- 15 -

                                   FORM 10-Q

                       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 December 31, 1998


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


Commission file number:  0-24126



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



         Colorado                                        84-1256945             
(State or other jurisdiction 
of incorporation or organization)           (I.R.S. Employer 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


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


The number of shares of the Company's  Common Stock  outstanding  as of February
10, 1999 was 15,792,814.



<PAGE>



                                TABLE OF CONTENTS

                          PART I. FINANCIAL INFORMATION
                                                                      Page

Item 1.  Financial Information

Financial Statements                                                   1

Item 2.  Management's Discussion and Analysis of Financial 
         Condition and Results of Operations                           6

Item 3:  Quantitative and Qualitative Disclosures About Market Risk   17




                           PART II. OTHER INFORMATION

Item 5.  Other Information                                            17

Item 6.  Exhibits and Reports on Form 8-K                             17




<PAGE>


                          PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
FRONTIER AIRLINES, INC.
Condensed Balance Sheets
<TABLE>
<CAPTION>
<S>                                                                               <C>               <C>
                                                                                   December 31,       March 31,
                                                                                       1998              1998
                                                                                  ---------------   ---------------
                                                                                   (unaudited)
Assets
Current assets:
    Cash and cash equivalents                                                        $25,322,423       $ 3,641,395
    Restricted investments                                                             4,000,000         4,000,000
    Trade receivables, net of allowance for doubtful accounts of $191,834
      and $139,096 at December 31, 1998 and March 31, 1998                            10,164,432        11,661,323
    Maintenance deposits                                                              12,025,502         9,307,723
    Prepaid expenses and other assets                                                  6,796,423         3,843,694
    Inventories                                                                        1,192,077         1,164,310
    Deferred lease expenses                                                              380,975           380,975
                                                                                  ---------------   ---------------
            Total current assets                                                      59,881,832        33,999,420

Security, maintenance and other deposits                                              10,289,233         7,633,143
Property and equipment, net                                                            6,900,406         5,579,019
Deferred lease and other expenses                                                        494,697           780,429
Restricted investments                                                                 4,555,332         2,606,459
                                                                                  ===============   ===============
                                                                                     $82,121,500      $ 50,598,470
                                                                                  ===============   ===============

Liabilities and Stockholders' Equity
Current liabilities:
    Accounts payable                                                                 $ 9,842,383      $ 13,664,750
    Air traffic liability                                                             20,301,758        18,910,441
    Other accrued expenses                                                             5,357,643         5,157,640
    Accrued maintenance expense                                                       15,987,605        12,537,228
    Note payable                                                                          61,006          -
    Current portion of obligations under capital leases                                   49,837            54,346
                                                                                  ---------------   ---------------
            Total current liabilities                                                 51,600,232        50,324,405

Senior secured notes payable                                                             814,019         3,468,138
Accrued maintenance expense                                                            4,955,805         2,381,354
Obligations under capital leases, excluding current portion                              102,605            97,757
                                                                                  ---------------   ---------------
            Total liabilities                                                         57,472,661        56,271,654
                                                                                  ---------------   ---------------

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 40,000,000 shares; 15,316,444 and 9,253,563 shares
        issued and outstanding at December 31, 1998 and March 31, 1998                    15,316             9,253
    Additional paid-in capital                                                        55,507,746        37,954,584
    Accumulated deficit                                                              (30,874,223)      (43,637,021)
                                                                                  ---------------   ---------------
            Total stockholders' equity                                                24,648,839        (5,673,184)
                                                                                  ---------------   ---------------
                                                                                     $82,121,500      $ 50,598,470
                                                                                  ===============   ===============
</TABLE>

See accompanying notes to financial statements.



<PAGE>




FRONTIER AIRLINES, INC.
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
<S>                                             <C>             <C>             <C>                 <C>

                                                       Three Months Ended                Nine Months Ended
                                                December 31,     December 31,      December 31,      December 31,
                                                    1998             1997              1998              1997
                                                --------------  ----------------  ---------------   ---------------

Revenues:
    Passenger                                    $ 49,112,767      $ 31,921,525     $146,175,655     $ 101,564,403
    Cargo                                           1,279,175           596,736        3,250,994         2,008,154
    Other                                             301,646           569,822        1,007,405         1,685,318
                                                --------------  ----------------  ---------------   ---------------

            Total revenues                         50,693,588        33,088,083      150,434,054       105,257,875
                                                --------------  ----------------  ---------------   ---------------

Operating expenses:
    Flight operations                              19,894,445        17,866,945       56,526,799        47,998,124
    Aircraft and traffic servicing                  8,584,155         8,376,494       24,175,968        22,824,452
    Maintenance                                     9,178,653         9,052,299       27,317,001        23,606,405
    Promotion and sales                             8,365,827         7,481,557       23,788,720        21,037,834
    General and administrative                      1,989,114         1,503,212        5,025,693         4,753,969
    Depreciation and amortization                     438,380           433,350        1,154,354         1,154,469
                                                --------------  ----------------  ---------------   ---------------

            Total operating expenses               48,450,574        44,713,857      137,988,535       121,375,253
                                                --------------  ----------------  ---------------   ---------------

            Operating income (loss)                 2,243,014       (11,625,774)      12,445,519       (16,117,378)
                                                --------------  ----------------  ---------------   ---------------

Nonoperating income (expense):
    Interest income                                   422,217           200,604        1,042,189           580,935
    Interest expense                                 (203,789)          (62,345)        (661,870)          (72,561)
    Other, net                                         (1,911)          (31,753)         (63,040)          (45,180)
                                                --------------  ----------------  ---------------   ---------------

            Total nonoperating income, net            216,517           106,506          317,279           463,194
                                                --------------  ----------------  ---------------   ---------------

Net income (loss)                                 $ 2,459,531      $(11,519,268)     $12,762,798      $(15,654,184)
                                                ==============  ================  ===============   ===============

Earnings (loss) per share:
            Basic                                   $    0.17        $    (1.25)       $    0.93        $    (1.73)
                                                ==============  ================  ===============   ===============
            Diluted                                 $    0.15        $    (1.25)       $    0.86        $    (1.73)
                                                ==============  ================  ===============   ===============

Weighted average shares of
  common stock outstanding                         14,697,983         9,228,313       13,726,675         9,048,926
                                                ==============  ================  ===============   ===============

Weighted average shares of common stock and
  common stock equivalents outstanding             16,117,426         9,228,313       14,875,968         9,048,926
                                                ==============  ================  ===============   ===============
</TABLE>

See accompanying notes to financial statements.



