each
     warrant entitled the warrant holder to purchase one share of common stock
     for $5.00. These warrants were subject to redemption at $.05 per warrant by
     the Company on 45 days written notice if certain conditions were met. The
     Company met these conditions and on May 14, 1996 the Company notified the
     warrant holders of the Company's intent to exercise its redemption rights
     with respect to the warrants not exercised on or before June 28, 1996. As a
     result, warrant holders exercised 2,666,133 warrants, the Company issued a
     like number of shares of common stock and received net proceeds of
     approximately $13,280,000.

                                       6
<PAGE>
 
ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

     The Company was incorporated in February 1994 and began flight operations
on July 5, 1994 with two leased Boeing 737-200 jet aircraft operating eight
daily flights between Denver, Colorado and four North Dakota cities. Since that
time, the Company has increased the number of markets it serves and the number
of flights offered. The Company placed three additional Boeing 737-200 aircraft
in service in 1994 and operated a total of five aircraft through October 1995.
In October 1995, the Company leased two Boeing 737-300 aircraft which were
placed in service during November 1995 in conjunction with adding four new, high
volume routes linking Denver to Los Angeles and San Francisco, California,
Minneapolis-St. Paul, Minnesota, and Salt Lake City, Utah. The Company
significantly rescheduled its flights in 1995 through the elimination of six
lesser traveled regional markets and the addition of Omaha, Nebraska, Las Vegas,
Nevada, Chicago (Midway), Illinois and Phoenix, Arizona to its schedule. Flights
to Seattle/Tacoma commenced on May 1, 1996, and flights to San Diego, California
and St. Louis, Missouri commenced on June 1, 1996 in conjunction with the
addition of two more Boeing 737-200 jets to the Company's fleet. Effective
September 11, 1996, the Company eliminated its Bismarck and Fargo, North Dakota
destinations. Since September 11, 1996, the Company's nine leased jet aircraft
have been serving 13 cities from its base of operations at Denver International
Airport ("DIA").

     In November 1996, the Company took delivery of an additional Boeing 737-300
which will be available for passenger service in December 1996. When this
aircraft becomes available for service, the Company will rotate each of its
remaining aircraft through scheduled maintenance checks in December 1996 and
January 1997. All ten aircraft are expected to be available for scheduled
service following completion of the maintenance cycles in mid-February 1997.

     The Company has agreed to lease two additional new Boeing 737-300s in April
and August 1997, which will permit it to add approximately two new cities to its
route system. Pending future aircraft availability, the Company plans to lease
additional jets in the 737 series for possible deliveries in 1997, which would
permit the Company to further expand its lines of service. The demand for used
Boeing 737 aircraft has increased significantly in the past year and aircraft
supplies are limited.

     The Company's initial strategy in July 1994 was to enter regional markets
where a series of earlier route abandonments by Continental Airlines and other
major airlines had resulted in either only limited jet service to Denver,
service transfers to commuter carriers operating small turboprop aircraft, or no
nonstop or direct service to Denver at all. In its early planning, the Company
had expected to capture two types of traffic on its selected routes: "local"
passengers (those either beginning or ending their trips in Denver) and
"connecting" passengers (those transferring to or from other airlines for
flights to destinations beyond Denver).

     After entering its first markets in July 1994, the Company encountered
difficulty in attracting connecting traffic because United Airlines, Denver's
dominant carrier, chose not to enter into interline agreements with the Company.
The Company's ability to attract connecting traffic was further inhibited by the
substantial reduction in service of Continental Airlines at Denver. As a result,
the Company modified its strategy to develop its own connecting hub at Denver.
The Company modified and expanded its route structure to routes that are more
dependent on local traffic and less dependent on connecting traffic.

     The Company further modified and expanded its operations beginning in
September 1995 to emphasize higher volume markets, operated seven aircraft for
the first two months of the quarter ended June 30, 1996, and added two
additional aircraft in June 1996. The Company operated five aircraft during the
six months ended September 30, 1995. Therefore, the Company's results of
operations for the months ended September 30, 1995 and 1996 are not necessarily
comparable or indicative of future operating results.

     Effective in September 1996, the Company began performing scheduled
maintenance on its aircraft using its 

                                       7
<PAGE>
 
own mechanics, with the exception of major maintenance cycles which continue to
be performed by a third party.
 
