- 14 -

                                    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 September 30, 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            (I.R.S. Employer Identification No.)
  incorporated or organization)

    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 November
10, 1998 was 14,507,364.



<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                     5

Item 3:  Quantitative and Qualitative Disclosures 
         About Market Risk                                      15




                            PART II. OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds              16

Item 4.  Submission of Matters to a Vote of Security Holders    16

Item 5.  Other Information                                      16

Item 6.  Exhibits and Reports on Form 8-K                       16
         



<PAGE>


                          PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
FRONTIER AIRLINES, INC.
Condensed Balance Sheets
<TABLE>
<CAPTION>
                                                                                    September 30,     March 31,
                                                                                        1998            1998
                                                                                   ---------------  --------------
                                                                                    (unaudited)
<S>                                                                                <C>               <C>    
Assets
Current assets:
    Cash and cash equivalents                                                        $ 23,823,598     $ 3,641,395
    Restricted investments                                                              4,000,000       4,000,000
    Trade receivables, net of allowance for doubtful accounts of $172,295
      and $139,096 at September 30, 1998 and March 31, 1998                             9,586,154      11,661,323
    Maintenance deposits                                                               12,132,909       9,307,723
    Prepaid expenses and other assets                                                   5,483,419       3,843,694
    Inventories                                                                         1,086,300       1,164,310
    Deferred lease expenses                                                               380,975         380,975
                                                                                   ---------------  --------------
            Total current assets                                                       56,493,355      33,999,420

Security, maintenance and other deposits                                                9,320,149       7,633,143
Property and equipment, net                                                             6,156,158       5,579,019
Deferred lease and other expenses                                                         589,941         780,429
Restricted investments                                                                  3,425,813       2,606,459
                                                                                   ===============  ==============
                                                                                     $ 75,985,416    $ 50,598,470
                                                                                   ===============  ==============

Liabilities and Stockholders' Equity
Current liabilities:
    Accounts payable                                                                 $ 10,768,778    $ 13,664,750
    Air traffic liability                                                              18,302,114      18,910,441
    Other accrued expenses                                                              5,862,216       5,157,640
    Accrued maintenance expense                                                        14,575,022      12,537,228
    Note payable                                                                          121,003          -
    Current portion of obligations under capital leases                                    60,495          54,346
                                                                                   ---------------  --------------
            Total current liabilities                                                  49,689,628      50,324,405

Senior secured notes payable                                                            2,701,173       3,468,138
Accrued maintenance expense                                                             3,839,292       2,381,354
Obligations under capital leases, excluding current portion                               108,254          97,757
                                                                                   ---------------  --------------
            Total liabilities                                                          56,338,347      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; 14,280,564 and 9,253,563 shares
        issued and outstanding at September 30, 1998 and March 31, 1998                    14,280           9,253
    Additional paid-in capital                                                         53,289,418      37,954,584
    Unearned ESOP shares                                                                 (322,875)         -
    Accumulated deficit                                                               (33,333,754)    (43,637,021)
                                                                                   ---------------  --------------
            Total stockholders' equity                                                 19,647,069      (5,673,184)
                                                                                   ---------------  --------------
                                                                                     $ 75,985,416    $ 50,598,470
                                                                                   ===============  ==============
</TABLE>
See accompanying notes to financial statements.


<PAGE>


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

                                                         Three Months Ended               Six Months Ended
                                                   September 30,    September 30,   September 30,   September 30,
                                                       1998            1997             1998            1997
                                                  ---------------  --------------  ---------------  --------------

<S>                                               <C>              <C>             <C>              <C>    
Revenues:
    Passenger                                       $ 55,502,301    $ 36,021,428     $ 97,062,888    $ 69,642,878
    Cargo                                                967,071         783,609        1,971,819       1,411,418
    Other                                                383,541         808,085          705,759       1,115,496
                                                  ---------------  --------------  ---------------  --------------

            Total revenues                            56,852,913      37,613,122       99,740,466      72,169,792
                                                  ---------------  --------------  ---------------  --------------

