FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934 For the fiscal year ended March 31, 1999

[ ]     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)

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

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

Securities registered pursuant to Section 12(g) of the Act:

                           Common Stock, No Par Value
                                 Title of Class

Indicate by check mark whether the Registrant (1) filed all reports  required to
be filed by Section 13 or 15(d) of the  Exchange  Act  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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K or any amendment to this Form 10-K. [X]

Aggregate  market  value of Common Stock held by  non-affiliates  of the Company
computed by  reference to the last quoted price at which such stock sold on such
date  as  reported  by  the  Nasdaq   National  Market  as  of  June  18,  1999:
$190,236,939.

The number of shares of the Company's  Common Stock  outstanding  as of June 18,
1999 is 17,232,772.

Documents  incorporated  by reference - Part III is incorporated by reference to
the Company's 1999 Proxy Statement.


<PAGE>



                                TABLE OF CONTENTS



                                                                           Page

PART I

Item 1:    Business...........................................................1
Item 2:    Properties .......................................................12
Item 3:    Legal Proceedings.................................................12
Item 4:    Submission of Matters to a Vote of Security Holders...............12

PART II

Item 5:    Market for Common Equity and Related Stockholder Matters..........13
Item 6:    Selected Financial Data...........................................16
Item 7:    Management's Discussion and Analysis of Financial Condition and
           Results of Operations.............................................17
Item 7a:   Quantitative and Qualitative Disclosures About Market Risk .......29
Item 8:    Financial Statements..............................................29
Item 9:    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure..............................................29

PART III

Item 10:   Directors and Executive Officers of the Registrant................29
Item 11:   Executive Compensation............................................30
Item 12:   Security Ownership of Certain Beneficial Owners and Management... 30
Item 13:   Certain Relationships and Related Transactions....................30

PART IV

Item 14:   Exhibits, Financial Statement Schedules and Reports on Form 8-K...31




<PAGE>



                                      - 7 -

                                     PART I

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.  ("Frontier"  or the  "Company")  and the
expectations  of  our  Company  and  management.  All  statements,   other  than
statements of historical facts, included in this report that address activities,
events or developments that we expect, believe, intend or anticipate will or may
occur in the future, are forward-looking statements. When used in this document,
the words  "estimate,"  "anticipate,"  "project"  and  similar  expressions  are
intended to identify forward-looking statements.  Forward-looking statements are
inherently subject to risks and uncertainties, many of which cannot be predicted
with accuracy and some of which might not even be anticipated. Future events and
actual results,  financial and otherwise, could differ materially from those set
forth in or contemplated by the forward-looking  statements herein.  These risks
and  uncertainties  include,  but are not limited to,  those  discussed in "Risk
Factors" below.

Item 1:  Business

General

       The  Company  is a  scheduled  airline  based  in  Denver,  Colorado.  We
currently  operate  routes  linking  our  Denver  hub to 19  cities in 15 states
spanning the nation from coast to coast.  We were organized in February 1994 and
we began flight  operations in July 1994 with two leased Boeing 737-200 jets. We
have since expanded our fleet to 20 leased jets, including eight Boeing 737-200s
and 12 larger  Boeing  737-300s.  We currently use up to seven gates at our hub,
Denver International  Airport ("DIA"),  where we operate  approximately 92 daily
system flight departures and arrivals.

       Our current route system links our Denver hub to 19 cities. The following
table  lists the  cities we serve as of June 14,  1999,  as well as the dates we
commenced service to those cities:

           El Paso, Texas                                October 13, 1994
           Albuquerque, New Mexico                       October 13, 1994
           Omaha, Nebraska                               January 16, 1995
           Chicago/Midway, Illinois                      September 25, 1995
           Phoenix, Arizona                              September 25, 1995
           Los Angeles, California                       November 3, 1995
           Minneapolis/St. Paul, Minnesota               November 13, 1995
           Salt Lake City, Utah                          November 13. 1995
           San Francisco, California                     November 17, 1995
           Seattle, Washington                           May 1, 1996
           Bloomington/Normal, Illinois                  January 6, 1997
           Boston, Massachusetts                         September 16, 1997
           Baltimore, Maryland                           November 16, 1997
           New York/LaGuardia, New York                  December 3, 1997
           San Diego, California                         July 23, 1998*
           Atlanta, Georgia                              December 17, 1998
           Dallas/Fort Worth, Texas                      December 17, 1998
           Las Vegas, Nevada                             December 17, 1998*
           Portland, Oregon                              June 14, 1999

              *reintroduction of service

       We initiated service to four additional  markets during fiscal year 1999:
Atlanta,  Georgia;  Dallas/Ft.  Worth,  Texas; Las Vegas,  Nevada and San Diego,
California.  On November 1, 1998,  we initiated  complimentary  shuttle  service
between Boulder, Colorado and Denver International airport. We currently operate
six daily round trip bus routes  between  Boulder and DIA. We also began serving
Portland, Oregon on June 14, 1999.

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

       Our corporate headquarters are located at 12015 East 46th Avenue, Denver,
Colorado 80239. Our administrative office telephone number is 303-371-7400;  our
reservations  telephone  number is  800-432-1359;  and our  world  wide Web site
address is www.frontierairlines.com.

Business Strategy and Markets

     Our business strategy is to provide air service at low fares to high volume
markets from our Denver hub. Our strategy is based on the following factors:

o        Stimulate  demand by  offering  a  combination  of low  fares,  quality
         service and frequent  flyer credits in  Continental  Airlines'  OnePass
         program.
o        Expand our Denver hub  operation  and  increase  connecting  traffic by
         adding additional high volume markets to our current route system.
o        Continue filling gaps in flight frequencies to high volume markets from
         our Denver hub.

       In  April  1999,  we were  named  "Best  Domestic  Low Fare  Carrier"  by
Entrepreneur Magazine in the publication's sixth annual Business Travel Awards.

Route System History

         Our route system strategy encompasses  connecting our Denver hub to top
business  and  leisure  destinations.  We  currently  serve  15 of  the  top  25
destinations from Denver, as defined by the U.S.  Department of Transportation's
Origin and  Destination  Market  Survey.  In  addition,  as we bring  additional
aircraft  into our fleet and add new  markets  to our route  system,  connection
opportunities  increase.  During fiscal year 1999, connection  opportunities for
our passengers connecting through DIA increased from 3.2 flights to 5.3 flights.