     This report contains forward-looking statements that describe the Company's
business and prospects and the expectations of the Company and management.
These statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those set forth.  These risks and
uncertainties include, but are not limited to:  the timing of, and expense
associated with, expansion and modification of the Company's operations in
accordance with its business strategy or in response to competitive pressures or
other factors such as the Company's commencement of "above wing" operations at
several airports and assumption of maintenance operations at DIA; general
economic factors and behavior of the fare-paying public and the federal
government, such as the crash in May 1996 of another low-fare carrier's aircraft
that resulted in a federal investigation of the carrier, suspension of the
carrier's operations and increased federal scrutiny of low-fare carriers
generally that may increase the Company's operating costs or otherwise adversely
affect the Company; actions of competing airlines such as United Airlines'
recent announcement of commencement of its United "Shuttle" operation in Denver
and pricing actions of competitors; the current limited supply of Boeing 737
aircraft and the higher lease costs associated with such aircraft, which
inhibits the Company's ability to achieve operating economies and implement its
business strategy; and reinstatement of the 10% excise tax on air transportation
and increasing aviation fuel prices.  Because the Company's business, like that
of the airline industry generally, is characterized by high fixed costs relative
to revenues and low profit margins, small fluctuations in the Company's yield
per RPM or expense per ASM can significantly affect operating results.

RESULTS OF OPERATIONS

The Company incurred a net loss of $853,000  or $.11 per share for the six
months ended September 30, 1996 as compared to a net loss of $2,843,000 or $.78
per share, for the six months ended September 30, 1995. Management believes that
the improvement in the operating results for the six months ended June 30, 1996
is largely due to the change in its business strategy to provide service to
higher volume markets, the increase in the number of aircraft in service and
higher aircraft utilization.  During the six months ended September 30, 1995,
the Company was serving six of its original regional markets.  During the six
months ended September 30, 1996, the Company continued to serve two of its
original regional markets until September 11, 1996, when service to those
markets was discontinued.

     The Company incurred an operating loss of $2,547,000 during the quarter
ended September 30, 1996 following two profitable quarters with operating
incomes of $833,000 and $1,138,000 for the three months ended March 31, 1996 and
June 30, 1996, respectively.  During the quarter ended September 30, 1996, the
Company experienced higher fuel costs, short-term lease expenses for aircraft to
replace its aircraft during scheduled maintenance cycles, increased competition
that drove down its average fare, increased maintenance expenses as it commenced
in-house maintenance operations in September 1996, and the return of the 10%
passenger excise tax on August 27, 1996.

                                       8
<PAGE>
 
     The following table sets forth certain quarterly financial and operating
data regarding the Company for the last fifteen months of operations ended
September 30, 1996.

<TABLE> 
<CAPTION> 
                                      SELECTED FINANCIAL AND OPERATING DATA

                                                                  QUARTER ENDED
                                  ----------------------------------------------------------------------------
                                    SEPTEMBER 30,   DECEMBER 31,     MARCH 31,      JUNE 30,     SEPTEMBER 30,
                                    --------------  -------------  -------------  -------------  --------------
                                         1995           1995           1996           1996            1996
                                    --------------  -------------  -------------  -------------  --------------
<S>                                 <C>             <C>            <C>            <C>            <C>
Passenger revenue                    $ 13,725,000   $ 16,831,000   $ 25,553,000   $ 27,570,000    $ 29,518,000
Revenue passengers carried                159,000        202,000        267,000        271,000         308,000
Revenue passenger miles
  (RPMs)(1)                            88,372,000    136,454,000    183,340,000    190,541,000     220,982,000
Available seat miles
  (ASMs)(2)                           160,244,000    226,106,000    296,974,000    313,216,000     363,667,000
Passenger load factor(3)                     55.2%          60.4%          61.7%          60.8%           60.8%
Break-even load factor(4)                    59.3%          73.6%          59.7%          58.3%           66.0%
Block hours(5)                              4,170          5,426          6,964          7,297           8,414
Average daily block hour
  utilization(6)                             9.21          10.33          10.93          11.46           10.98
Yield per RPM(7)                           15.53c         12.33c         13.94c         14.47c          13.36c
Yield per ASM(8)                            8.57c          7.44c          8.60c          8.80c           8.12c
Expense per ASM                             9.53c          9.24c          8.48c          8.62c           8.98c
Passenger revenue per block hour     $   3,291.47   $   3,102.90   $   3,669.30   $   3,778.27    $   3,508.20
Average fare(9)                      $         85   $         80   $         93   $         98    $         92
Average aircraft in service                   4.9            5.7            7.0            7.3             8.3
 
Operating income (loss)               ($1,020,000)   ($3,687,000)  $    833,000   $  1,138,000     ($2,547,000)
Net income (loss)                       ($986,000)   ($3,555,000)  $    816,000   $  1,336,000     ($2,189,000)
</TABLE>