Operating expenses:
    Flight operations                                 18,778,648      15,887,077       36,632,354      30,131,179
    Aircraft and traffic servicing                     8,453,991       7,659,465       15,591,813      14,447,958
    Maintenance                                        9,410,480       6,819,415       18,138,348      14,554,106
    Promotion and sales                                8,296,433       7,256,755       15,422,893      13,556,277
    General and administrative                         1,758,020       1,871,991        3,036,579       3,250,757
    Depreciation and amortization                        377,525         371,531          715,974         721,119                 
                                                  ---------------  --------------  ---------------  --------------

            Total operating expenses                  47,075,097      39,866,234       89,537,961      76,661,396
                                                  ---------------  --------------  ---------------  --------------

            Operating income (loss)                    9,777,816      (2,253,112)      10,202,505      (4,491,604)
                                                  ---------------  --------------  ---------------  --------------

Nonoperating income (expense):
    Interest income                                      344,403         219,525          619,972         380,331
    Interest expense                                    (217,842)         (5,679)        (458,081)        (10,216)
    Other, net                                           (34,819)         (8,993)         (61,129)        (13,427)                 
                                                  ---------------  --------------  ---------------  --------------

            Total nonoperating income, net                91,742         204,853          100,762         356,688
                                                  ---------------  --------------  ---------------  --------------

Net income (loss)                                    $ 9,869,558    $ (2,048,259)    $ 10,303,267    $ (4,134,916)                 
                                                  ===============  ==============  ===============  ==============

Earnings (loss) per share:
            Basic                                      $    0.71      $    (0.23)       $    0.78       $   (0.46)
                                                  ===============  ==============  ===============  ==============
            Diluted                                    $    0.64      $    (0.23)       $    0.71       $   (0.46)
                                                  ===============  ==============  ===============  ==============

Weighted average shares of
  common stock outstanding                            13,955,031       9,071,866       13,238,367       8,958,742
                                                  ===============  ==============  ===============  ==============

Weighted average shares of common stock and
  common stock equivalents outstanding                15,354,381       9,071,866       14,483,683       8,958,742
                                                  ===============  ==============  ===============  ==============

</TABLE>
See accompanying notes to financial statements.

<PAGE>

FRONTIER AIRLINES, INC.
Condensed Statements of Cash Flows
For the Six Months Ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>

                                                                                        1998            1997
                                                                                   ---------------  --------------
<S>                                                                                <C>              <C>    
Cash flows from operating activities:
    Net income (loss)                                                                $ 10,303,267    $ (4,134,916)
    Adjustments to reconcile net income (loss) to net cash 
    provided by operating activities:
            Employee stock option plan compensation expense                               322,875         -
            Depreciation and amortization                                               1,438,249         862,334
            Loss on sale of equipment                                                       6,793         -
            Changes in operating assets and liabilities:
                Restricted investments                                                   (819,354)           (266)
                Trade receivables                                                       2,075,169      (8,126,346)
                Security, maintenance and other deposits                               (4,228,192)     (3,061,901)
                Prepaid expenses and other assets                                      (1,639,725)     (4,205,127)
                Inventories                                                                78,010          (2,120)
                Note receivable                                                          -                 11,740
                Accounts payable                                                       (2,895,972)       (265,918)
                Air traffic liability                                                    (608,327)     17,982,369
                Other accrued expenses                                                    704,576       4,280,185
                Accrued maintenance expense                                             3,495,732       4,487,544
                                                                                   ---------------  --------------
                                                                                   
                     Net cash provided by operating activities                          8,233,101       7,827,578
                                                                                   ---------------  --------------

Cash flows used by investing activities:                                                  
    Aircraft lease deposits                                                              (284,000)       (117,500)
    Increase in restricted investments                                                   -               (750,000)
    Capital expenditures                                                               (1,259,468)     (1,077,977)
                                                                                   ---------------  --------------
                     