<PAGE>



FRONTIER AIRLINES, INC.
Condensed Statements of Cash Flows
For the Nine Months Ended December 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
<S>                                                                               <C>               <C>     

                                                                                       1998              1997
                                                                                  ---------------   ---------------
Cash flows from operating activities:
    Net income (loss)                                                                $12,762,798      $(15,654,184)
                                                                                                      
    Adjustments to reconcile net income (loss) to net cash provided by operating
        activities:
            Employee stock option plan compensation expense                              645,750               -              
            Depreciation and amortization                                              1,640,062         1,386,633
            Loss on sale of equipment                                                      6,793               -
            Changes in operating assets and liabilities:
                Restricted investments                                                  (828,873)       (2,250,266)
                Trade receivables                                                      1,496,891          (836,136)
                Security, maintenance and other deposits                              (5,089,869)       (3,383,149)
                Prepaid expenses and other assets                                     (2,952,729)       (1,890,180)
                Inventories                                                              (27,767)         (207,753)
                Note receivable                                                              -              11,741
                Accounts payable                                                      (3,822,367)        2,337,583
                Air traffic liability                                                  1,391,317         3,980,925
                Other accrued expenses                                                   200,003           807,672
                Accrued maintenance expense                                            6,024,828         5,777,719
                                                                                  ---------------   ---------------
                     Net cash provided (used) by operating activities                 11,446,837        (9,919,395)
                                                                                  ---------------   ---------------

Cash flows used by investing activities:
    Aircraft lease deposits                                                             (284,000)          207,500
    Increase in restricted investments                                                (1,120,000)       (1,500,000)
    Capital expenditures                                                              (2,447,096)       (1,584,240)
                                                                                  ---------------   ---------------
                     Net cash used by investing activities                            (3,851,096)       (2,876,740)
                                                                                  ---------------   ---------------

Cash flows from financing activities:
    Net proceeds from issuance of common stock                                        14,064,381           415,357
    Proceeds from sales of senior secured notes including warrants                                       5,000,000
    Proceeds from short-term borrowings                                                  179,664           170,318
    Principal payments on short-term borrowings                                         (118,658)         (122,176)
    Principal payments on obligations under capital leases                               (40,100)          (26,787)
                                                                                  ---------------   ---------------
                    Net cash provided by financing activities                         14,085,287         5,436,712
                                                                                  ---------------   ---------------

                    Net increase (decrease) in cash and cash equivalents              21,681,028        (7,359,423)

Cash and cash equivalents, beginning of period                                         3,641,395        10,286,453
                                                                                  ---------------   ---------------

Cash and cash equivalents, end of period                                             $25,322,423       $ 2,927,030
                                                                                  ===============   ===============
</TABLE>

See accompanying notes to financial statements.



<PAGE>


FRONTIER AIRLINES, INC.
Notes to Condensed Financial Statements
December 31, 1998


(1)  Basis of Presentation

     The  accompanying   unaudited  condensed  financial  statements  have  been
     prepared in accordance with generally  accepted  accounting  principles for
     interim  financial  information  and  the  instructions  to Form  10-Q  and
     Regulation S-X. Accordingly, they do not include all of the information and
     footnotes required by generally accepted accounting principles for complete
     financial statements and should be read in conjunction with the 1998 Annual
     Report  on  Form  10-K.  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
     three and nine months ended December 31, 1998 and 1997 are not  necessarily
     indicative of the results that will be realized for the full year.

(2)  Senior Secured Notes Payable

     In December 1997,  the Company sold  $5,000,000 of 10% senior secured notes
     to Wexford  Management LLC  ("Wexford").  The notes were due and payable in
     full on December 15, 2001 with interest payable  quarterly in arrears.  The
     notes were secured by substantially  all of the assets of the Company.  The
     Wexford  agreement  contained  restrictions  primarily  related to liens on
     assets and required  prior  written  consent for  expenditures  outside the
     ordinary  course of business.  In  connection  with this  transaction,  the
     Company  issued  Wexford  warrants to purchase  1,750,000  shares of Common
     Stock at $3.00 per share. The Company  determined the value of the warrants
     to be  $1,645,434  and recorded the value as equity in  additional  paid-in
     capital.  The  balance of the notes were to be  accreted  to its face value
     over the term of the notes and included as interest expense.  The effective
     interest rate on the notes was  approximately  18.2% including the value of
     the warrants. (See Note 5.)

     During the nine months ended December 31, 1998,  Wexford exercised warrants
     to purchase  1,369,880  shares of Common Stock with proceeds to the Company
     totaling $4,109,640.  Under the terms of the agreement,  Wexford elected to
     tender debt for the warrant  exercise price first by application of accrued
     unpaid interest and the remainder by reducing the principal  balance of the
     notes.  As a result,  $3,912,951 of the principal  balance of the notes was
     tendered during the nine months ended December 31, 1998.

(3)  Common Stock

     In April  1998,  the Company  sold  4,363,001  shares of its Common  Stock,
     through a private placement to an institutional investor. Gross proceeds to
     the Company from the  transaction  were  $14,179,753,  of which the Company
     received net proceeds of  approximately  $13,650,000.  The Company issued a
     warrant to this investor to purchase  716,929 shares of Common Stock of the
     Company at a purchase  price of $3.75 per share,  which warrant  expires in
     April 2002.

(4)  Income Tax Expense

     The  Company's  income tax  expense  was zero for the three and nine months
     ended  December 31, 1998.  The current income tax expense for these periods
     was offset by a reduction in the Company's valuation allowance for deferred
     tax  assets,  a result  of the  Company's  ability  to  utilize  previously
     reserved for net operating loss carryforwards.

(5)  Subsequent Event

     In January 1999, Wexford,  the holder of the senior secured notes (see Note
     2),  exercised an additional  49,000  warrants with proceeds to the Company
     totaling  $147,000.  Under the terms of the agreement,  Wexford  elected to
     tender debt for the warrant  exercise price first by application of accrued
     unpaid interest and the remainder by reducing the principal  balance of the
     notes. As a result, an additional  $145,208 of the principal balance of the
     notes was tendered. In January 1999, the Company paid the remaining balance
     of the note in full which  totaled  $941,841,  thereby  terminating  all of
     Wexford's security interests in the Company's assets.  Wexford had warrants
     to purchase  331,120 shares of Common Stock  outstanding as of the date the
     notes were paid. As of February 10, 1999,  subsequent to the pay-off of the
     notes,  Wexford exercised warrants to purchase 261,120 additional shares of
     Common Stock with total proceeds to the Company of $783,360.


<PAGE>


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

This report contains  forward-looking  statements  within the meaning of Section
21E of the  Securities  Exchange  Act of 1934 that  describe  the  business  and
prospects of Frontier Airlines, Inc. (the "Company") and the expectations of the
Company  and  management.  When used in this  document,  the  words  "estimate,"
"anticipate,"  "intend," "project,"  "management believes" and similar words and
phrases are intended to identify  forward-looking  statements.  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  passenger  service  and  ground  handling
operations at several airports and assumption of maintenance and ground handling
operations at DIA with its own employees;  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 increasing  capacity and pricing actions of United
Airlines and other competitors;  the availability of Boeing 737 aircraft,  which
may inhibit the Company's ability to achieve  operating  economies and implement
its business strategy; and uncertainties regarding aviation fuel prices. Because
the  Company's  business,  like  that  of the  airline  industry  generally,  is
characterized  by high fixed costs relative to revenues,  small  fluctuations in
the  Company's  yield  per  RPM or  expense  per ASM  can  significantly  affect
operating results.