Marketing and Sales

         Our sales  efforts are targeted to  price-sensitive  passengers in both
the leisure and  corporate  travel  markets.  In the  leisure  market,  we offer
discounted fares marketed through  newspaper,  radio and television  advertising
along with special promotions. We market these activities in both our Denver hub
and throughout our route system.

         To balance  the  seasonal  demand  changes  that  occur in the  leisure
market, we introduced several programs in late 1996 designed to capture a larger
share of the corporate market,  which tends to be less seasonal than the leisure
market.  These programs  include  negotiated fares for large companies that sign
contracts committing to a specified volume of travel,  future travel credits for
small and medium size businesses  contracting with us and special  discounts for
members of various trade and nonprofit associations. As of June 10, 1999, we had
signed contracts with over 2,300 corporations.

         We  also  pursue  sales   opportunities  with  meeting  and  convention
arrangers,  government  travel offices and vacation clubs.  The primary tools we
use to attract this  business  include  personal  sales  calls,  direct mail and
telemarketing.  In  addition,  we offer  air/ground  vacation  packages  to many
destinations on our route system under contracts with various tour operators.

         An  important  marketing  tool in today's  airline  environment  is the
frequent  flyer  program.  In 1995,  we  joined  Continental  Airlines'  OnePass
program.  We  selected  the OnePass  program  because  there was an  established
membership base in Denver and in other cities we served and planned to serve. In
addition,  the OnePass  program  consistently  receives high marks when compared
with other programs.

         An important  relationship for airlines is the relationship with travel
agencies.  We currently pay travel agent  commissions of eight  percent.  Unlike
some other  airlines,  we do not limit the earnings  potential of travel  agents
through a commission cap. We have implemented  marketing  strategies designed to
maintain and encourage  relationships with travel agencies  throughout our route
system.  We communicate  with travel agents through  personal  visits by company
executives and sales managers,  sales  literature  mailings,  telemarketing  and
advertising in various travel agent trade publications.

         We participate in the four major computer  reservation  systems used by
travel agents to make airline reservations. We maintain a reservations center in
Denver,  operated by our  employees.  We also maintain an  "overflow"  center in
Miami,  Florida,  staffed  by  contract  personnel,  which  assists  our  Denver
reservations center during peak booking periods.

         In January 1999, we renewed an agreement with  Electronic  Data Systems
("EDS") for  continued  and  enhanced  airline  customer  information  services,
including computerized reservations, passenger processing and telecommunications
services.  Since  early  1997,  we  have  made  greater  use  of  electronic  or
"paperless"  ticketing,  a lower cost  alternative  to ticketing  passengers  on
relatively  expensive  ticket  stock.  Currently,  we do  not  offer  electronic
ticketing  through travel agents.  Through our agreement with EDS, we are taking
steps to offer travel agents with this ticketing  option.  We anticipate that by
August  1999  we  will  be able to  offer  travel  agents  electronic  ticketing
capabilities through two of the major computer  reservations systems and that by
the  end of our  fiscal  year  2000 we will  be  able  to  offer  travel  agents
electronic   ticketing   capabilities  through  the  other  two  major  computer
reservations systems.

         Our  agreement  with EDS  enhances  our  ability  to  provide  Internet
bookings  through the EDS  SHARESWEB  booking  engine.  In April 1999,  we began
offering "Spirit of the Web" fares via our Web site, which permits  customers to
make "close in" bookings beginning on Wednesdays for the following weekend. This
is intended to fill seats that might otherwise go unfilled.

         In  order to gain  connecting  traffic  from  other  carriers,  we have
negotiated various types of interline agreements with approximately 140 domestic
and international airlines serving cities on our route system. Generally,  these
agreements  include joint ticketing and baggage services and other  conveniences
designed to expedite the connecting process.

Product Pricing

         We generally offer our seats at discount fares. We believe by doing so,
we  reduce  the cost of  travel  in  markets  we serve by as much as 60  percent
compared to other carriers.  Seat inventories on each flight are managed through
a yield management  system and we generally offer discounts with three levels of
advance purchase requirements. In contrast to most carriers, our fares generally
do not require  travelers to include a Saturday  overnight stay in order to take
advantage of these discount  rates.  We also do not charge a premium for one-way
fares and, generally, our fares do not require a round-trip purchase.

Competition

         The Airline Deregulation Act of 1978  (the "Deregulation Act") produced
a highly competitive airline industry,  freed of certain government  regulations
that for 40 years prior to the  Deregulation  Act had  dictated  where  domestic
airlines  could fly and how much they  could  charge for their  services.  Since
then,  small  carriers such as Frontier have entered  markets long  dominated by
large airlines with substantially  greater  resources,  such as United Airlines,
American Airlines, Northwest Airlines and Delta Air Lines.

         We  compete  principally  with United Airlines, the dominant carrier at
DIA, and its commuter affiliates with a total market share of approximately 74%.
This gives United a significant  competitive  advantage compared to us and other
carriers   serving  DIA.  We  believe  our  current   market  share  at  DIA  is
approximately 5.6%. We compete with United primarily on the basis of fares, fare
flexibility and the quality of our customer service.

Aircraft

         As of June 1999, we operated 20 leased  Boeing 737 twinjet  aircraft in
all-coach  seating  configurations.  We  anticipate  we will operate 19 aircraft
between  August and  mid-October  1999,  at which time we expect to increase our
fleet  size  to 20  aircraft.  Our  intent  is  to  add  the  21st  aircraft  in
approximately  April 2000.  The age of our  current  aircraft,  their  passenger
capacities and their lease expirations are shown in the following table:


                                                   Approximate
                                                    Number of
Aircraft           No. of          Year of          Passenger           Lease
Model             Aircraft       Manufacture          Seats           Expiration

B-737-200            5            1968-1969           108           July-October
                                                                        1999
B-737-200A           3            1978-1981           119             2001-2005

B-737-300           12            1985-1998           136             2000-2006


       Stage  3  noise  level  requirements  presently  require  that  75% of an
operator's fleet comply with Stage 3. Our aircraft fleet currently complies with
Stage 3 noise level  requirements.  See  "Description  of Business -  Government
Regulation."  By January 1, 2000,  our  entire  fleet must  comply  with Stage 3
requirements.  We plan to return our five smaller B-737-200 aircraft,  which are
not Stage 3  compliant,  to the lessor in the second half of 1999.  We intend to
replace these  aircraft  with  B-737-200A  and B-737-300  aircraft that meet the
Stage 3 noise level requirements.