                     Net cash used by investing activities                             (1,543,468)     (1,945,477)
                                                                                   ---------------  --------------

Cash flows from financing activities:
    Net proceeds from issuance of common stock                                         13,395,477         396,106
    Proceeds from short-term borrowings                                                   179,664         170,318
    Principal payments on short-term borrowings                                           (58,778)        (65,526)
    Principal payments on obligations under capital leases                                (23,793)        (17,342)
                                                                                   ---------------  --------------
                     Net cash provided by financing activities                         13,492,570         483,556
                                                                                   ---------------  --------------

                     Net increase in cash and cash equivalents                         20,182,203       6,365,657

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

Cash and cash equivalents, end of period                                             $ 23,823,598    $ 16,652,110                  
                                                                                   ===============  ==============
</TABLE>

See accompanying notes to financial statements.


<PAGE>


FRONTIER AIRLINES, INC.
Notes to Condensed Financial Statements
September 30, 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 six months ended  September 30, 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 are due and payable in
     full on December 15, 2001 with interest payable  quarterly in arrears.  The
     notes are secured by  substantially  all of the assets of the Company.  The
     Wexford  agreement  contains  restrictions  primarily  related  to liens on
     assets and requires  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 will be accreted to its face value over
     the term of the notes and  included  as  interest  expense.  The  effective
     interest rate on the notes is  approximately  18.2%  including the value of
     the warrants.

     During the six months ended September 30, 1998,  Wexford  exercised 459,000
     warrants with proceeds to the Company totaling $1,377,000.  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, $1,298,634 of the
     principal  balance of the notes was  tendered  during the six months  ended
     September 30, 1998.

 (3) Common Stock

     In April 1998,  the Company sold 4,363,001  shares of its common stock,  no
     par value, 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 $13,654,694.  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 six months
     ended  September 30, 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.


<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;  recent changes to the former air  transportation  excise
tax of 10% to a  combination  of a  percentage  tax and flight  segment fee; 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 15 cities in 12 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; and El Paso, Texas. At
present,  the Company utilizes  approximately five gates at Denver International
Airport ("DIA") for approximately 66 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 15 leased jets as of October 1998,  including eight Boeing 737-200s and
seven larger Boeing 737-300s. The Company has executed letters of intent for two
new Boeing 737-300s with scheduled deliveries in November and December 1998. The
Company plans to add service to Atlanta,  Georgia,  Dallas/Fort Worth, Texas and
Las Vegas, Nevada in mid-December 1998 with the addition of these two aircraft.

       The Company's senior management team includes executives with substantial
experience  in the airline  industry,  including  persons who  occupied  similar
positions at a former  airline  called  Frontier  Airlines that served  regional
routes to and from  Denver  from 1950 to 1986.  From  time to time,  the  former
Frontier Airlines served most of the Company's current and intended markets with
jet equipment from its Denver hub.

Terminated Merger with Western Pacific Airlines

       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 ("Western  Pacific"),  a low-fare airline that had
previously used Colorado Springs, Colorado as its base of flight operations. The
Merger  Agreement was signed following  Western  Pacific's shift of a portion of
its flight  operations  to DIA, and its announced  intent to further  expand its
operations at DIA.  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 and
is in the process of liquidating its business.

Results of Operations

       The Company had net income of $10,303,000 or $0.71 per diluted  share for
the six months ended  September 30, 1998 as compared to a net loss of $4,135,000
or $0.46 per share for the six months ended  September 30, 1997. The Company had
net income of  $9,869,000  or $0.64 per diluted share for the three months ended
September  30, 1998 as compared to a net loss of  $2,048,000  or $0.23 per share
for the three months ended  September 30, 1997.  During the three and six months
ended September 30, 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 three months
ended  September 30, 1998 the Company also  experienced  higher average fares in
certain  of  its  markets  as  a  result  of  accommodating  Northwest  Airlines
passengers  while that carrier  experienced  a pilot strike  during a portion of
August and September  1998.  The Company's  cost per ASM declined to 7.76(cents)
during the six months ended  September 30, 1998 from  8.55(cents)  for the prior
comparable  period,  principally  as a result of a reduction  in 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 six months  ended
September 30, 1998, the Company's  break-even  load factor was 56.2% compared to
the passenger load factor achieved of 62.9%.  For the six months ended September
30,  1997,  the  Company's  break-even  load  factor was 62.8%  compared  to the
achieved  passenger load factor of 59.3%.  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 $117 during the six months ended September 30, 1998 from $96
during the six months ended September 30, 1997 and a decrease in its expense per
ASM to 7.76(cents) for the six months ended September 30, 1998 from  8.55(cents)
for the six months ended September 30, 1997.