(1) "Revenue passenger miles," or RPMs, are determined by multiplying the number
     of fare-paying passengers carried by the distance flown.
(2) "Available seat miles," or ASMs, are determined by multiplying the number
     of seats available for passengers by the number of miles flown.
(3) "Passenger load factor" is determined by dividing revenue passenger miles
     by available seat miles.
(4) "Break-even load factor" is the passenger load factor that will result in
     operating revenues being equal to operating expenses, assuming constant
     revenue per passenger mile and expenses
(5) "Block hours" represent the time between aircraft gate departure and
     aircraft gate arrival.
(6) "Average daily block hour utilization" represents the total block hours
     divided by the weighted average number of aircraft days in service.
(7) "Yield per RPM" is determined by dividing passenger revenues by revenue
     passenger miles.
(8)  "Yield per ASM" is determined by dividing passenger revenues by available
     seat miles.
(9)  "Average fare" excludes revenue included in passenger revenue for non-
     revenue passengers, administrative fees, and revenue recognized for unused
     tickets that are greater than one year from issuance date.

                                       9
<PAGE>
 
     The following table provides information regarding the Company's operating
revenues and expenses for the six months ended September 30, 1995.

<TABLE>
<CAPTION>
                                                              REVENUE/      YIELD/     YIELD/      
                                   AMOUNT        PERCENT     BLOCK HOUR      ASM        RPM        
                                -------------   ---------  -------------  ---------  --------        
<S>                             <C>             <C>        <C>            <C>        <C>         
REVENUES                                                                                           
Passenger                         $26,145,000       96.4%     $3,115.10       8.14c    16.33c      
Cargo                             $   571,000        2.1%     $   68.03       0.18c     0.36c      
Other                             $   416,000        1.5%     $   49.57       0.13c     0.26c      
                                -------------   ---------  -------------  ---------  --------        
  Total operating revenues        $27,132,000      100.0%     $3,232.69       8.45c    16.95c      
                                =============   =========  =============  =========  ========       
 
                                                 PERCENT                                       
                                                   OF         EXPENSE/     EXPENSE/         
                                    AMOUNT       REVENUE     BLOCK HOUR      ASM            
                                -------------   ---------  -------------  ---------   
EXPENSES                                                                                    
Flight operations                 $10,350,000       38.1%     $1,233.17       3.22c         
Aircraft and traffic servicing    $ 7,483,000       27.6%     $  891.58       2.33c         
Maintenance                       $ 5,066,000       18.7%     $  603.60       1.58c         
Promotion and sales               $ 5,404,000       19.9%     $  643.87       1.68c         
General and administrative        $ 1,662,000        6.1%     $  198.02       0.52c         
Depreciation and amortization     $   253,000        0.9%     $   30.14       0.08c         
                                -------------   ---------  -------------  ---------  
                                  $30,218,000      111.4%     $3,600.38       9.41c         
                                =============   =========  =============  =========  
</TABLE>

     The following table provides information regarding the Company's operating
revenues and expenses for the six months ended September 30, 1996.

<TABLE>
<CAPTION>
                                                              REVENUE/      YIELD/     YIELD/  
                                    AMOUNT       PERCENT     BLOCK HOUR      ASM        RPM    
                                -------------   ---------  -------------  ---------  --------        
<S>                             <C>             <C>        <C>            <C>        <C>     
REVENUES                                                                                       
Passenger                         $57,088,000       98.0%     $3,633.63       8.43c    13.87c  
Cargo                             $   816,000        1.4%     $   51.94       0.12c     0.20c  
Other                             $   338,000        0.6%     $   21.51       0.05c     0.08c  
                                -------------   ---------  -------------  ---------  --------        
  Total operating revenues        $58,242,000      100.0%     $3,707.08       8.60c    14.15c  
                                =============   =========  =============  =========  ========        
 
                                                 PERCENT                             
                                                   OF         EXPENSE/     EXPENSE/  
                                    AMOUNT       REVENUE     BLOCK HOUR      ASM     
                                -------------   ---------  -------------  ---------   
EXPENSES                                                                             
Flight operations                 $23,841,000       40.9%     $1,517.47       3.52c  
Aircraft and traffic servicing    $12,703,000       21.8%     $  808.54       1.88c  
Maintenance                       $10,147,000       17.4%     $  645.85       1.50c  
Promotion and sales               $10,248,000       17.6%     $  652.28       1.51c  
General and administrative        $ 2,216,000        3.8%     $  141.05       0.33c  
Depreciation and amortization     $   495,000        0.8%     $   31.51       0.07c  
                                -------------   ---------  -------------  ---------   
                                  $59,650,000      102.4%     $3,796.70       8.81c  
                                =============   =========  =============  =========   
</TABLE> 

                                       10
<PAGE>
 
REVENUES

     General.  Airline revenues are primarily a function of the number of
passengers carried and fares charged by the airline.  The Company believes that
revenues will gradually increase in a new market over a 60 to 120 day period as
anticipated market penetration is achieved.  During the six months ended
September 30, 1996, the Company commenced service to Seattle-Tacoma, Washington
on May 1, 1996 and San Diego, California and St. Louis, Missouri on June 1,
1996.