       We  regularly  seek to lease  additional  aircraft  in  order to  replace
aircraft with  expiring  lease terms and to expand our service and route system.
However,  the aircraft  lease market is cyclical,  and we cannot be certain that
additional  aircraft will be available  when we need or want to procure them, or
that they will be  available  at  acceptable  lease  rates and terms.  By way of
example,  we are returning five of our smaller B-737-200  aircraft to the lessor
in the second half of 1999.  We have firm lease  agreements  to replace three of
these  aircraft  and have  signed  letters of intent to  replace  the other two.
However, delivery delays could cause us to temporarily reduce our fleet size and
our passenger revenues could therefore be adversely affected.

Maintenance and Repairs

       All  of  our  aircraft   maintenance  and  repairs  are  accomplished  in
accordance  with the our  maintenance  program  approved  by the  United  States
Federal  Aviation   Administration  ("FAA").  Spare  or  replacement  parts  are
maintained  by us primarily in Denver.  A major airline and a spare parts vendor
supply us with  certain  of these and we  purchase  or lease  others  from other
airline or vendor sources.

       We   terminated  a  contract  with   Continental   Airlines  for  routine
maintenance at Denver in August 1996. Since that time, we have trained,  staffed
and supervised our own maintenance  work force at Denver.  We lease a portion of
Continental  Airlines'  hangar  at  DIA  where  we  presently  perform  our  own
maintenance  through  the "C"  check  level.  Other  major  maintenance  such as
airframe  overhauls  and major  engine  repairs,  continues  to be  performed by
outside  FAA  approved  contractors.  We also  maintain  a  smaller  maintenance
facility at El Paso, Texas.

       Under our aircraft lease agreements,  we pay all expenses relating to the
maintenance  and operation of our  aircraft,  and we are required to pay monthly
maintenance reserve deposits to the lessors based on usage.  Maintenance reserve
deposits are applied against the cost of scheduled major maintenance.  Scheduled
major  maintenance  has  occurred or will occur for three of our aircraft in the
fiscal year ending March 31, 2000. To the extent not used for major  maintenance
during the lease terms,  maintenance  reserve  deposits remain with the aircraft
lessors upon redelivery of the aircraft.

       Our monthly  completion factors for the years ending March 31, 1999, 1998
and 1997 ranged from 97.6% to 99.8%, from 92.8% to 99.9%, and from 94% to 99.8%,
respectively.  The completion  factor is the percentage of our scheduled flights
that were  operated  by us (i.e.,  not  canceled).  Flights not  completed  were
canceled principally as a result of mechanical problems, and to a lesser extent,
weather.  There  can be no  assurance  that our  aircraft  will  continue  to be
sufficiently reliable over longer periods of time.

Fuel

       During the years ending March 31, 1999, 1998 and 1997, jet fuel accounted
for 11.6%, 14.1% and 16.6%,  respectively,  of our operating  expenses.  We have
arrangements  with major fuel  suppliers  for  substantial  portions of our fuel
requirements, and we believe that such arrangements assure an adequate supply of
fuel for current and anticipated future operations. However, we have not entered
into any agreements that fix the price of fuel over any period of time. Jet fuel
costs are  subject to wide  fluctuations  as a result of sudden  disruptions  in
supply beyond our control.  Therefore, we cannot predict the future availability
and cost of jet fuel with any degree of  certainty.  Our average  fuel price per
gallon  including  taxes and  into-plane  fees was 55.4(cent) for the year ended
March 31, 1999, with the monthly average price per gallon during the same period
ranging from a low of 48.3(cent) to a high of  62.3(cent).  As of June 11, 1999,
the price per gallon was 60.2(cent).

       Newer aircraft are more fuel  efficient than our Boeing 737-200  aircraft
due to improved  aircraft  airframe  design and engine  technology.  Significant
increases  in the price of jet fuel  would  result in a higher  increase  in our
overall total costs than those of competitors  whose fleets consist of more fuel
efficient aircraft such as our Boeing 737-300 aircraft. Increases in fuel prices
or a shortage of supply could have a material  adverse  affect on our operations
and financial results. Our ability to pass on increased fuel costs to passengers
through price  increases or fuel surcharges may be limited,  particularly  given
our low fare strategy.

Insurance

       We carry $700 million per aircraft per occurrence in property  damage and
passenger and third-party  liability insurance,  and insurance for aircraft loss
or damage as required by our aircraft lease agreements,  and customary  coverage
for other business insurance. While we believe such insurance is adequate, there
can be no assurance  that such coverage will  adequately  protect us against all
losses which we might sustain. Our property damage and passenger and third-party
liability  insurance  coverage  exceeds the minimum amounts  required by the DOT
regulations.

Employees

       As of June 1, 1999, we had 1650  employees,  including 1273 full-time and
377  part-time  personnel.   Our  employees  included  194  pilots,  271  flight
attendants,  646 customer service agents, 156 reservations agents, 256 mechanics
and related  personnel,  and 127 general management  personnel.  We consider our
relations with our employees to be good.

       We believe  we  operate with lower personnel costs than many  established
airlines,  principally due to lower base salaries and greater flexibility in the
utilization  of  personnel.  There can be no  assurance  that we can continue to
realize these advantages over established or other air carriers for any extended
period of time.  In November  1998,  our pilots  voted to be  represented  by an
independent  union, the Frontier Airlines Pilots  Association.  This is our only
employee  group that  currently is  represented  by a union.  The impact of this
unionization  on labor costs is unknown at this time since the first  bargaining
agreement has not been negotiated.

       We have  enhanced our  Retirement  Savings Plan  [401(k)] by announcing a
matching  contribution by the Company for April 1999 through  December 31, 1999.
Participants  will receive a 25% Company match for  contributions  up to 15%. We
anticipate  that the match and  related  vesting  schedule  of 20% per year will
reduce our turnover rates.

       Training,  both initial and recurring, is required for many employees. We
train our pilots, flight attendants,  ground service personnel,  reservationists
and  mechanics.  FAA  regulations  require  pilots to be licensed as  commercial
pilots,  with  specific  ratings for  aircraft  to be flown and to be  medically
certified as physically fit.  Licenses and medical  certification are subject to
periodic  continuation  requirements,  including  recurrent  training and recent
flying experience.  Mechanics, quality control inspectors and flight dispatchers
must be licensed and qualified for specific  aircraft.  Flight  attendants  must
have initial and periodic  competency,  fitness training and certification.  The
FAA approves and monitors our training programs.  Management  personnel directly
involved in the  supervision of flight  operations,  training,  maintenance  and
aircraft   inspection   must  meet  experience   standards   prescribed  by  FAA
regulations.  Employees  performing  safety-sensitive  functions  are subject to
pre-employment and subsequent random drug and alcohol testing.