<PAGE>


       The following table sets forth certain quarterly  financial and operating
data regarding the Company for the fifteen months of operations ended  September
30, 1998.

<TABLE>
<CAPTION>

                                                    Selected Financial and Operating Data

                                                                 Quarter Ended
                            ----------------------------------------------------------------------------------

<S>                          <C>               <C>              <C>              <C>            <C>
                             September 30,     December 31,      March 31,        June 30,      September 30,
                                 1997             1997             1998             1998            1998

Passenger revenue              $36,021,000      $31,922,000     $40,454,000      $41,561,000      $55,502,000
Revenue passengers carried         347,000          301,000         370,000          368,000          420,000
Revenue passenger
    miles (RPMs)(1)            282,190,000      259,443,000     328,309,000      337,555,000      387,810,000
Available seat miles
  (ASMs)(2)                    490,810,000      524,686,000     575,294,000      544,557,000      609,111,000
Passenger load factor(3)             57.5%            49.4%           57.1%            62.0%            63.7%
Break-even load factor(4)            60.8%            67.3%           60.0%            61.3%            52.3%
Block hours(5)                      10,507           11,059          12,114           11,255           12,543
Average daily block hour
  utilization(6)                      9.89            10.52           10.30            10.27            10.27
Yield per RPM (cents)(7)             12.76            12.30           12.32            12.31            14.31
Total yield per RPM                  
(cents)(8)                           13.33            12.75           12.76            12.71            14.66
Total yield per ASM                   
(cents)(9)                            7.66             6.31            7.28             7.88             9.33
Expense per ASM (cents)               8.12             8.52            7.70             7.80             7.73
Passenger revenue per
  block hour                     $3,428.29        $2,886.52       $3,339.44        $3,692.67        $4,424.94
Average fare(10)                       $99             $101            $105             $108             $125
Average aircraft in fleet             11.8             13.0            13.6             14.0             14.0

Operating income (loss)        ($2,253,000)    ($11,626,000)    ($2,437,000)        $425,000       $9,778,000
Net income (loss)              ($2,048,000)    ($11,519,000)    ($2,092,000)        $434,000       $9,869,000

</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)  "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.



<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 six  months  ended
September 30, 1998 and 1997.
<TABLE>
<CAPTION>

                               Three Months Ended September 30,            Six Months Ended September 30,
                           ------------------------------------------ -----------------------------------------
                                   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                9.11      97.6%        7.34     95.8%       8.41     97.3%       7.77      96.5%
    Cargo                    0.16       1.7%        0.16      2.1%       0.17      2.0%       0.16       2.0%
    Other                    0.06       0.7%        0.16      2.1%       0.06      0.7%       0.12       1.5%
                           ---------  ---------  ---------- --------- ---------- ---------  ---------  --------
Total revenues               9.33     100.0%        7.66    100.0%       8.64    100.0%       8.05     100.0%
                                                                                   