     The Company's results are highly sensitive to changes in fare levels. Fare
pricing policies have a significant impact on the Company's revenues.  The
Company's average fare for the six months ended September 30, 1996 of $95 was
slightly higher than the average fare of $90 for the six months ended June 30,
1995 largely as a result of the Company's new yield management system and the
expiration of a 10% excise tax on air transportation which occurred effective
December 31, 1995 offset slightly by lower introductory fares to its new
markets.  On August 27, 1996 the 10% excise tax on air transportation was
reinstated through December 31, 1996.  The decrease in the average fare of $98
for the three months ended June 30, 1996 to $92 for the three months ended
September 30, 1996 was largely due to increased competition for traffic from
other airlines in the Company's markets and partially a result of the
reinstatement of the 10% excise tax.  Management believes that the excise tax
may expire for a short period during the first few months of 1997.  However,
some other type of consumer paid tax will be likely in the future which could
exceed 10% of the fare.  Given the elasticity of passenger demand, increases in
fares and associated taxes may result in a decrease in passenger demand.  To
maintain passenger traffic if there is an excise tax increase, the Company may
be required to adjust its net fares downward.  The Company cannot completely
predict future fare levels, which depend to a substantial degree on actions of
competitors.  When sale prices or other price changes are made by competitors in
the Company's markets, the Company believes that it must, in most cases, match
these competitive fares in order to maintain its market share.

     The Company had anticipated that the September quarter would be its
strongest and the March quarter its weakest in terms of revenue.  Passenger
volumes and therefore revenues are seasonal due to highly competitive pricing in
its markets.  Revenue for the September 1996 quarter was lower than anticipated
because the Company experienced lower fares during the September quarter due to
highly competitive pricing in its markets.  In addition, management believes
that consumer demand for its service may have been higher during the first six
months of the year as a result of passengers traveling before the excise tax was
reinstated, which reduced traffic in the September quarter.  Additionally, the
Company found it necessary to decrease prices beginning in August to maintain
passenger traffic because of the reinstatement of the excise tax and increased
competitive pricing in its markets.

     Passenger Revenue.  Passenger revenues totaled $57,088,000 for the six
months ended September 30, 1996 compared to $26,145,000 for the six months ended
September 30, 1995, or an increase of 118%.  The number of revenue passengers
carried was 308,000 for the six months ended September 30, 1996 compared to
289,000 for the six months ended September 30, 1995 or an increase of 107%. The
Company had an average of 7.8 aircraft in service during the six months ended
September 30, 1996 compared to an average of 5.0 aircraft during the six months
ended September 30, 1995 for an increase in ASMs of 355,802,000 or 110.8%.

     An airline's break-even load factor is the passenger load factor that will
result in operating revenues being equal to operating expenses, assuming
constant revenue per passenger mile and expenses.  For the six months ended
September 30, 1996, the Company's break-even load factor was 62.3% compared to a
passenger load factor of 60.8%.   For the six months ended September 30, 1995,
the Company's break-even load factor was 55.7% compared to a passenger load
factor of 49.9%.  The Company's low load factors during the six months ended
September 30, 1995 reflect the start-up nature of the airline, the difficulties
the Company encountered in entering the connecting traffic market at Denver, the
modification to the Company's initial strategy to create its own hub at Denver
and to enter higher volume markets, and public reaction to higher fares
necessary to cover the increased costs of DIA.

     The Company's load factor in the six months ended September 30, 1996
reflects the result of the Company's change in business strategy to provide
service to higher volume markets.  Management believes that its load factor for
the 

                                       11
<PAGE>
 
six months ended September 30, 1996 was affected by increased competitive fare
pricing and by the public's initial reaction to two significant airline
accidents which occurred during the six months ended September 30, 1996. One of
the accidents was an Atlanta-based low fare carrier and the other was a major
national airline where both aircraft were destroyed and all passengers and crew
were killed.

     Cargo revenues, consisting of revenues from freight and mail service,
totaled $816,000 and $571,000 for the six months ended September 30, 1996 and
1995, representing 1.4% and 2.1% of total operating revenues, respectively.
This adjunct to the passenger business is highly competitive and depends heavily
on aircraft scheduling, alternate competitive means of same day delivery service
and schedule reliability.

     Other revenues, comprised principally of liquor sales and excess baggage
fees, totaled $338,000 and $415,000 for the six months ended September 30, 1996
and 1995, respectively, and represented approximately one percent of total
operating revenues for both periods.