Government Regulation

       All  interstate  air  carriers  are  subject  to  regulation  by the U.S.
Department of  Transportation  ("DOT") and the Federal  Aviation  Administration
("FAA") under the Federal Aviation Act. The DOT's jurisdiction extends primarily
to the  economic  aspects  of air  transportation,  while the  FAA's  regulatory
authority relates primarily to air safety,  including aircraft certification and
operations,  crew licensing and training and maintenance standards.  In general,
the amount of regulation over domestic air carriers in terms of market entry and
exit,  pricing and inter-carrier  agreements has been greatly reduced subsequent
to enactment of the Deregulation Act.

       U.S.  Department  of  Transportation.  We hold a  Certificate  of  Public
Convenience  and  Necessity  issued  by the DOT that  allows us to engage in air
transportation.  Pursuant to law and DOT regulation,  each United States carrier
must qualify as a United States  citizen,  which requires that its President and
at least  two-thirds  of its Board of Directors and other  managing  officers be
comprised of United States citizens;  that not more than 25% of its voting stock
may be owned by foreign nationals, and that the carrier not be otherwise subject
to foreign control.

       U.S.  Federal  Aviation   Administration.   We  also  hold  an  operating
certificate  issued  by the FAA  pursuant  to Part 121 of the  Federal  Aviation
Regulations.  The FAA has jurisdiction  over the regulation of flight operations
generally,  including the  licensing of pilots and  maintenance  personnel,  the
establishment of minimum  standards for training and maintenance,  and technical
standards for flight,  communications and ground equipment.  We must have and we
maintain FAA certificates of airworthiness  for all of our aircraft.  Our flight
personnel, flight and emergency procedures,  aircraft and maintenance facilities
are subject to periodic inspections and tests by the FAA.

       At the present time, four airports,  including New York City (LaGuardia),
are  regulated  by means  of  "slot"  allocations,  which  represent  government
authorization  to take off or land at a  particular  airport  within a specified
time period.  FAA  regulations  require the use of each slot at least 80% of the
time and provide for forfeiture of slots in certain  circumstances.  The Company
currently  holds an exemption  representing  six  take-off and landing  slots to
serve the Denver-New York City (LaGuardia) market.

       The DOT and FAA also have authority  under the Aviation  Safety and Noise
Abatement  Act of 1979,  the Airport Noise and Capacity Act of 1990 ("ANCA") and
Clean Air Act of 1963 to monitor and regulate  aircraft engine noise and exhaust
emissions.  We are  required to comply  with all  applicable  FAA noise  control
regulations  and with  current  exhaust  emissions  standards.  According to FAA
rules,  we must presently have at least 75% of our fleet in compliance  with the
FAA's Stage 3 noise level requirements. The balance of our fleet must be brought
into full  compliance  by January  2000.  Our  aircraft  fleet is  currently  in
compliance  with  Stage  3  noise  level   requirements.   See  "Description  of
Business-Aircraft."

       Railway Labor Act/National  Mediation Board. Our pilots organized in 1998
under an independent union, the Frontier Airlines Pilots Association.  Our labor
relations  with  respect  to the pilots are now  covered  under  Title II of the
Railway Labor Act and are subject to the jurisdiction of the National  Mediation
Board.

       Miscellaneous. All air carriers are also subject to certain provisions of
the Communications Act of 1934 because of their extensive use of radio and other
communication  facilities,  and are  required  to obtain an  aeronautical  radio
license from the Federal  Communications  Commission ("FCC"). To the extent that
we are subject to FCC  requirements,  we take all necessary steps to comply with
those requirements.

Risk Factors

       In  addition  to  the  other information contained in this Form 10-K, the
following risk factors  should be considered  carefully in evaluating us and our
business.

We Have a History of Net Losses,  Substantial  Third-Party  Credit and A Limited
Operating History

         Although  we had net income of  $30,566,000  for the fiscal  year ended
March 31, 1999, we had net losses of $17,746,000  and  $12,186,000 for the years
ended  March  31,  1998  and  1997,  respectively.  We had  working  capital  of
$25,488,000 at March 31, 1999. Our suppliers  currently provide goods,  services
and  operating  equipment on open credit  terms.  If such terms were modified to
require immediate cash payments,  we would be materially adversely affected.  We
have a limited operating history in a highly competitive  industry,  and we face
all of the  difficulties  inherent  in a  relatively  new entrant in the airline
industry.

The Airline Industry is Seasonal and Cyclical

         Our operations  primarily  depend on passenger  travel demand,  and, as
such are  subject  to  seasonal  variations.  Our  weakest  travel  periods  are
generally during the quarters ending in June and December.  The airline industry
is  also a  highly  cyclical  business  with  substantial  volatility.  Airlines
frequently experience  short-term cash requirements.  This is caused by seasonal
fluctuations  in  traffic,  which  often  put a drain  on cash  during  off-peak
periods,  and various other  factors,  including  price  competition  from other
airlines,  national and international  events,  fuel prices and general economic
conditions, including inflation. Because a substantial portion of airline travel
is discretionary, our operating and financial results may be negatively impacted
by any  downturn  in  national or  regional  economic  conditions  in the United
States,   particularly  Colorado.  Airlines  require  substantial  liquidity  to
continue  operating  under most  conditions.  The airline  industry also has low
gross profit  margins and revenues that vary to a  substantially  greater degree
than do the related  costs.  Therefore,  a significant  shortfall  from expected
revenue levels could have a material  adverse effect on our operations.  Working
capital  deficits  are not  uncommon  in the  airline  industry  since  airlines
typically  have no  product  inventories  and  ticket  sales  not yet  flown are
reflected as current liabilities.

Increasing Number of Consolidations and Alliances Has Also Increased Competition

         The U.S.  airline  industry  has  consolidated  in recent years and may
further consolidate in the future.  Consolidations have enabled certain carriers
to expand their international operations and increase their presence in the U.S.
domestic market. In addition, many major domestic carriers have formed alliances
with domestic regional carriers and foreign carriers.  As a result,  many of the
carriers with which we compete in our markets are larger and have  substantially
greater  resources than we have.  Continuing  developments  in the industry will
affect our ability to compete in the various markets in which we operate.

We Are in a High Fixed Cost Business

         The airline  industry is  characterized by fixed costs that are high in
relation to revenues.  Accordingly, a shortfall from expected revenue levels can
have a material adverse effect on our profitability and liquidity.