Operating expenses:
    Flight operations        3.08      33.0%        3.24     42.2%       3.18     36.7%       3.36      41.7%
    Aircraft and traffic                                                                  
      servicing              1.39      14.9%        1.56     20.4%       1.35     15.6%       1.61      20.0%
    Maintenance              1.55      16.5%        1.39     18.1%       1.57     18.2%       1.63      20.2%
    Promotion and sales      1.36      14.6%        1.48     19.3%       1.34     15.5%       1.51      18.8%
    General and                                                                               
      administrative         0.29       3.1%        0.38      5.0%       0.26      3.0%       0.36       4.5%
    Depreciation and                                                                              
      amortization           0.06       0.7%        0.07      1.0%       0.06      0.7%       0.08       1.0%
                           =========  =========  ========== ========= ========== =========  =========  ========
Total operating expenses     7.73      82.8%        8.12    106.0%       7.76     89.7%       8.55     106.2%
                           =========  =========  ========== ========= ========== =========  =========  ========

Total ASMs (000s)           609,111                490,810            1,153,668              896,205

</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 six months ended  September 30, 1998
and 1997 was $117 and $96,  respectively.  Management believes that the increase
in the average  fare  during the six months  ended  September  30, 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 775 miles for the
six  months  ended  September  30,  1997 to 920 miles for the six  months  ended
September 30, 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  during a portion of August and  September  1998.
Effective  October 1, 1997, the U.S.  Congress reduced the 10% excise tax to 9%,
but added a per-flight-segment  fee of $1 on domestic flights. The tax decreased
to  8%  October  1,  1998  and  decreases  to  7.5%  on  October  1,  1999.  The
per-flight-segment  fee increased to $2 effective October 1, 1998,  increases to
$2.25 effective October 1, 1999 and thereafter increases in annual amounts of 25
cents until it reaches $3 effective October 1, 2002.

       Passenger  Revenues.  Passenger revenues totaled  $97,063,000 for the six
months ended September 30, 1998 compared to $69,643,000 for the six months ended
September  30, 1997, or an increase of 39.4%.  The number of revenue  passengers
carried was  788,000 for the six months  ended  September  30, 1998  compared to
686,000 for the six months ended September 30, 1997 or an increase of 14.9%. The
Company had an average of 14 aircraft in its fleet  during the six months  ended
June 30,  1998  compared  to an average of 11.4  aircraft  during the six months
ended  September  30,  1997,  an increase  of 22.8%,  and an increase in ASMs of
257,463,000 or 28.7%.

       Cargo  revenues,  consisting  of revenues  from freight and mail service,
totaled  $1,972,000 and  $1,411,000 for the six months ended  September 30, 1998
and 1997,  respectively,  representing  2% of total  operating  revenues  and an
increase of 39.8%. 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  $706,000 and $1,116,000 or .7% and 1.5%
of total operating  revenues for each of the six months ended September 30, 1998
and 1997,  respectively.  Other revenues were higher during the six months ended
September 30, 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  $539,000 in ticket  handling fees  associated with its code share
agreement with Western  Pacific during the months of August and September  1997.
The costs  which  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
$89,538,000 and $76,661,000 for the six months ended September 30, 1998 and 1997
and represented 89.7% of and 106.2% of revenue, respectively. Operating expenses
decreased as a percentage of revenue  during the six months ended  September 30,
1998 as the Company  experienced  a  significant  reduction in 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  $36,632,000  and
$30,131,000  were  36.7% and 41.7% of total  revenue  for the six  months  ended
September 30, 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 $10,807,000 for 18,621,000  gallons used and $11,425,000 for 15,486,000
gallons used  resulted in an average fuel cost of 58(cents)  and  74(cents)  per
gallon and represented 29.5% and 37.9% of total flight  operations  expenses for
the six months ended September 30, 1998 and 1997, respectively. The average fuel
cost per gallon  decreased for the six months ended  September 30, 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 the six months ended September 30,
1998 and 1997  averaged 782 and 790 gallons per block hour,  respectively.  Fuel
consumption per block hour decreased as a result of more fuel efficient aircraft
and an increase in the average stage length.

       Aircraft lease expenses totaled  $15,181,000 (15.2% of total revenue) and
$10,329,000 (14.3% of total revenue) for the six months ended September 30, 1998
and 1997,  respectively,  or an increase of 47%.  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 from 11.4, or 22.8%,  for the six months ended September 30, 1998
and 1997, respectively.