OPERATING EXPENSES

     Operating expenses include those related to flight operations, aircraft and
traffic servicing, maintenance, promotion and sales, general and administrative
and depreciation and amortization.  In general, operating expenses declined as a
percentage of revenue during the six months ended September 30, 1996 compared to
the six months ended September 30, 1995 because of the 114.7% increase in
revenue during the six months ended September 30, 1996.

     Flight Operations. Flight operations expenses of $23,841,000 and
$10,350,000 were 40.9% and 38.1% of total revenue for the six months ended
September 30, 1996 and 1995, respectively. Flight operations expenses include
all expenses related directly to the operation of the aircraft including fuel,
lease and insurance expenses, pilot and flight attendant compensation, in flight
catering, crew overnight expenses, flight dispatch and flight operations
administrative expenses.

     Aircraft fuel expenses include both the direct cost of fuel including taxes
as well as the cost of delivering fuel into the aircraft. Aircraft fuel costs of
$10,034,000 for 12,610,000 gallons used and $4,662,000 for 6,843,000 gallons
used resulted in an average fuel cost of 79.6c and 68.1c per gallon for the six
months ended September 30, 1996 and 1995, respectively. The average fuel cost
per gallon increased for the six months ended September 30, 1996 over the
comparable prior period due to an overall increase in the cost of fuel and loss
of the fuel tax exemption next discussed. In August 1993, the United States
increased taxes on domestic fuel, including aviation fuel, by 4.3 cents per
gallon. Airlines were exempt from this tax increase until October 1, 1995. Fuel
prices are subject to change weekly as the Company does not purchase supplies in
advance for inventory. Fuel consumption for the six months ended September 30,
1996 and 1995 averaged 804 and 815 gallons per block hour, respectively. Fuel
consumption per block hour decreased as a result of the addition of more fuel
efficient aircraft and an increase in the average length of haul.

     Aircraft lease and insurance expenses, including passenger liability
insurance but excluding wet-lease expenses, totaled $7,009,000 and $2,737,000
for the six months ended September 30, 1996 and 1995, respectively, or an
increase of 156%. The increase is attributable to the increase in the number of
aircraft in service and generally higher lease expenses on more recent aircraft
fleet additions. In August 1996, the Company entered into short-term lease
agreements in order to add a partial spare to its fleet to improve the Company's
on-time performance and completion factors and to substitute for aircraft in the
Company's fleet rotated out of service for scheduled maintenance. The final
short term aircraft lease agreement terminates March 31, 1997 when the Company
takes delivery of its eleventh aircraft. Total expenses associated with the
short term lease agreements totaled $887,000 for the months of August and
September 1996. The Company pays a premium for short-term lease agreements and
does not anticipate continuing such agreements after March 1997.

     Pilot and flight attendant compensation totaled $3,231,000 and $1,581,000
for the six months ended September 30, 1996 and 1995, respectively, or an
increase of 104%. Pilot and flight attendant compensation increased as a result
of a 

                                       12
<PAGE>
 
58% increase in the average number of aircraft in service and an increase of 87%
in block hours. The Company added two leased aircraft to its fleet in June 1996.
The Company pays pilot and flight attendant salaries for training consisting of
approximately six and three weeks, respectively, prior to scheduled increases in
service, causing the compensation expense for the six months ended September 30,
1996 to appear high in relationship to the average number of aircraft in
service. When the Company is not in the process of adding aircraft to its
system, it expects that pilot and flight attendant expense per aircraft will
normalize. With a scheduled passenger operation, and with salaried rather than
hourly crew compensation, the Company's expenses for flight operations are
largely fixed, with flight catering and fuel expenses the principal exception.
Higher aircraft utilization produces a more favorable cost per block hour or per
ASM, and the Company benefited from an increase in aircraft utilization during
the six months ended September 30, 1996. Average utilization during the six
months ended September 30, 1996 was 11.2 block hours per day per aircraft,
compared with the comparable prior period of 9.2 block hours per day per
aircraft.

     Aircraft and Traffic Servicing. Aircraft and traffic servicing expenses
were $12,703,000 and $7,483,000 for the six months ended September 30, 1996 and
1995, respectively, and represented 21.8% and 27.6% of total revenue. These
include all expenses incurred at the airports as well as station operations
administration and flight operations ground equipment maintenance. Station
expenses include landing fees, facilities rental, station labor and ground
handling expenses. Station expenses as a percentage of revenue decreased during
the six months ended September 30, 1996 over the six months ended September 30,
1995 as a result of the Company's rental costs (in particular, the gate rentals
at DIA) which are largely fixed costs, remaining relatively constant as compared
to the increase in revenue. Additionally, the Company began its own "above wing"
operations at DIA (including passenger check-in at ticket counters, concourse
gate operations, cabin cleaning and baggage services) effective April 1996, at
Los Angeles International Airport in June 1996, and Chicago (Midway) in July
1996 rather than contracting these services through a third party supplier.
Aircraft and traffic servicing expenses will increase with the addition of new
cities; however, the increased existing gate utilization at DIA is expected to
reduce per unit expenses.