Increases in Fuel Costs Affect Our Operating Costs

         Fuel is a major component of operating  expense for all airlines.  Both
the cost and  availability  of fuel are subject to many  economic and  political
factors and events  occurring  throughout  the world,  and fuel costs  fluctuate
widely.  Fuel accounted for 11.6% of our total  operating  expenses for the year
ended March 31,  1999.  We cannot  predict our future cost and  availability  of
fuel,  and  substantial  sustained  price  increases  or the  unavailability  of
adequate fuel supplies  could have a material  adverse  effect on our operations
and  profitability.  Because  newer  aircraft are more fuel  efficient  than our
Boeing  737-200  aircraft a significant  increase in the price of jet fuel would
therefore  result  in a  higher  increase  in our  total  costs  than  those  of
competitors using more fuel-efficient aircraft. In addition, larger airlines may
have a competitive  advantage  because they pay lower prices for fuel. We intend
generally to follow  industry trends by raising fares in response to significant
fuel price  increases.  However,  our  ability to pass on  increased  fuel costs
through fare increases may be limited by economic and competitive conditions.

We are Subject to Federal Regulatory Oversight

         We have obtained the necessary  authority to conduct flight operations,
including a Certificate of Public  Convenience and Necessity from the Department
of  Transportation  and an  operating  certificate  from the FAA.  However,  the
continuation  of  such  authority  is  subject  to  continued   compliance  with
applicable statutes,  rules and regulations  pertaining to the airline industry,
including any new rules and  regulations  that may be adopted in the future.  We
believe that small and start-up airlines are often subject to strict scrutiny by
FAA officials, making them susceptible to regulatory demands that can negatively
impact  their  operations.  No  assurance  can be given  that we will be able to
continue  to comply  with all  present  and  future  rules and  regulations.  In
addition,  we can give no  assurance  about  the costs of  compliance  with such
regulations and the effect of such compliance costs on our profitability. In May
1996 a relatively  new  domestic  airline,  as we are,  sustained an accident in
which one of its  aircraft was  destroyed  and all persons on board were fatally
injured.  In June 1996, that airline agreed at the FAA's request to cease all of
its  flight  operations.  Although  the FAA,  after  an  intensive  and  lengthy
investigation,  allowed  that  airline  to  resume  its  operations,  should  we
experience  a similar  accident  it is  probable  that there would be a material
adverse effect on our business and results of operations.

We  Experience  High  Costs  at  Denver   International   Airport;   the  Future
Availability and Location of Our DIA Gates and Their Cost is Uncertain

         DIA opened in March  1995,  and  Stapleton  International  Airport  was
closed.  Financed  through  revenue  bonds,  DIA depends on landing  fees,  gate
rentals and other income from airlines,  the traveling  public and others to pay
debt service and support  operations.  Generally,  our cost of operations at DIA
will vary as traffic  increases or diminishes  at that airport.  We believe that
our operating costs at DIA substantially  exceed those we would have incurred at
Stapleton or that other airlines incur at most hub airports in other cities.

         We currently sublease from Continental  Airlines, on a preferential-use
basis,  four  departure  gates on Concourse A at DIA. In addition,  we use, on a
non-preferential  use basis, another three gates under the direct control of the
City and County of Denver  ("CCD").  Our sublease  with  Continental  expires on
February 29, 2000, as does Continental's lease with CCD for these four gates and
an additional six gates it leases on Concourse A.  Continental  has an option to
renew its lease for five years and reduce its lease  obligation  to three  gates
and related space.  United  Airlines,  which  occupies all of DIA's  Concourse B
gates,  has a right of first  refusal  on any of the ten  Continental  gates for
which  Continental  does not  renew  its  lease.  Continental's  lease and lease
renewal  option for gates on  Concourse  A, as well as  United's  right of first
refusal on Continental's Concourse A gates, are provided for in a 1995 agreement
between CCD, Continental and United (the "1995 Agreement"). We have requested of
CCD a lease,  effective March 1, 2000, for the four gates we currently  sublease
from  Continental and an additional  four gates  contiguous to those we now use.
However,  our request is  contingent  upon the  implementation  of a rate making
methodology  for DIA terminal  facilities  that  remedies what we consider to be
unfair and discriminatory aspects of the current methodology,  as established by
the  1995  Agreement.   Under  the  present   methodology  costs  related  to  a
non-functioning  Concourse A automated  baggage system and associated  equipment
and space  ("AABS") are  allocated  exclusively  to Concourse A, causing  rental
rates on Concourse A to be higher than those on DIA's  Concourse C. Our sublease
for Concourse A gates with Continental, which expires in February 2000, provides
that Continental  pays, on our behalf,  a significant  portion of the AABS costs
that would otherwise be payable by us under the current rate-making methodology.

         CCD has indicated that it is considering  alternative means of treating
AABS costs upon  expiration of the  Continental  lease in February 2000. CCD and
the signatory airlines at DIA, including us, are discussing  possible changes to
the rate-making methodology to deal with the AABS costs, although CCD has stated
that  absent  an  agreement  with a  majority-in-interest  of the DIA  signatory
airlines, CCD will unilaterally impose a solution to the issue. Unless the issue
is  resolved  by  agreement  of all or at least a majority  in  interest  of the
affected parties, there is a significant possibility that the 1995 Agreement, or
any  rate-making  methodology  unilaterally  imposed by CCD,  will be subject to
litigation.  In these  circumstances,  there is uncertainty  with respect to the
number and location of gate  facilities  at DIA that will be available to us, as
well  as the  rates  and  charges  that  we will  be  required  to pay for  such
facilities  after  February  2000. If we were required to operate at fewer gates
than we have  requested or if the  rate-making  methodology  is not amended,  it
could have a material adverse effect on our business and results of operations.

We Have a Limited Number of Routes

         Because  of our  relatively  small  fleet  size and  limited  number of
routes, we are at a competitive disadvantage compared to other airlines, such as
United Airlines, that can spread their operating costs across more equipment and
routes  and retain  connecting  traffic  (and  revenue)  within  their much more
extensive route networks.