Aircraft  insurance  expenses totaled $1,235,000 (1.2% of total revenue) for the
six months ended  September  30, 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 six months ended September 30,
1997  were  $1,300,000  (1.8% 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
has 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 $4,787,000 and $4,132,000 or 4.9% and 5.9% of passenger revenue for each
of the six months ended  September  30, 1998 and 1997,  or an increase of 13.7%.
Pilot and flight attendant  compensation  increased principally as a result of a
22.8%  increase in the average  number of aircraft in service and an increase of
21.5% in block  hours.  Pilot  and  flight  attendant  salaries  decreased  as a
percentage  of  passenger  revenue  because the  Company did not add  additional
aircraft  during the six months ended September 30, 1998. 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  $15,292,000 and $14,448,000 (an increase of 5.8%) for the six months ended
September 30, 1998 and 1997,  respectively,  and represented  15.6% and 20.0% 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 six months ended September 30, 1998
over the six months ended September 30, 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. 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 $18,138,000 and  $14,554,000  were
18.2% and 20.2% of total revenue for the six months ended September 30, 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 $762 and $743 per block hour for the six months ended September 30, 1998 and
1997,  respectively.  Maintenance  costs per block hour increased as a result of
corrosion inspections on the Company's Boeing 737-200s and revisions in airframe
and engine overhaul  estimates offset by lower maintenance costs on the four 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. 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 $15,423,000 and
$13,556,000  and were 15.5% and 18.8% of total  revenue for the six months ended
September 30, 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 six months ended  September 30,
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 six months  ended  September  30, 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 six months ended September 30, 1998 over the prior comparable period largely
as a result of the increase in revenue.

       Promotion  and sales  expenses  per  passenger  decreased  to $19.56 from
$19.76  for  the six  months  ended  September  30,  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 the month of 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 5.5% for the six months  ended
September 30, 1998 from 7.4% for the six months ended September 30, 1997.

       Advertising expenses of $1,836,000 were 1.9% of passenger revenue for the
six months ended September 30, 1998, compared to $1,237,000 or 1.8% of passenger
revenue for the six months ended September 30, 1997. During the six months ended
September 30, 1997,  the Company's  advertising  expenses were less than the six
months ended September 30, 1998 because of the code share agreement with Western
Pacific that was in effect during the six months ended  September 30, 1997.  The
Company received benefits from the advertising that Western Pacific did, that it
was able to reduce its level of advertising and related expenses.

       General and Administrative.  General and administrative  expenses for the
six months ended September 30, 1998 and 1997 totaling  $3,037,000 and $3,251,000
were 3.0% 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. During the six months
ended  September 30, 1998, the Company  relieved  approximately  $240,000 of its
employee health insurance liability which was determined to be overfunded with a
corresponding  credit to  general  and  administrative  expenses.  Without  this
adjustment,  general and  administrative  expenses would have been approximately
$3,277,000 or 3.3% of revenue.  Included in general and administrative  expenses
during  the six  months  ended  September  30,  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
$716,000 and $721,000 were approximately .7% and 1% of total revenue for the six
months ended September 30, 1998 and 1997,  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.

       Nonoperating  Income (Expense).  Net nonoperating income totaled $101,000
for the six months  ended  September  30, 1998  compared to $357,000 for the six
months ended  September 30, 1997.  Interest  income  increased  from $380,000 to
$620,000  during  the six  months  ended  September  30,  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 $458,000 during the six months
ended  September 30, 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
$380,000 during the six months ended September 30, 1998.

       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 six months ended
September 30, 1998 and 1997 were 7.76(cents) and 8.55(cents), respectively, or a
decrease of 9.2%. 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 are influenced to a degree
by the amount of  aircraft  utilization  and by the 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 six months ended
September  30, 1998 were 124 as compared to 121 seats per  aircraft  for the six
months ended September 30, 1997.