General

       The  Company is a  low-fare,  full-service  commercial  airline  based in
Denver,  Colorado.  The Company currently operates routes linking its Denver hub
to 18 cities in 14 states spanning the nation from coast to coast. The Company's
current route system  extends from Denver to Los Angeles,  San Francisco and San
Diego,   California;   Chicago   and   Bloomington/Normal,   Illinois;   Boston,
Massachusetts;   Baltimore,  Maryland;   Seattle/Tacoma,   Washington;  Phoenix,
Arizona; Minneapolis/St. Paul, Minnesota; Salt Lake City, Utah; Omaha, Nebraska;
Albuquerque,  New Mexico, New York (LaGuardia), New York; El Paso and Dallas/Ft.
Worth, Texas;  Atlanta,  Georgia; and Las Vegas, Nevada. At present, the Company
utilizes  approximately  six gates at Denver  International  Airport ("DIA") for
approximately 83 daily flight departures and arrivals.

       Organized in February 1994, the Company  commenced  flight  operations in
July 1994 with two leased Boeing 737-200 jet aircraft. It has since expanded its
fleet to 17 leased jets as of December 1998, including eight Boeing 737-200s and
nine larger Boeing 737-300s.

       On June 30,  1997,  the Company  signed an  Agreement  and Plan of Merger
("the Merger Agreement")  providing for the merger (the "Merger") of the Company
with Western Pacific Airlines.  Pursuant to the Merger Agreement, a "code share"
marketing  alliance  between the Company and Western Pacific went into effect on
August 1, 1997, in effect integrating the route networks of the two airlines. On
September  29, 1997,  both  companies  mutually  agreed to terminate  the Merger
Agreement and the  code-share  arrangement.  The  separation of the two carriers
required the Company to implement a costly  restructuring of its flight schedule
and route  system to support a  stand-alone  operation  competing  against  both
Western Pacific and United Airlines, the dominant air carrier at DIA. On October
5, 1997,  Western  Pacific  filed for  protection  under  Chapter 11 of the U.S.
Bankruptcy  Code.  Western  Pacific ceased  operations on February 4, 1998. This
transaction  and  the  Company's  competition  with  Western  Pacific  adversely
affected the Company's  results of operations for the nine months ended December
31, 1997.

Results of Operations

       The Company had net income of  $12,763,000 or .86(cent) per diluted share
for the  nine  months  ended  December  31,  1998 as  compared  to a net loss of
$15,654,000 or 1.73(cent) per share for the nine months ended December 31, 1997.
The Company had net income of  $2,460,000 or .15(cent) per diluted share for the
three months ended December 31, 1998 as compared to a net loss of $11,519,000 or
1.25(cent)  per share for the three months ended  December 31, 1997.  During the
three  and  nine  months  ended  December  31,  1998 as  compared  to the  prior
comparable period, the Company experienced higher fares as a result of increases
in  business  travelers,  decreased  competition  as a result  of the  demise of
Western Pacific, and an increase in the average length of haul and stage length.
During the nine months ended  December 31,  1998,  the Company also  experienced
higher  average  fares in  certain of its  markets as a result of  accommodating
Northwest  Airlines  passengers during that carrier's pilot strike in August and
September  1998.  The Company's  cost per ASM declined to 7.72(cent)  during the
nine months ended  December 31, 1998 from  8.54(cent)  for the prior  comparable
period,  principally  as a result of lower fuel  prices and  improved  operating
efficiencies  and  economies of scale as the  Company's  fixed costs were spread
across a larger base of operations.

       Small  fluctuations in the Company's yield per RPM or expense per ASM can
significantly affect operating results because the Company, like other airlines,
has high fixed costs and low operating margins in relation to revenues.  Airline
operations  are highly  sensitive to various  factors,  including the actions of
competing airlines and general economic factors,  which can adversely affect the
Company's liquidity, cash flows and results of operations.

       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 nine months ended
December 31, 1998,  the Company's  break-even  load factor was 54.4% compared to
the passenger load factor achieved of 59.6%.  For the nine months ended December
31,  1997,  the  Company's  break-even  load  factor was 64.3%  compared  to the
achieved  passenger load factor of 55.7%.  The Company's  break-even load factor
decreased from the prior comparable period largely as a result of an increase in
its average fare to $119 during the nine months ended December 31, 1998 from $98
during the nine months ended  December 31, 1997,  an increase in its total yield
per RPM  from  13.31(cent)  for the  nine  months  ended  December  31,  1997 to
14.14(cent)  for the nine months ended  December 31, 1998, and a decrease in its
expense per ASM to 7.72(cent)  for the nine months ended  December 31, 1998 from
8.54(cent) for the nine months ended December 31, 1997.



<PAGE>


       The following table sets forth certain quarterly  financial and operating
data regarding the Company for the fifteen  months of operations  ended December
31, 1998.
<TABLE>
<CAPTION>

                                                 Selected Financial and Operating Data

                                                             Quarter Ended
                           ----------------------------------------------------------------------------------
<S>                         <C>               <C>               <C>           <C>              <C>    

                             December 31,        March 31,        June 30,      September 30,    December 31,
                                 1997              1998             1998             1998            1998

Passenger revenue             $31,922,000      $40,454,000      $41,561,000      $55,502,000     $49,113,000
Revenue passengers carried        301,000          370,000          368,000          420,000         373,000
Revenue passenger
    miles (RPMs)(1)           259,443,000      328,309,000      337,555,000      387,810,000     338,691,000
Available seat miles
  (ASMs)(2)                   524,686,000      575,294,000      544,557,000      609,111,000     632,754,000
Passenger load factor(3)            49.4%            57.1%            62.0%            63.7%           53.5%
Break-even load factor(4)           67.3%            60.0%            61.3%            52.3%           50.8%
Block hours(5)                     11,059           12,114           11,255           12,543          13,325                       
Average daily block hour
  utilization(6)                    10.52            10.30            10.27            10.27            9.57
Yield per RPM (cents)(7)            12.30            12.32            12.31            14.31           14.50
Total yield per RPM (cents)(8)                                                                         
Total yield per ASM (cents)(9)       6.31             7.28             7.88             9.33            8.01
Expense per ASM (cents)              8.52             7.70             7.80             7.73            7.66
Passenger revenue per
  block hour                    $2,886.52        $3,339.44        $3,692.67        $4,424.94       $3,685.78
Average fare(10)                     $101             $105             $108             $125            $124
Average aircraft in fleet            13.0             13.6             14.0             14.0            14.4