     Maintenance. Maintenance expenses of $10,147,000 and $5,066,000 were 17.4%
and 18.7% of total revenue for the six months ended September 30, 1996 and 1995,
respectively. These include all maintenance, labor, parts and supplies expenses
related to the upkeep of the aircraft. Routine maintenance is charged to
maintenance expense as incurred while major engine overhauls and heavy
maintenance checks are accrued each quarter. Maintenance cost per block hour was
$647 and $604 per block hour for the six months ended September 30, 1996 and
1995, respectively. Continental Airlines had been providing routine aircraft
maintenance services for the Company at Denver. Continental discontinued this
service in mid-September 1996. As a result of the discontinued service, the
Company hired its own aircraft mechanics to perform routine maintenance and
subleased a portion of a hangar from Continental at DIA in which to perform this
work. The performance of this work by the Company, together with the cost of
leasing adequate hangar space, increased the Company's maintenance cost per
block hour. Management believes that these costs will normalize as it adds
additional aircraft to its fleet.

     Promotion and Sales.  Promotion and sales expenses totaled $10,248,000 and
$5,404,000 and were 17.6% and 19.9% of passenger revenue for the six months
ended September 30, 1996 and 1995, respectively.  These include advertising
expenses, telecommunications expenses, wages and benefits for reservationists
and reservations supervision as well as marketing management and sales
personnel. Credit card fees, travel agency commissions and computer reservations
costs are included in these costs. The promotion and sales expense per passenger
was $17.70 and $18.70 for the six months ended September 30, 1996 and 1995,
respectively.  The $1.00 per passenger decrease is largely a result of a
reduction in credit card fees and interline service charges.  During the six
months ended September 30, 1996, the Company's credit card fees were reduced
because of the increase in the dollar volume of transactions as a result of the
Company's growth in revenues.  The Company's interline service charges decreased
as a result of a 5.3% reduction in the percentage of interline revenue to total
revenues.  Interline revenue is for travel on the Company's flights ticketed by
another airline on connecting traffic.  The decrease in interline revenue as a
percentage of total revenues is a result of the decrease in routes in regional
markets.

                                       13
<PAGE>
 
     General and Administrative. General and administrative expenses for the six
months ended September 30, 1996 and 1995 totaling $2,216,000 and $1,662,000 were
3.8% and 6.1% of total revenue, respectively. These expenses include the wages
and benefits for the Company's executive officers and various other
administrative personnel. Legal and accounting expenses, supplies and other
miscellaneous expenses are also included in this category. The increase in
general and administrative expenses is largely a result of an increase in
employee benefits and office rent as a result of an increase in the number of
full and part-time employees from 388 in September 1995 to 726 in September 1996
and an increase in revenue accounting fees.

     Depreciation and Amortization. Depreciation and amortization expense of
$495,000 and $254,000 were less than one percent of total revenue for the six
months ended September 30, 1996 and 1995, respectively. These expenses include
depreciation of office equipment, ground station equipment, and other fixed
assets of the Company. Amortization of start-up and route development costs are
not included as these expenses have been expensed as incurred.

     Expenses per ASM. The Company's expenses per ASM for the six months ended
September 30, 1996 and 1995 were 8.81c and 9.41c, respectively, or a decrease of
6.4%. Increased service, as evidenced by a 110.8% increase in ASMs, and
additional aircraft contributed to economies of scale as the fixed costs
associated with the airline were spread across a larger base of operation.

     Expenses per ASM are influenced to some degree by the utilization of
aircraft and by the seating configuration that each airline employs. For
example, with the 108 seat all coach seating configuration selected by the
Company on five of its 737-200 aircraft, the expenses per ASM of the Company are
higher by 11% when compared with the 120 seat alternative used by many carriers.


LIQUIDITY AND CAPITAL RESOURCES

     The Company's balance sheet reflected cash, cash equivalents and short-term
investments of $19,663,000 at September 30, 1996.  At September 30, 1996, total
current assets were $42,748,000 as compared to $30,081,000 of total current
liabilities, resulting in working capital of $12,685,000.  At March 31, 1996,
total current assets were $25,797,000 and total current liabilities were
$25,844,000, resulting in a working capital deficit of $47,000.