We Face Intense Competition and Market Dominance by United Airlines

         The  airline  industry  is  highly  competitive,  primarily  due to the
effects of the Airline  Deregulation Act of 1978 (the "Deregulation Act"), which
has substantially  eliminated  government  authority to regulate domestic routes
and fares and has  increased  the ability of airlines to compete with respect to
flight  frequencies  and fares.  We compete  with United  Airlines in the Denver
market,  which is our hub, and we  anticipate  that we will compete  principally
with United  Airlines in our future  market  entries.  United  Airlines  and its
commuter  affiliates  is  the  dominant  carrier  out  of  DIA,  accounting  for
approximately  74% of all passenger  boardings and  approximately 490 departures
per day. Effective in February 1997, United Airlines commenced service using its
low fare United "Shuttle"  between Denver and Phoenix,  Arizona,  and on October
31,  1997  service  to Salt Lake City was  added,  markets  in which we  provide
services,  as well as additional United Airlines flights in certain of our other
markets. Additionally,  from June 29, 1997 until February 4, 1998 when it ceased
flight operations entirely,  Western Pacific Airlines,  another low-fare carrier
provided  hub  service at DIA.  This  additional  competition,  as well as other
competitive  activities by United Airlines and other  carriers,  have had in the
past and could  continue to have a material  adverse  effect on our revenues and
results of  operations.  Most of our  current  and  potential  competitors  have
significantly  greater financial  resources,  larger route networks and superior
market identity than we have.

We are Dependent on Our Chief Executive Officer

         We are dependent on the active  participation of Samuel D. Addoms,  our
President and Chief Executive Officer. The loss of his services could materially
and adversely affect our business and future  prospects.  We do not maintain key
person life insurance on any of our officers.

We Could Lose Airport and Gate Access

         We have not initially  encountered  barriers to airport or airport gate
access  other than cost.  However,  any  condition  that would deny or limit our
access  to the  airports  that  we  intend  to  utilize  in the  future  or that
diminishes the desire or ability of potential customers to travel between any of
those cities may have a materially adverse effect on our business.  In addition,
gates  may be  limited  at some  airports,  which  could  adversely  affect  our
operations.

There are Certain Risks Associated with Our Boeing 737 Aircraft

       A. Maintenance.  Under our aircraft lease agreements,  we are required to
bear all routine and major maintenance expenses. Maintenance expenses comprise a
significant  portion of our  operating  expenses.  In addition,  we are required
periodically to take aircraft out of service for heavy maintenance checks, which
can  adversely  affect  revenues.  We  also  may  be  required  to  comply  with
regulations  and  airworthiness   directives  issued  by  the  Federal  Aviation
Administration,  the cost of which  may be  partially  assumed  by our  aircraft
lessors  depending upon the magnitude of the expense.  There can be no assurance
that we will not incur higher than anticipated  maintenance expenses. Our leased
aircraft are in compliance with all FAA-issued Airworthiness Directives ("ADs").
However,  other ADs are  presently  required to be  performed  in the future and
there is a high probability that additional ADs will be required.

       B. Stage 3 Noise Regulations.  FAA rules require each new entrant airline
such as Frontier to have at least 75% of its fleet in compliance  with the FAA's
Stage 3 noise level requirements. We are currently in compliance. The balance of
each airline's  fleet must be brought into full compliance by January 2000. Five
of our eight  leased  Boeing  737-200  aircraft  do not  presently  meet Stage 3
requirements,  and we plan to return them to the lessor in 1999. We believe that
we will be able to replace these  aircraft  with Stage 3 compliant  aircraft but
there can be no assurance that we will not be required to temporarily reduce our
fleet size during this  replacement  process.  The  remaining 12 Boeing  737-300
aircraft we lease are Stage 3 compliant.

       C. Local Noise  Regulations.  As a result of litigation and pressure from
airport area  residents,  airport  operators  have taken local  actions over the
years  to  reduce  aircraft  noise.  These  actions  have  included  regulations
requiring  aircraft  to meet  prescribed  decibel  limits by  designated  dates,
curfews  during  night  time  hours,   restrictions  on  frequency  of  aircraft
operations and various operational  procedures for noise abatement.  The Airport
Noise  and  Capacity  Act of 1990  ("ANCA")  recognized  the  right  of  airport
operators  with  special  noise  problems to  implement  local  noise  abatement
procedures as long as such  procedures do not  interfere  unreasonably  with the
interstate and foreign commerce of the national air transportation  system. ANCA
generally  requires FAA approval of local noise restrictions on Stage 3 aircraft
and establishes a regulatory notice and review process for local restrictions on
Stage 2 aircraft. An agreement between the City and County of Denver and another
city adjacent to DIA  precludes the use of Stage 2 aircraft,  such as certain of
our Boeing 737-200 aircraft, on one of DIA's runways. On occasion,  this results
in longer taxi times for our aircraft than would otherwise be the case. This has
not had a material  adverse  effect on our  operations to date, and we would not
expect it to have such an effect in the  future  due to the fact that our entire
aircraft fleet must be Stage 3 compliant by January 2000.

We Have a Limited Number of Aircraft, and the Market for Aircraft Fluctuates

         We currently schedule all of our aircraft in regular passenger  service
with limited  spare  aircraft  capability  in the event one or more  aircraft is
removed  from  scheduled  service  for  unplanned  maintenance  repairs or other
reasons.  The  unplanned  loss  of  use of one or  more  of our  aircraft  for a
significant  period  of time  could  have a  materially  adverse  effect  on our
operations  and operating  results.  The market for leased  aircraft  fluctuates
based on worldwide  economic factors.  There can be no assurance that we will be
able to lease additional  aircraft on satisfactory terms or at the times needed.
By way of example,  we are returning five of our smaller  B-737-200  aircraft to
the lessor in the second half of 1999. We have firm lease  agreements to replace
three of these  aircraft and have signed  letters of intent to replace the other
two.  However,  delivery  delays could cause us to temporarily  reduce our fleet
size and our passenger revenues could therefore be adversely affected.

Our Relations With Our Employees is Very Important

         We believe we operate with lower personnel costs than many  established
airlines,  principally due to lower base salaries and greater flexibility in the
utilization  of  personnel.  There can be no assurance  that we will continue to
realize these  advantages over established or other air carriers for an extended
period of time. Our pilots are  represented by an independent  labor union,  the
Frontier  Airlines Pilots  Association.  Our mechanics and stock clerks voted in
October 1997, and our flight  attendants voted in 1998, not to be represented by
a union.  Unionization  of our  employees  could  materially  increase our labor
costs.

We Have Not Paid Dividends

         We have never declared or paid cash  dividends on our Common Stock.  We
currently  intend  to retain  any  future  earnings  to fund  operations  and to
continue development of our business and do not expect to pay any cash dividends
on our Common Stock in the foreseeable future.

We Face the Year 2000 Issue

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

       We have  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.