Operating income (loss)      ($11,626,000)     ($2,437,000)        $425,000       $9,778,000      $2,243,000
Net income (loss)            ($11,519,000)     ($2,092,000)        $434,000       $9,870,000      $2,460,000
EBITDAR(11)                   ($4,372,000)      $5,318,000       $8,384,000      $17,859,000     $11,126,000
EBITDAR as a % of revenue          (13.2%)           12.7%            19.5%            31.4%           21.9%
</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)  "Total yield per RPM" is  determined by dividing  total revenues by revenue
passenger miles.
(9)  "Total yield per ASM" is determined by dividing total revenues by available
seat miles.
(10) "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. 
(11) "EBITDAR",   or " earnings  before  interest,  income taxes,  depreciation,
amortization and aircraft rentals," is a supplemental financial measurement used
by the Company in the  evaluation  of its business and by many airline  industry
analysts.  However,  EBITDAR should only be read in conjunction  with all of the
Company's financial data summarized above and its financial statements appearing
elsewhere  herein,  and  should not be  construed  as an  alternative  either to
operating income (as determined in accordance with generally accepted accounting
principles)  as an indicator of the Company's  operating  performance or to cash
flows from  operating  activities  (as  determined in accordance  with generally
accepted accounting principles) as a measure of liquidity.

<PAGE>


The following  table  provides  operating  revenues and expenses for the Company
expressed as cents per total available seat miles ("ASM") and as a percentage of
total  operating  revenues,  as  rounded,  for the three and nine  months  ended
December 31, 1998 and 1997.
<TABLE>
<CAPTION>

                                Three Months ended December 31,             Nine Months Ended December 31,
                            -----------------------------------------  -----------------------------------------
                                  1998                 1997                  1998                 1997
                            -------------------- --------------------  -------------------  --------------------
                              Per         %        Per         %         Per        %          Per         %
                             total        of      total        of       total       of        total       of
                              ASM      Revenue     ASM      Revenue      ASM     Revenue       ASM      Revenue
<S>                         <C>        <C>       <C>        <C>        <C>       <C>        <C>         <C>


Revenues:
    Passenger                  9.36       96.9%    6.09        96.5%      8.18      97.2%      7.15       96.5%
    Cargo                       .24        2.5%     .11         1.8%       .18       2.1%       .14        1.9%    
    Other                       .06        0.6%     .11         1.7%       .06       0.7%       .12        1.6%
                            ---------  --------- ---------  ---------  --------- ---------  ----------  --------
Total revenues                 9.66      100.0%    6.31       100.0%      8.42     100.0%      7.41      100.0%
                                                                                    

Operating expenses:
    Flight operations          3.15       39.3%    3.40        54.0%      3.17      37.5%      3.38       45.6%  
    Aircraft and traffic       1.36       16.9%    1.60        25.3%      1.35      16.1%      1.61       21.7%
    servicing                                                                                            
    Maintenance                1.45       18.1%    1.72        27.4%      1.53      18.2%      1.66       22.4%
    Promotion and sales        1.32       16.5%    1.43        22.6%      1.33      15.8%      1.48       20.0%
    General and                 .31        3.9%     .29         4.5%       .28       3.3%       .33        4.5%
    administrative                                                                  
    Depreciation and            .07        0.9%     .08         1.3%       .06       0.8%       .08        1.1%
    amortization                                                                                      
                            =========  ========= =========  =========  ========= =========  ==========  ========
Total operating expenses       7.66       95.6%    8.52       135.1%      7.72      91.7%      8.54      115.3%
                            =========  ========= =========  =========  ========= =========  ==========  ========

Total ASMs (000s)            632,754              524,686              1,786,422            1,420,891                              
                             
</TABLE>

Revenues

       The  Company's  revenues are highly  sensitive to changes in fare levels.
Fare pricing  policies  have a  significant  impact on the  Company's  revenues.
Because of the  elasticity  of  passenger  demand,  the  Company  believes  that
increases  in fares  will  result  in a  decrease  in  passenger  demand in many
markets.  The Company  cannot  predict  future fare  levels,  which  depend to a
substantial  degree on actions of  competitors.  When sale prices or other price
changes are  initiated by  competitors  in the  Company's  markets,  the Company
believes that it must, in most cases,  match those competitive fares in order to
maintain its market  share.  Passenger  revenues are seasonal in leisure  travel
markets  depending on the markets'  locations and when they are most  frequently
patronized.

       The  Company's  average fare for the nine months ended  December 31, 1998
and 1997 was $119 and $98,  respectively.  Management believes that the increase
in the  average  fare during the nine months  ended  December  31, 1998 over the
prior  comparable  period  was  largely  a  result  of the  Company's  focus  on
increasing the number of business travelers,  decreased  competition as a result
of the demise of Western Pacific,  and an increase in the average length of haul
and stage length.  The average  length of haul  increased from 802 miles for the
nine months  ended  December  31,  1997 to 916 miles for the nine  months  ended
December 31, 1998. The Company also experienced  higher average fares in certain
of its markets as a result of accommodating Northwest Airlines passengers during
that carrier's pilot strike in August and September 1998.

       Passenger Revenues.  Passenger revenues totaled $146,176,000 for the nine
months ended  December  31, 1998  compared to  $101,564,000  for the nine months
ended  December  31,  1997,  or an  increase  of 43.9%.  The  number of  revenue
passengers  carried was  1,161,000  for the nine months ended  December 31, 1998
compared to 986,000 for the nine months  ended  December 31, 1997 or an increase
of 17.8%.  The Company had an average of 14.4  aircraft in its fleet  during the
nine months  ended  December  31, 1998  compared to an average of 11.8  aircraft
during the nine months  ended  December  31,  1997,  an increase of 22%,  and an
increase in ASMs of 365,531,000 or 25.7%.

       Cargo  revenues,  consisting  of revenues  from freight and mail service,
totaled  $3,251,000  and  $2,008,000 for the nine months ended December 31, 1998
and 1997, respectively,  representing 2.1% and 1.9% of total operating revenues,
respectively, or an increase of 61.9%. 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 interline handling fees, liquor
sales and excess baggage fees, totaled $1,007,000 and $1,685,000 or .7% and 1.6%
of total operating  revenues for each of the nine months ended December 31, 1998
and 1997, respectively.  Other revenues were higher during the nine months ended
December 31, 1997 as a result of ticket  handling fees  associated with the code
share  agreement with Western  Pacific.  Ticket  handling fees are earned by the
ticketing airline to offset ticketing costs incurred on segments ticketed on the
flight  operated by the Company's  code share  partner.  The Company  recognized
approximately  $857,000 in ticket  handling fees  associated with its code share
agreement  with Western  Pacific during the nine months ended December 31, 1997.
The costs that offset this revenue are included in sales and promotion expenses.