     Cash used by operating activities for the six months ended September 30,
1996 and 1995 was $2,619,000 and $2,710,000, respectively. The Company's net
loss of $853,000 for the six months ended September 30, 1996 adjusted for non-
cash transactions provided $8,000 to cash from operating activities. The
significant uses of cash during the six months ended September 30, 1996 were
$1,590,000 for security deposits for the aircraft added to the fleet in June
1996 and future aircraft to be delivered in 1997 and $2,000,000 in restricted
investments for collateral to secure letters of credits which secure credit card
transactions. In October 1996 restricted cash totaling $1,537,000 became
available for operations as a result of a decrease in security requirements for
credit card transactions which decreased during the non-peak travel months of
September and October 1996. Additionally, the Company was able to remove the
collateral requirements totaling $587,000 for a surety bond issued to the
Airline Reporting Corporation to secure travel agency cash transactions. The
Company anticipates that it will be required to increase its security for credit
card transactions later in the quarter ended December 31, 1996. During the six
months ended September 30, 1995, cash used by operating activities was largely a
result of the Company's net loss of $1,980,000 after adjustments for non-cash
transactions and $659,000 for security deposits on aircraft.

     Cash used in investing activities for the six months ended September 30,
1996 was $9,819,000. The Company invested $8,562,000 in short-term investments
comprised of government backed agencies and commercial paper with maturities of
one year or less. The Company also acquired property and equipment totaling
$1,258,000 for equipment, spare parts, and improvements to the Boeing 737-300s
and the two additional Boeing 737-200s leased during the six months ended
September 30, 1996, maintenance equipment for its new maintenance facility
started in September 1996, 

                                       14
<PAGE>
 
ground equipment, computer equipment, and leasehold improvements. Cash used in
investing activities totaled $240,000 for the six months ended September 30,
1995 which consisted of capital expenditures for spare parts, ground equipment,
computer equipment, leasehold improvements and maintenance equipment and was
partially offset by miscellaneous equipment sales as a result of closing
operations at Montana points.

     Cash provided by financing activities for the six months ended September
30, 1996 and 1995 was $16,012,000 and $6,364,000, respectively. In April 1996,
the Company completed a private placement of its Common Stock that resulted in
net proceeds of approximately $2,723,000. In May 1996, the Company notified the
warrant holders of the Company's intent to exercise its redemption rights with
respect to the warrants not exercised on or before June 28, 1996. The Company
received net proceeds from the exercise of these warrants of approximately
$13,280,000. During the six months ended September 30, 1995, the Company
completed a secondary public offering of the Company's common stock with net
proceeds of $6,309,000. The Company currently has no lines of credit.

     Five of the Company's Boeing 737-200 aircraft are leased under operating
leases which expire in the year 1997. The leases provide for up to two two-year
renewal terms with no increase in basic rent. Under these leases, the Company
was required to make security deposits and makes deposits for maintenance of
these leased aircraft. These deposits totaled $625,000 and $8,254,000
respectively, at September 30, 1996.

     The Company leased two Boeing 737-300 aircraft under operating leases in
November 1995 which expire in the year 2000.  The Company was required to make
security deposits and makes deposits for maintenance of these leased aircraft.
Security and maintenance deposits for these aircraft totaled $1,505,000 and
$1,779,000, respectively, at September 30, 1996. These aircraft are compliant
with Federal Aviation Administration ("FAA") Stage 3 noise regulations.  The
Company has issued to each of the two Boeing 737-300 aircraft lessors a warrant
to purchase 100,000 shares of the Company's Common Stock at a purchase price of
$500,000.  These warrants, to the extent not earlier exercised, expire upon the
expiration dates of the aircraft leases.

     In June 1996, the Company leased two additional Boeing 737-200 aircraft
under operating leases which expire in the year 2001. The Company was required
to make security deposits totaling $858,000. Commencing July 1996 the Company
was required to make deposits for maintenance for these leased aircraft. At
September 30, 1996, these deposits totaled $489,000. These aircraft were "hush-
kitted" by the lessor at its expense during 1996 making them compliant with FAA
Stage 3 noise regulations. The Company has issued to the aircraft lessor two
warrants, each of which entitles the lessor to purchase 70,000 shares of the
Company's common stock at a purchase price of $503,300 per warrant.

     In June 1996, the Company entered into a lease for a new Boeing 737-300
aircraft which is scheduled for delivery in April 1997. The lease term for this
aircraft is eight years from date of delivery with three additional one year
renewal terms at the Company's option. Between June 1996 and February 1997, the
Company is required to make security deposits with respect to this aircraft
totaling $726,250.

     The Company has signed a letter of intent to lease a new Boeing 737-300
with scheduled delivery in August 1997.  The lease term for this aircraft is
eight years from date of delivery.

     In November 1996, the Company took delivery of a leased Boeing 737-300
aircraft which it expects to place in scheduled service in December 1996.  The
lease term for this aircraft is eight years from date of delivery. The Company
is required to secure the aircraft lease with a letter of credit totaling
$600,000.