Liquidity and Capital Resources

       The  Company's  balance  sheet  reflected  cash and cash  equivalents  of
$23,824,000 at September 30, 1998 and $3,641,000 at March 31, 1998. At September
30, 1998,  total current  assets were  $56,493,000 as compared to $49,690,000 of
total current liabilities,  resulting in working capital of $6,803,000. 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  $6,063,000  at
September 30, 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  $13,677,000  combined with
cash flows from operating  activities  during the six months ended September 30,
1998.

       Cash provided by operating  activities for the six months ended September
30, 1998 was  $8,233,000.  This is  attributable to the Company's net income for
the period,  a decrease in receivables  and increases in other accrued  expenses
and accrued maintenance expenses,  offset by increases in security,  maintenance
and other  deposits and prepaid  expenses  and other  assets,  and  decreases in
accounts  payable  and  air  traffic  liability.   Cash  provided  by  operating
activities for the six months ended September 30, 1997 was $7,828,000.  This was
largely  attributable to an increase in air traffic liability,  accrued expenses
and accrued  maintenance  expenses,  offset by increases  in trade  receivables,
security,  maintenance and other deposits,  prepaid expenses,  and the Company's
net loss for the period.

       The large increase in cash and cash equivalents and  corresponding  large
increase in air traffic liability during the six months ended September 30, 1997
was a result of the code share agreement with Western  Pacific.  If a ticket for
travel on another airline is ticketed on the Company's  ticket stock  designated
by the other  airline's  code,  the Company  receives  the cash for the sale and
records  a  corresponding  liability  until the  passenger  has  traveled.  Upon
providing  the service,  the airline that carries the  passenger can invoice the
ticketing  carrier.  The  payment on the  invoice is made the  following  month.
During the month of October 1997,  Western Pacific and the Company  invoiced and
paid one another for travel services provided during the month of September 1997
totaling $6,949,000 and $1,970,000, respectively, or a net amount of $4,979,000.
The air traffic  liability  was  decreased by the  corresponding  amount paid to
Western Pacific.

       Cash used in investing  activities for the six months ended September 30,
1998 was $1,543,000.  The Company used $1,259,000 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 the Boeing 737-200 aircraft to be delivered in
October  1998.  Cash  used in  investing  activities  for the six  months  ended
September 30, 1997 was $1,945,000,  largely a result of capital expenditures for
rotable  aircraft  components and aircraft  leasehold costs and improvements for
aircraft  delivered in May 1997,  August and September 1997.  Additionally,  the
Company  secured the  aircraft  delivered in August 1997 with a letter of credit
totaling  $750,000.  In turn the Company  received  $325,000  from the  aircraft
lessor that was  previously  on deposit to secure this  aircraft.  The Company's
restricted investments increased $750,000 to collateralize the letter of credit.

       Cash provided by financing  activities for the six months ended September
30, 1998 and 1997 was  $13,493,000  and $484,000,  respectively.  During the six
months ended September 30, 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 $13,677,000. 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.  During the six months  ended  September  30, 1997,  the Company  received
$396,000 from the exercise of common stock options.

       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 $3,521,000, respectively, at September 30, 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.
There can be no assurances  that the Company will be successful in replacing any
or all of these 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
$3,235,000,  respectively, at September 30, 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 September 30, 1998,  these  deposits
totaled  $2,156,000.  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.

       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 September 30, 1998, the Company had made  maintenance  deposits
associated with this leased aircraft totaling $1,878,000.

       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.  As of
September  30,  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 September 30, 1998,
the Company had maintenance  deposits  associated  with these aircraft  totaling
$4,583,000.

       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 of this aircraft commencing in November 1998.

       During October 1998, the Company  executed two letters of intent with two
different  lessors for two additional new Boeing 737-300 aircraft with scheduled
deliveries in November 1998 and December 1998. 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 April 15, 2000,
and may be extended to October 31, 2000 at the lessor's  option.  The Company is
required  to secure  these  aircraft  with cash or  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 in 1998 will permit 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
also has implemented and maintains a booking capability on its Internet site.