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.  Total operating expenses were
$137,989,000  and  $121,375,000  for the nine months ended December 31, 1998 and
1997 and represented 91.7% and 115.3% of total revenue, respectively.  Operating
expenses  decreased  as a  percentage  of revenue  during the nine months  ended
December 31, 1998 as the Company experienced significantly lower fuel prices and
improved  operating  efficiencies  and economies of scale as the Company's fixed
costs were spread across a larger base of operations.

       Flight  Operations.   Flight  operations   expenses  of  $56,527,000  and
$47,998,000  were 37.5% and 45.6% of total  revenue  for the nine  months  ended
December 31, 1998 and 1997, 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 $16,691,000 for 28,964,000  gallons used and $17,478,000 for 23,918,000
gallons used resulted in an average fuel cost of 57.6(cent)  and  73.1(cent) per
gallon and represented 29.5% and 36.4% of total flight  operations  expenses for
the nine months ended December 31, 1998 and 1997, respectively. The average fuel
cost per gallon  decreased for the nine months ended  December 31, 1998 from the
comparable  prior  period due to an overall  decrease in the cost of fuel.  Fuel
prices are subject to change weekly as the Company does not purchase supplies in
advance  for  inventory.  Fuel  consumption  for each of the nine  months  ended
December 31, 1998 and 1997 averaged 780 gallons per block hour.

       Aircraft lease expenses totaled  $23,387,000 (15.6% of total revenue) and
$17,041,000 (16.2% of total revenue) for the nine months ended December 31, 1998
and 1997, respectively,  or an increase of 37.2%. The increase is largely due to
higher lease expenses for larger and newer Boeing 737-300  aircraft added to the
fleet and  partially  attributable  to the  increase  in the  average  number of
aircraft to 14.4 from 11.8, or 22%, for the nine months ended  December 31, 1998
and 1997, respectively.

Aircraft  insurance  expenses totaled $1,774,000 (1.2% of total revenue) for the
nine months ended  December 31, 1998 offset by a profit  commission  of $153,000
for the  policy  period  ended June 6, 1998.  The profit  commission  was earned
because the Company had no aircraft hull  insurance  claims during the 1997-1998
policy year.  Aircraft insurance expenses for the nine months ended December 31,
1997  were  $2,075,000  (2%  of  total  revenue).  Aircraft  insurance  expenses
decreased as a percentage of revenue as a result of  competitive  pricing in the
aircraft insurance industry,  the Company's favorable experience rating since it
began flight  operations in July 1994 and economies of scale due to the increase
in fleet size.  For the policy period June 7, 1998 to June 6, 1999,  the Company
reduced its  aircraft  insurance  rates by  approximately  44.8% or an estimated
annual savings of $1,787,000 at its present fleet levels.

       Pilot and flight  attendant  salaries  before  payroll taxes and benefits
totaled $8,235,000 and $6,948,000 or 5.6% and 6.8% of passenger revenue for each
of the nine months  ended  December  31, 1998 and 1997,  or an increase of 8.5%.
Pilot and flight attendant  compensation  increased principally as a result of a
22%  increase  in the  average  number of aircraft in service and an increase of
21.1% in block hours. The Company pays pilot and flight  attendant  salaries for
training consisting of approximately six and three weeks, respectively, prior to
scheduled  increases in service which can cause the compensation  expense during
that period 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,  pilot and flight  attendant  expense per  aircraft  normalizes.  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.

       Aircraft and Traffic  Servicing.  Aircraft and traffic servicing expenses
were $24,176,000 and $22,825,000 (an increase of 5.9%) for the nine months ended
December 31, 1998 and 1997,  respectively,  and  represented  16.1% and 21.7% of
total  revenue.  These include all expenses  incurred at airports  served by the
Company,  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 nine months ended December 31, 1998
over the nine months ended December 31, 1997 as a result of the Company's rental
costs (in particular, the gate rentals at DIA and other cities where the Company
added  additional  frequencies),   which  are  largely  fixed  costs,  remaining
relatively  constant as compared to the increase in revenue.  Additionally,  the
Company began its own ground handling  operations at DIA effective  September 1,
1998 which is more cost effective than using a third party contractor.  Aircraft
and traffic servicing  expenses will increase with the addition of new cities to
the Company's route system;  however, the increased existing gate utilization at
DIA is expected to reduce per unit expenses.

       Maintenance.  Maintenance  expenses of $27,317,000 and  $23,606,000  were
18.2% and 22.4% of total revenue for the nine months ended December 31, 1998 and
1997, respectively. These include all labor, parts and supplies expenses related
to  the  maintenance  of  the  aircraft.   Routine  maintenance  is  charged  to
maintenance   expense  as  incurred  while  major  engine  overhauls  and  heavy
maintenance  check expense is accrued  monthly.  Maintenance cost per block hour
was $736 and $770 per block hour for the nine months ended December 31, 1998 and
1997,  respectively.  Maintenance  costs per block hour decreased as a result of
six new aircraft added to the Company's fleet during the past year and the fixed
rental cost of the hangar  facility  being spread over a larger  aircraft  fleet
offset by FAA mandated  corrosion  inspections  on the Company's  737-200s.  The
newer  aircraft  require  fewer routine  repairs and are generally  covered by a
warranty  period  of   approximately  up  to  three  years  on  standard  Boeing
components.  Management  believes that these costs will continue to normalize as
additional aircraft are added to the fleet.

       Promotion and Sales. Promotion and sales expenses totaled $23,789,000 and
$21,038,000  and were 15.8% and 20% of total  revenue for the nine months  ended
December 31, 1998 and 1997,  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. The
Company's  promotion and sales  expenses for the nine months ended  December 31,
1997  included  expenses as a result of the code share  agreement  with  Western
Pacific,  under which the Company incurred additional  communications,  computer
reservation,  and interline service charges and handling fees for the code share
agreement.  These  expenses  were offset,  in part,  by interline  handling fees
earned which are included in other  revenues.  The Company did not have any code
share  agreements  during the nine months  ended  December  31, 1998 that had as
large of an impact on its  expenses  as the code share  agreement  with  Western
Pacific.  Promotion and sales expenses  decreased as a percentage of revenue for
the nine months ended December 31, 1998 over the prior comparable period largely
as a result of the increase in revenue.

       Promotion  and sales  expenses  per  passenger  decreased  to $20.49 from
$21.32  for the  nine  months  ended  December  31,  1997,  as a  result  of the
elimination of expenses related to the code share agreement with Western Pacific
offset by increased  reservation  costs and an increase in credit card fees. The
costs of reservation  expenses  increased as a result of outsourcing part of the
Company's  reservations  requirements.  These  increased  costs were offset by a
decrease in travel agency  commissions.  During April 1998, the Company  reduced
travel agency  commissions to 8% from 10%, matching an 8% commission  instituted
by the Company's  competitors in the fall of 1997.  Additionally,  the Company's
direct sales, which are not subject to commissions, increased as a percentage of
passenger  revenue.  Travel agency commissions and interline service charges and
handling  fees,  as  a  percentage  of  passenger  revenue,  before  non-revenue
passengers,  administrative  fees and breakage  (revenue from expired  tickets),
decreased to 5.4% for the nine months ended  December 31, 1998 from 7.5% for the
nine months ended December 31, 1997.