     Management is continuing to take steps designed to improve the Company's
operating performance.  Effective September 11, 1996, the Company eliminated its
Bismarck and Fargo, North Dakota destinations due to the unprofitability of
these routes.  The aircraft used to serve these destinations were redeployed to
more heavily traveled routes elsewhere on the Company's route system.

     The Company is exploring various means to reduce expenses.  These include
use of a ticketless reservations 

                                       15
<PAGE>
 
system, further reductions in credit card fees, and an in-house revenue
accounting system. The Company believes that it can reduce its airport operating
expenses at certain cities by performing its own "above wing" operations rather
than continuing to contract out these services. The Company commenced performing
such operations at DIA in April 1996, at Los Angeles International Airport in
June 1996, at Chicago/Midway in July 1996, and Seattle-Tacoma in August 1996.
Effective October 1996, the Company began its own "above wing" operation in El
Paso, Texas.

     The Company's suppliers currently provide goods, services and operating
equipment on open credit terms.  If such terms were modified to require
immediate cash payments, the Company's cash position would be materially and
adversely affected.

     The Company's goal is to lease a number of additional aircraft to serve
additional cities from Denver. The Company believes that such a route system
would facilitate a greater volume of connecting traffic as well as a stable base
of local traffic and offset the impact of higher DIA-related operating costs
through more efficient gate utilization. The proceeds from the private placement
completed in April 1996 and the exercise of the warrants in June 1996 have
provided additional working capital for the Company and, subject to aircraft
availability, will enable it to further expand its operations through the
leasing of additional aircraft. The expansion of the Company's operations will
entail the hiring of additional employees to staff flight and ground operations
in its new markets and significant initial costs such as deposits for airport
and aircraft leases.  Because of the expansion of the Company's business and the
competitiveness of the airline industry, which often requires quick reaction by
management to changes in market conditions, the Company may require additional
capital to maintain or further expand its business notwithstanding the
significant improvement in its capital position during the six months ended
September 30, 1996.

     In November 1996, United Airlines announced that in February 1997 it will
commence service using its low fare United "Shuttle" between Denver, on the one
hand, and Phoenix and Las Vegas on the other hand, two markets in which the
Company provides service, as well as additional United Airlines flights in
certain of the Company's other markets.  United has not announced the fares
which it will charge for these services and the Company is unable to predict the
competitive impact of these actions upon it.  However, this additional
competition, as well as other competitive incursions by United and other
carriers, could have a material adverse effect on the Company's revenues and
results of operations.

                                       16
<PAGE>
 
                          PART II.  OTHER INFORMATION

Item 4:   Submission of Matters to a Vote of Security Holders
          ---------------------------------------------------

          The annual meeting of shareholders of the Company was held on
          September 13, 1996, at which a quorum for the transaction of business
          was present. Three matters were voted upon, as described below.

          (a)  Members of the Company's Board of Directors elected at the
               meeting were Samuel D. Addoms, B LaRae Orullian, Paul S. Dempsey,
               William B. McNamara and D. Dale Browning. The votes cast with
               respect to each nominee were as follows:

                    7,710,161 "For" Mr. Addoms;        23,586 "Withheld" 
                    7,709,799 "For" Ms. Orullian;      23,947 "Withheld" 
                    7,711,899 "For" Mr. Dempsey;       21,847 "Withheld" 
                    7,708,711 "For" Mr. McNamara;      25,035 "Withheld" 
                    7,709,799 "For" Mr. Browning;      39,146 "Withheld"  

          (b)  Shareholders voted to ratify an increase in the number of options
               available for grant under the Company's 1994 Stock Option Plan by
               500,000. There were 2,449,599 votes "for" this proposal, 543,226
               "against", 46,501 abstentions and 4,694,420 shares not voted.

          (c)  Shareholders ratified the appointment of KPMG Peat Marwick as the
               Company's independent public accountants for the year ending
               March 31, 1997. There were 7,661,628 votes "for" this proposal,
               54,246 "against", and 17,872 abstentions.

Item 6:        Exhibits and Reports on Form 8-K
               --------------------------------

          (a)  Exhibits

                    None

          (b)  Reports on Form 8-K

                    On July 10, 1996, the Company filed a Report on Form 8-K, 
                    Item 5, Other Events.

Item 27.1      Financial Data Schedule
               -----------------------
 

                                       17
<PAGE>
 
                                   SIGNATURES


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

 

                               FRONTIER AIRLINES, INC.



Date:  November 12, 1996       By:  /s/ Samuel D. Addoms
                               -------------------------
                               Samuel D. Addoms, Principal Executive
                               Officer and Principal Financial Officer



Date:  November 12, 1996       By:  /s/ Elissa A. Potucek
                               --------------------------
                               Elissa A. Potucek, Vice President,Controller and 
                               Principal Accounting Officer

                                       18