       We rely on third party business and government  agencies to provide goods
and services which are critical to our  operations,  including the FAA, the DOT,
local airport authorities,  including DIA, utilities,  communication  providers,
financial  institutions  including credit card companies and fuel suppliers.  We
are reviewing,  and have initiated formal communications with, these third party
service providers to determine their Year 2000 readiness, the extent to which we
are vulnerable to any failure by such third parties to remediate their Year 2000
problems and to resolve such issues to the extent practicable.

       All  internal  systems  are in the testing and  remediation  phases.  The
customer  reservations  and  ticketing  system  and the credit  card  processing
system, for example, have already been tested and remediated.  These systems are
outsourced  and the costs of  modifying  and  testing  these  systems  are being
absorbed by the third party provider. Our general accounting and payroll systems
have  been  upgraded  to new  versions  that are  certified  as being  Year 2000
compliant  at an  insignificant  cost to us.  Our  crew  and  dispatch  training
records,  aircraft  maintenance  records and inventory  control are in the final
stages of being  automated  from  manual  systems to computer  systems  that are
certified as being Year 2000 compliant. The Boeing Company has verified that the
computer  systems on the aircraft type operated by us are, or will be, Year 2000
compliant  before the year 2000. We plan to complete the testing and remediation
phases by September 30, 1999, and the contingency  planning phase by October 31,
1999.

       We have utilized existing  resources with the exception of four temporary
personnel  and have  incurred  $60,000 of  expenses to  implement  our Year 2000
project as of March 31, 1999. The total remaining costs of the Year 2000 project
are  expected  to  be  insignificant  and  will  be  funded  through  cash  from
operations.  The costs and the dates on which we  anticipate  completion  of the
Year 2000  project are based on our best  estimates.  There can be no  guarantee
that these estimates will be achieved and actual results could differ materially
from those anticipated.

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

Item 2:  Properties

       We have leased approximately 42,000 square feet of office space in Denver
with terms  ending  August 2000 and January 2001 at a current  annual  rental of
approximately $543,000. This facility provides space for our reservations center
together with space for administrative activities,  including senior management,
purchasing,   accounting,  sales,  marketing,   advertising,   human  resources,
maintenance and engineering and management information systems.

       Each  airport  location   requires  leased  space  associated  with  gate
operations,  ticketing  and  baggage  operations.  We either  lease  the  ticket
counters,  gates and airport office  facilities at each of the airports we serve
from the appropriate airport authority or sublease them from other airlines.

       We have entered into an airport lease and  facilities  agreement with the
City and  County of Denver  at DIA that  expires  in 2005.  We  sublease  ticket
counter  space and four gates at DIA from  Continental  Airlines  until March 1,
2000 and a portion of Continental Airlines' hangar at DIA until January 1, 2004.
See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources" and "Risk Factors."

Item 3:  Legal Proceedings

       In  February  1997,  we filed a  complaint  with the U.S.  Department  of
Justice  ("DOJ")  alleging  that  United  Airlines  has  engaged  in  predatory,
anticompetitive and monopolistic practices at DIA. The complaint asks the agency
to investigate  eight separate  counts of potential  antitrust  violations.  The
eight counts range from  "capacity  dumping" in markets served by competitors to
alleged abuses relating to United's pricing practices,  "exclusive dealing" with
corporate  customers and commuter carriers,  and other tactics used by United to
allegedly  drive  competitors  from its  markets.  In early 1998 we received and
answered  a DOJ Civil  Investigative  Demand  which  requested  information  and
documents  in our  possession  relating  to possible  violations  of the federal
antitrust  laws  concerning   monopolization   or  attempts  to  monopolize  air
transportation in certain markets,  including certain Denver city-pair  markets.
To date, the DOJ has not acted on our complaint. Although the DOJ recently filed
a federal civil antitrust action against another major U.S. carrier with respect
to certain alleged  anti-competitive  practices against smaller carriers, we are
unable to predict  what  action,  if any,  the DOJ will take in  response to our
complaint.

       In a related  matter,  the DOT, in response to complaints by us and other
smaller  airlines,  in April  1998  published  a number of  proposed  guidelines
designed to identify  predatory  practices in the airline  industry,  along with
enforcement  policies.  We are unable to predict what  actions,  if any, will be
taken either by the DOT or by Congress with respect to these issues.

       From time to time, we are engaged in routine litigation incidental to our
business.  Except as may be otherwise specifically discussed in this section, we
believe  there are no legal  proceedings  pending  in which we are a party or of
which any of our  property is the  subject  that are not  adequately  covered by
insurance maintained by us, or which if adversely decided, would have a material
adverse effect upon our business or financial condition.

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

       During the fourth quarter of the year covered by this report,  we did not
submit any matters to a vote of our security holders through the solicitation of
proxies or otherwise.


                                     PART II

Item 5:  Market for Common Equity and Related Stockholder Matters

Price Range of Common Stock

       Until May 26, 1999,  our Common  Stock was traded on the Nasdaq  SmallCap
Market under the symbol  "FRNT."  Effective May 26, 1999, our Common Stock began
trading on the Nasdaq  National  Market.  Our stock will continue to trade under
the symbol "FRNT." We were able to move from the SmallCap Market to the National
Market because of our ability to meet minimum  requirements in areas such as net
tangible assets, market capitalization, public float, number of shareholders and
corporate governance.

       The following  table shows the range of high and low bid prices per share
for our Common Stock for the periods indicated and as reported by Nasdaq through
May 25, 1999, and thereafter the high and low sale prices as reported by Nasdaq.
Market  quotations  listed  here  represent  prices  between  dealers and do not
reflect retail  mark-ups,  mark-downs or commissions.  As of June 18, 1999 there
were 652 holders of record of our Common Stock.

                                                            Price Range of
                                                            Common Stock
           Quarter Ended                                   High         Low

           June 30, 1997                                $ 4 7/16    $ 2 15/16
           September 30, 1997                             4 5/16      2 13/32
           December 31, 1997                              3  5/8      1 9/16
           March 31, 1998                                 4           1 3/4

           June 30, 1998                                  3 7/8       2 7/8
           September 30, 1998                             4 5/8       3
           December 31, 1998                              5 3/8       3
           March 31, 1999                                 10          4 15/16

           June 30, 1999 (through June 18, 1999)        17 3/16       9 1/2

Recent Sales of  Securities

       In April 1998, in connection with a private placement of 4,363,001 shares
of our  Common  Stock,  we  issued a warrant  to an  institutional  investor  to
purchase  716,929  shares of our Common  Stock at a purchase  price of $3.75 per
share,  which warrant expires in April 2002. In May 1998, we issued a warrant to
a financial  advisor in connection  with debt and equity  financings to purchase
548,000 shares of our Common Stock at a purchase price of $3.00 per share, which
warrant  expires  in May  2003.  In  September  1998 we  issued  to a  financial
consultant a warrant to purchase 15,000 shares of our common stock at a purchase
price of $3.57 per share, which warrant expires in September 2003. Each of these
transactions was made under an exemption from registration  under the Securities
Act of 1933  pursuant  to Sections  4(2) or 4(6)  thereof,  although  the shares
underlying  the warrants  issued to the  institutional  investor  and  financial
advisor were subsequently registered with the Securities and Exchange Commission
on Forms S-3.