       Advertising expenses of $2,654,000 were 1.8% of passenger revenue for the
nine months ended December 31, 1998, compared to $2,336,000 or 2.3% of passenger
revenue for the nine months ended  December 31, 1997. As new cities are added to
the Company's flight schedule, advertising and marketing promotions are designed
and  implemented  to increase  awareness of the Company's new service,  name and
brand  awareness.  Advertising  expenses  decreased as a  percentage  of revenue
largely as a result of the increase in the average  fare.  Additionally,  during
the nine months ended  December 31, 1997 the Company was competing  with Western
Pacific for the "low fare" market which required a higher volume of advertising.

       General and Administrative.  General and administrative  expenses for the
nine months ended December 31, 1998 and 1997 totaled  $5,026,000 and $4,754,000,
respectively,  and were  3.3% and 4.5% 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. Included in
general and  administrative  expenses  during the nine months ended December 31,
1997  were  unusual  expenses  of  approximately  $500,000  associated  with the
terminated Merger Agreement with Western Pacific.

       Depreciation and Amortization.  Depreciation and amortization expenses of
$1,154,000 were approximately .8% and 1.1% of total revenue for each of the nine
months ended December 31, 1998 and 1997. 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.

       Nonoperating  Income (Expense).  Net nonoperating income totaled $317,000
for the nine months ended  December  31, 1998  compared to $463,000 for the nine
months ended  December 31, 1997.  Interest  income  increased  from  $581,000 to
$1,042,000  during  the nine  months  ended  December  31,  1998  from the prior
comparable period due to an increase in cash balances as a result of the sale of
Common  Stock in April 1998 and an increase in cash from  operating  activities.
Interest  income was offset by  interest  expense  of  $662,000  during the nine
months ended December 31, 1998. In December 1997, the Company sold $5,000,000 of
10% senior notes.  In connection with this  transaction,  the Company issued the
lender warrants to purchase  1,750,000 shares of Common Stock.  Interest expense
paid in cash and the  accretion  of the  warrants  and  deferred  loan  expenses
totaled $562,000 during the nine months ended December 31, 1998.
See Notes 2 and 5 to Financial Statements.

       Income Tax  Expense:  The  Company has  substantial  net  operating  loss
carryforwards  (NOL's)  available to offset future taxable  income.  However,  a
portion of these  NOL's could be subject to Internal  Revenue  Code  Section 382
annual limitations.  Additionally, alternative minimum tax rules could limit the
Company's  ability to utilize a portion of the NOL's each year and could  result
in alternative minimum tax expense.

       Expenses  per ASM.  The  Company's  expenses  per ASM for the nine months
ended December 31, 1998 and 1997 were 7.72(cent) and  8.54(cent),  respectively,
or a decrease of 9.6%.  Expenses  per ASM  decreased  from the prior  comparable
period as a result of  economies  of scale as fixed costs were  spread  across a
larger base of operations,  a decrease in fuel prices,  and the average ASMs per
aircraft  having  increased as the Company added  aircraft with greater  seating
capacity as compared to earlier fleet additions. Expenses per ASM excluding fuel
for the nine  months  ended  December  31,  1998 and 1997  were  6.79(cent)  and
7.31(cent), respectively, or a decrease of 7.1%. Expenses per ASM are influenced
to a degree by the  amount  of  aircraft  utilization  and by  aircraft  seating
configuration.  For example,  with the 108 seat all coach seating  configuration
selected by the Company on five of its Boeing 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.  The  Company's  average seats per aircraft for the nine
months  ended  December  31, 1998 were 124 as compared to 122 seats per aircraft
for the nine months ended December 31, 1997.

Liquidity and Capital Resources

       The  Company's  balance  sheet  reflected  cash and cash  equivalents  of
$25,322,000  at December 31, 1998 and  $3,641,000 at March 31, 1998. At December
31, 1998,  total current  assets were  $59,882,000 as compared to $51,600,000 of
total current liabilities,  resulting in working capital of $8,282,000. At March
31, 1998,  total current  assets were  $33,999,000 as compared to $50,324,000 of
total  current   liabilities,   resulting  in  a  working   capital  deficit  of
$16,325,000.  The  Company  had a working  capital  deficit  of  $13,580,000  at
December 31, 1997. The Company's  present working capital is largely a result of
the sale in April 1998 of 4,363,001  shares of the  Company's  Common Stock with
net proceeds to the Company totaling  approximately  $13,650,000,  combined with
cash flows from operating  activities  during the nine months ended December 31,
1998.

       Cash provided by operating  activities for the nine months ended December
31, 1998 was  $11,447,000.  This is attributable to the Company's net income for
the period,  a decrease in receivables  and increases in air traffic  liability,
other accrued expenses and accrued maintenance expenses,  offset by increases in
restricted  investments,  security,  maintenance  and other deposits and prepaid
expenses  and other  assets,  and  decreases in accounts  payable.  Cash used by
operating activities for the nine months ended December 31, 1997 was $9,919,000.
This was  attributable  primarily to the Company's  net loss for the period,  an
increase in restricted investments, trade receivables, security, maintenance and
other deposits,  and prepaid  expenses and other assets,  offset by increases in
accounts  payable,  air traffic  liability,  other accrued  expenses and accrued
maintenance expenses.

       Cash used by investing  activities for the nine months ended December 31,
1998 was $3,851,000.  The Company used $2,447,000 for capital  expenditures  for
ground handling  equipment,  rotable aircraft  components and aircraft leasehold
costs and  improvements.  The Company  used cash of $284,000  for initial  lease
acquisition  security  deposits  for one Boeing  737-200  aircraft  delivered in
October  1998.  Additionally,  the Company  secured two  aircraft  delivered  in
December  1998  with  letters  of  credit  totaling  $1,120,000.  The  Company's
restricted  investments  increased  $1,120,000 to  collateralize  the letters of
credit. Cash used by investing activities for the nine months ended December 31,
1997 was  $2,877,000,  largely  a result of  capital  expenditures  for  rotable
aircraft  components and aircraft  leasehold  costs and  improvements  for three
aircraft delivered in May, August and September 1997. Additionally,  the Company
secured  aircraft  delivered  in August 1997 and  February  1998 with letters of
credit totaling  $1,500,000.  In turn the Company  received  $650,000 during the
nine months ended December 31, 1997 from the aircraft lessor that was previously
on  deposit to secure  these  aircraft.  The  Company's  restricted  investments
increased $1,500,000 to collateralize the letter of credit.