       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.
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.  Other
potential cost savings programs include an in-house  revenue  accounting  system
and conducting certain heavy maintenance checks in-house.

       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
$850,000.

       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.

       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  if the Company does not meet
certain financial  covenants and if the credit card processor  requests that the
collateral be increased.  As of September 30, 1998, the Company did not meet the
financial  covenant  requirements.  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.  As of November 9, 1998,  the Company could be
required to increase the collateral  amount to  $6,183,000.  Given the Company's
improved  financial  results,  management  is  negotiating  with the credit card
processor to reduce the  collateral  amount  although  there can be no assurance
that the Company will be able to reduce the collateral amount required.

       The Company's goal is to continue to lease  additional  aircraft to serve
additional cities from Denver. The Company is adding 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.  The  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 also plans to commence service between Denver and
Las Vegas in December 1998, another market in which United provides service with
United  "Shuttle".  This additional  competition,  as well as other  competitive
activities by United and other  carriers,  have had and could continue to have a
material adverse effect on the Company's revenues and results of operations.

       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 will be adequate to fund the
Company's operations at least through March 31, 1999. There can be no assurances
however,  that the Company will be successful in achieving  profitable operating
results in fiscal 1999,  and the Company could be required to obtain  additional
capital or other financing to fund its operations.

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 December 31, 1998, 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 2:  Changes in Securities and Use of Proceeds

              Notes  2  and  3  to  the  Condensed   Financial   Statements  are
              incorporated by reference herein.  The transactions  referenced in
              those notes were exempt from the registration  requirements of the
              Securities Act of 1933, as amended (the "Securities Act") pursuant
              to Section 4(2) thereof as sales to  institutional  investors  not
              involving a public offering. No underwriters were involved in such
              offerings.

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

              The annual  meeting of  shareholders  of the  Company  was held on
              September  10,  1998,  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,  D. Dale  Browning,  Arthur H.
                  Amron and B. Ben Baldanza. The votes cast with respect to each
                  nominee were as follows:

                     12,679,084 "For" Mr. Addoms;              55,590 "Withheld"
                     12,668,683 "For" Ms. Orullian;            65,991 "Withheld"
                     12,680,006 "For" Mr. Dempsey;             54,668 "Withheld"
                     12,657,857 "For" Mr. McNamara;            76,817 "Withheld"
                     12,662,603 "For" Mr. Browning;            72,071 "Withheld"
                     12,665,986 "For" Mr. Amron                78,688 "Withheld"
                     12,635,442 "For" Mr. Baldanza             99,232 "Withheld"

(b)               Shareholders  voted to ratify  an  increase  in the  number of
                  shares  available  for grant  under the  Company's  1994 Stock
                  Option Plan from 2,250,000 to 4,250,000.  There were 6,660,843
                  votes  "for"  this  proposal,  564,073  "against",  and 63,507
                  abstentions.

(c)               Shareholders ratified the appointment of KPMG Peat Marwick LLP
                  as the Company's  independent  public accountants for the year
                  ending March 31, 1999.  There were 12,631,988 votes "for" this
                  proposal, 35,717"against", and 66,969 abstentions.

Item 5:  Other Information

              On October 19, 1998,  James B.  Upchurch was appointed as a member
              of the Company's board of directors.

Item 6:       Exhibits and Reports on Form 8-K

              (a)      Exhibits

                       10.34   Aircraft Lease Agreement (MSN 21613)  dated as of
                               August 10,1998 between the Company and Interlease
                               Aviation Investors, L.L.C.

                       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:  November 12, 1998                 By: /s/ Samuel D. Addoms               
                                         ---------------------------------------
                                         Samuel D. Addoms, Principal Executive
                                         Officer and Principal Financial Officer


Date:  November 12, 1998                 By: /s/ Elissa A. Potucek             
                                         ---------------------------------------
                                         Elissa A. Potucek, Vice President, 
                                         Controller, Treasurer and Principal 
                                         Accounting Officer