       Cash provided by financing  activities for the nine months ended December
31, 1998 and 1997 was $14,085,000 and $5,437,000,  respectively. During the nine
months ended December 31, 1998, the Company sold 4,363,001  shares of its Common
Stock through a private placement to an institutional  investor.  Gross proceeds
to the Company from the transaction were approximately $14,180,000, of which the
Company received net proceeds of approximately $13,650,000. The Company issued a
warrant to this  investor  to  purchase  716,929  shares of Common  Stock of the
Company at a purchase  price of $3.75 per share.  This warrant  expires in April
2002. Additionally,  during the nine months ended December 31, 1998, the Company
received  $208,000  from the exercise of Common Stock  options.  During the nine
months ended December 31, 1997, the Company received  $415,000 from the exercise
of Common Stock options.  In December  1997, the Company sold  $5,000,000 of 10%
senior secured notes.  In connection with this  transaction,  the Company issued
warrants to purchase 1,750,000 shares of Common Stock at $3.00 per share.


<PAGE>


       Five of the Company's  Boeing 737-200 aircraft are leased under operating
leases that originally expired in 1997. The leases provide for up to two renewal
terms of two years each with no increase in basic rent. The Company  renewed the
leases for the first  two-year  renewal  period  and these  leases now expire in
1999. 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 $4,431,000,  respectively, at December 31, 1998. These aircraft are
not compliant with FAA Stage 3 noise regulations. As their leases expire in 1999
the Company  plans to replace these  aircraft  with Stage 3 compliant  aircraft.
Although  there can be no  assurances  that the Company  will be  successful  in
replacing any or all of these aircraft, the Company has entered into a letter of
intent to lease two Boeing 737-200  advanced  aircraft to replace two of the non
Stage 3 compliant aircraft.  Management believes that the replacement  aircraft,
if any, will be newer, larger aircraft with higher monthly rental costs.

       The Company in November  1995 leased two Boeing  737-300  aircraft  under
operating  leases that 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
$2,918,000,  respectively,  at December 31, 1998. 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 an aggregate 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 that expire in the year 2001.  In  November  1997,  the
Company renegotiated one of these leases extending the lease term by one year to
2002 in return for a slight reduction in the monthly rental payment. The Company
was required to make security  deposits for these  aircraft  totaling  $858,000.
Commencing  July 1996,  the Company was  required to make  monthly  deposits for
maintenance  of these leased  aircraft.  At December 31,  1998,  these  deposits
totaled  $2,921,000.  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
an aggregate  purchase  price of $503,300 per warrant.  These  warrants,  to the
extent not earlier  exercised,  expire upon the expiration dates of the aircraft
leases.

       In November  1996,  the Company took delivery of a leased Boeing  737-300
aircraft  which it placed in scheduled  service in December 1996. The lease term
for this aircraft is eight years from date of delivery. The Company was required
to secure the  aircraft  lease with a letter of credit  totaling  $600,000.  The
Company is also required to make monthly cash deposits for  maintenance  of this
aircraft.  As of  December  31,  1998,  the  Company  had  maintenance  deposits
associated with this leased aircraft totaling $1,459,000.

       During the year ended  March 31,  1997,  the  Company  entered  into four
operating lease agreements for four additional new Boeing 737-300 aircraft.  The
Company took delivery of these aircraft in May, August and September 1997 and in
February  1998.  In connection  with the Boeing  737-300  aircraft  delivered in
September  1997,  the  Company  has issued to the  lessor a warrant to  purchase
55,000 shares of common stock at an aggregate  purchase price of $385,000.  This
warrant,  to the extent not earlier exercised,  expires upon the expiration date
of the  aircraft  lease.  As of  December  31,  1998,  the Company had made cash
security deposits totaling $1,616,000 with respect to these aircraft. During the
year ended March 31, 1998,  the Company  secured  lease  obligations  for two of
these aircraft with letters of credit totaling $1,500,000 and, in turn, $650,000
of cash security deposits was returned to the Company.  The Company's restricted
cash increased by $1,500,000 to collateralize the letters of credit.  Two of the
four leases have seven year terms,  and two have eight year terms,  in each case
from date of  delivery.  Two of the four leases have up to two one year  renewal
terms and a third may be renewed for up to three one year terms.  The Company is
required to pay monthly cash  deposits to each  aircraft  lessor based on flight
hours and cycles  operated to provide  funding of future  scheduled  maintenance
costs. As of December 31, 1998, the Company had maintenance  deposits associated
with these aircraft totaling $5,358,000.

       In October 1998,  the Company took  delivery of a leased  Boeing  737-200
advanced aircraft.  The lease term for this aircraft is seven years from date of
delivery.  The  Company has made cash  security  deposits  totaling  $284,000 to
secure the  aircraft  lease.  The Company is also  required to make monthly cash
deposits for  maintenance.  As of December 31, 1998, the Company had maintenance
deposits associated with this aircraft totaling $22,000.

       During  December 1998, the Company leased from two different  lessors two
additional new Boeing 737-300 aircraft.  The first aircraft has a 40 month lease
term from date of  delivery  with an  option  to  extend  the lease  term for an
additional 12 months. The second aircraft lease term expires on May 1, 2000, and
may be extended to October 31, 2000 at the lessor's option.  The Company secured
these aircraft with letters of credit totaling  $1,120,000.  The Company is also
required  to make  monthly  cash  deposits  for  maintenance  of these  aircraft
commencing  in January  1999.  The addition of these two aircraft  permitted the
Company's  then 17 aircraft  fleet to be in compliance  with Stage 3 noise level
requirements until January 1, 2000.

        Management is continuing to take steps designed to improve the Company's
operating  performance.  Effective  in  January  1997,  the  Company  introduced
electronic ticketing.  Passengers who call the Company directly are provided the
option of receiving a paper ticket or a  confirmation  number in lieu of a paper
ticket.  Electronic  ticketing  decreases  certain costs  including  postage and
handling costs, ticket stock, and reduced revenue accounting fees.

       The Company is exploring  various  means to increase  revenues and reduce
expenses.  The Company has  performed ad hoc charters and will  consider them in
the  future  depending  on  the  availability  of  its  fleet.  The  Company  is
considering  revenue  enhancement  initiatives  with  new  marketing  alliances.
Effective  March 1, 1999,  the Company  will begin to conduct  certain  aircraft
heavy  maintenance  checks  in-house  which is  expected  to reduce  maintenance
expenses. Other potential expense reduction programs include the installation of
an upgraded  flight  operations,  maintenance,  and parts  inventory  management
information  system which will be installed by the end of the fiscal year ending
March 31, 1999.

       The Company  began its own ground  handling  operations  at DIA effective
September  1,  1998,  a  function  which  had been  provided  by an  independent
contractor.  Ground handling  equipment required by the Company to perform these
operations   internally   necessitated  capital  expenditures  of  approximately
$800,000

       The Company's  sublease with Continental  Airlines for terminal gates and
other  related  space at DIA expires in March 2000.  If DIA is  unsuccessful  in
reallocating the cost of the inoperative  automated  baggage system on Concourse
A,  which  is  presently  subsidized  by  Continental  Airlines,  the  Company's
operating  costs to cover the additional  cost associated with this system would
increase materially. The Company's present fixed monthly rate under the terms of
the  sublease  with  Continental  would  change to a per  passenger  fee charged
directly to the Company.

       The Company has a contract with a credit card processor that requires the
Company to provide a letter of credit to match the total  amount of air  traffic
liability associated with credit card customers.  The credit card processor does
not always  require the Company to match the total  amount  depending on certain
events  or  circumstances  such as  seasonality,  ticket  price  sales,  and the
Company's  financial  condition.  In November  1997,  the credit card  processor
required  an  increase  in the  collateral  amount  from  its  present  level of
$2,000,000 to  $4,000,000,  which  increased the  Company's  current  restricted
investment balance accordingly.  The credit card processor has not requested any
increases  since  November  1997.  As of February 4, 1999,  the Company could be
required to increase the collateral amount to $7,314,000.

       The Company's goal is to continue to lease  additional  aircraft to serve
additional cities and to add flights on existing routes from Denver. The Company
added routes to Atlanta, Georgia,  Dallas/Ft. Worth, Texas and Las Vegas, Nevada
effective  December 17, 1998.  The Company  believes  that  expanding  its 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.  Expansion of the
Company's  operations  will entail the hiring of  additional  employees to staff
flight and ground operations in new markets,  and significant initial costs such
as deposits for airport and  aircraft  leases.  Because of the  expansion of the
Company's  business,  and  competition  within the airline  industry which often
requires  quick  reaction by  management  to changes in market  conditions,  the
Company may require additional capital to further expand its business.

       In February 1997,  United Airlines  commenced  service using its low fare
United "Shuttle" between Denver and Phoenix,  Arizona,  and in October 1997 such
service to Salt Lake City was added by United.  These are both  markets in which
the Company provides service, in addition to other markets where United Airlines
provides flights.  The Company commenced service between Denver and Las Vegas in
December  1998,  another  market in which  United  provides  service with United
"Shuttle".  This competition,  as well as other competitive activities by United
and other carriers, have had and could continue to have an adverse effect on the
Company's revenues and results of operations.

       Except for the nine  months  ended  December  31,  1998,  the Company has
incurred  substantial  operating  losses since its inception.  In addition,  the
Company has  substantial  contractual  commitments  for leasing and  maintaining
aircraft.  The Company  believes that its existing  cash  balances  coupled with
improved  operating  results  are and will be  adequate  to fund  the  Company's
operations at least through December 31, 1999.

Year 2000 Compliance

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

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

       The Company has designated an employee  committee that is responsible for
(1)  identifying  and assessing Year 2000 issues,  (2)  modifying,  upgrading or
replacing  computer  systems,  (3) testing internal and third party systems and,
(4)  developing  contingency  plans in the event that a system or systems  fail.
This committee  periodically reports to management regarding progress being made
in addressing the Year 2000 issue. Management,  in turn, periodically reports to
the Board of Directors on the issue.

       The Company  relies on third  parties  which  provide  goods and services
which are imperative to the Company's operations including,  but not limited to,
the U.S. Federal Aviation Administration, the U.S. Department of Transportation,
local airport authorities including DIA, utilities, communication providers, and
fuel   suppliers.   The  Company  is  reviewing,   and  has   initiated   formal
communications with, these third party service providers to determine their Year
2000 readiness,  the extent to which the Company is vulnerable to any failure by
such third  parties to  remediate  their Year 2000  problems and to resolve such
issues to the extent practicable.

       Although the Company is primarily in the  identification  and  assessment
phase of its Year 2000 project, some systems are in the modification and testing
phases.  These include the customer  reservations  and ticketing  system and the
credit card  processing  system that is  interfaced  with the  reservations  and
ticketing  system.  These systems are  outsourced and the costs of modifying and
testing  these  systems  are being  absorbed by the third  party  provider.  The
Company's  general  accounting  and payroll  systems  are being  upgraded to new
versions that are Year 2000 compliant at an  insignificant  cost to the Company.
The Company's crew and dispatch training records,  aircraft  maintenance records
and inventory  control are in the process of automating  from manual  systems to
computer  systems that are Year 2000 compliant.  The Boeing Company has verified
that the computer  systems on the aircraft  type  operated by the Company are or
will be Year 2000 compliant  before the year 2000. The Company plans to complete
its  identification  and assessment phase by February 28, 1999, its modification
and testing  phases by June 30, 1999, and its  contingency  plans by October 31,
1999.

       The Company has  utilized  existing  resources  and has not  incurred any
significant  costs to  implement  its Year  2000  project  to  date.  The  total
remaining  cost of the Year 2000 project are expected to be immaterial  and will
be funded  through  cash from  operations.  The costs and the dates on which the
Company  anticipates  it will  complete  the  Year  2000  project  are  based on
management's best estimates. There can be no guarantee that these estimates will
be achieved and actual results could differ materially from those anticipated.

       Despite  its  efforts to address  Year 2000  issues,  the  Company  could
potentially  experience  disruptions to some of its operations,  including those
resulting  from   non-compliant   systems  used  by  third  party  business  and
governmental entities. The Company's business, financial condition or results of
operations could be materially  adversely affected by the failure of its systems
or those operated by third parties upon which the Company's business relies.

Item 3:  Quantitative and Qualitative Disclosures About Market Risk

         Not applicable.


                           PART II. OTHER INFORMATION

Item 5:  Other Information

         Effective  January 11, 1999, Arthur H. Amron resigned his position as a
member of the Company's board of directors.

Item 6:  Exhibits and Reports on Form 8-K

(a)      Exhibits

10.35    Aircraft  Lease  Agreement  (MSN  28738)  dated as of November 23, 1998
         among  First  Security  Bank,  National  Association,  Lessor,   Heller
         Financial Leasing, Inc., Owner Participant, and the Company, Lessee.

10.36    Aircraft  Sublease  Agreement (MSN 28734) dated as of December 14, 1998
         between Indigo Pacific AB, Sublessor, and the Company, Sublessee.

27.1     Financial Data Schedule

(b) Reports on Form 8-K

         None.  



<PAGE>



SIGNATURES

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


FRONTIER AIRLINES, INC.


Date:  February 12, 1999                 By: /s/ Samuel D. Addoms              
                                                     
                                         Samuel D. Addoms, Principal Executive
                                         Officer and Principal Financial Officer


Date:  February 12, 1999                 By: /s/ Elissa A. Potucek             
                                                        
                                         Elissa A. Potucek, Vice President, 
                                         Controller, Treasurer and Principal 
                                         Accounting Officer