<PAGE>



       During the period April 1, 1998 through June 16, 1999, various holders of
warrants to purchase our Common  Stock  exercised  their  warrants and we issued
Common Stock as described below:

                                                      Warrant
                                    Number of        Exercise          Dates of
Warrant Holder                    Shares Issued       Price            Exercise

Initial Public Offering
Underwriter (and affiliates)         110,000          $5.525           3/29/99-
                                                                       5/18/99

Aircraft Lessor                      395,000        $5.00-$7.19        5/6/99 &
                                                                       6/16/99

Lender                             1,750,000          $3.00            7/30/98-
                                                                       2/19/99

Financial Advisor                    548,000          $3.00            6/14/99

Consultant                            20,000          $3.00           12/23/98

       As of June 18, 1999,  we have granted  stock options to our employees and
directors to purchase up to 2,658,750  shares of Common Stock,  927,396 of which
options have been  previously  exercised  and  1,038,020 of which are  currently
exercisable at exercise prices ranging from $1.00 to $3.86 per share.

Dividend Policy

       We have not  declared  or paid cash  dividends  on our Common  Stock.  We
currently  intend to retain  any  future  earnings  to fund  operations  and the
continued development of our business,  and, thus, do not expect to pay any cash
dividends on our Common Stock in the foreseeable future.  Future cash dividends,
if any,  will be determined by our Board of Directors and will be based upon our
earnings,  capital  requirements,  financial  condition and other factors deemed
relevant by the Board of Directors.

Rights Dividend Distribution

       In February 1997, our Board of Directors declared a dividend distribution
of one right (a  "Right")  for each  outstanding  share of our  Common  Stock to
shareholders  of record at the close of  business on March 15,  1997.  Except as
described below, each Right, when exercisable, entitles the registered holder to
purchase  from us one share of Common  Stock at a  purchase  price of $17.50 per
share (the "Purchase  Price"),  subject to adjustment.  The Rights expire at the
close of business  on  February  20,  2007,  unless we redeem or  exchange  them
earlier as  described  below.  The  description  and terms of the Rights are set
forth in a Rights  Agreement,  as amended by amendments  dated June 30, 1997 and
December 5, 1997 (as so amended, the "Rights Agreement").

       The Rights are  exercisable  upon the earlier of (i) 10 days  following a
public  announcement that a person or group of affiliated or associated  persons
other than us, our subsidiaries or any person receiving  newly-issued  shares of
Common Stock  directly from us or indirectly  via an  underwriter  in connection
with a public offering by us (an "Acquiring  Person") has acquired,  or obtained
the right to acquire,  beneficial  ownership  of 20% or more of the  outstanding
shares of Common Stock (the "Stock Acquisition  Date"), or (ii) 10 business days
following the commencement of a tender offer or exchange offer that would result
in a person or group beneficially  owning 20% or more of such outstanding shares
of Common Stock.

       If any person  becomes an  Acquiring  Person  other  than  pursuant  to a
Qualifying  Offer (as  defined  below),  each holder of a Right has the right to
receive,  upon  exercise,  Common  Stock (or,  in certain  circumstances,  cash,
property or other  securities of the Company)  having a value equal to two times
the  exercise  price of the Right.  Notwithstanding  any of the  foregoing,  all
Rights  that are  beneficially  owned by any  Acquiring  Person will be null and
void.  However,  Rights are not  exercisable in any event until such time as the
Rights are no longer redeemable by us as set forth below.

       A  "Qualifying  Offer"  means a tender  offer or  exchange  offer for, or
merger proposal involving, all outstanding shares of Common Stock at a price and
on terms determined by at least a majority of the Board of Directors who are not
our  officers or  employees  and who are not  related to the Person  making such
offer,  to be  fair  to  and in the  best  interests  of  the  Company  and  our
shareholders.

       If after the Stock  Acquisition Date we are acquired in a merger or other
business  combination  transaction  in which  the  Common  Stock is  changed  or
exchanged or in which we are not the surviving  corporation (other than a merger
that  follows  a  Qualifying  Offer) or 50% or more of the  Company's  assets or
earning  power is sold or  transferred,  each  holder of a Right  shall have the
right to receive, upon exercise,  common stock of the acquiring company having a
value equal to two times the exercise price of the Right.

       The Purchase Price  payable,  and the number of shares of Common Stock or
other securities or property  issuable,  upon exercise of the Rights are subject
to adjustment from time to time to prevent  dilution (i) in the event of a stock
dividend on, or a subdivision,  combination or  reclassification  of, the Common
Stock,  (ii) if  holders  of the  Common  Stock are  granted  certain  rights or
warrants to subscribe  for Common Stock or  convertible  securities at less than
the current market price of the Common Stock, or (iii) upon the  distribution to
holders  of the  Common  Stock of  evidences  of  indebtedness  or  assets or of
subscription rights or warrants.

       At any time until ten days following the Stock  Acquisition  Date, we may
redeem the Rights in whole at a price of $.01 per Right.  Upon the action of the
Board of Directors ordering  redemption of the Rights, the Rights will terminate
and the  only  right  of the  holders  of  Rights  will be to  receive  the $.01
redemption price.

       While the  distribution,  if any,  of the  Rights  will not be taxable to
shareholders  or to us,  shareholders  may,  depending  upon the  circumstances,
recognize  taxable income if the Rights become  exercisable for Common Stock (or
other  consideration)  of the  Company  or for  common  stock  of the  acquiring
company.

<PAGE>


Item 6:  Selected Financial Data

       The  following  selected  financial  data as of and for each of the years
ended March 31,  1999,  1998,  1997,  1996 and 1995 are derived from our audited
financial statements. This data should be read in conjunction with "Management's
Discussion and Analysis of Financial  Condition and Results of Operations,"  and
the financial  statements  and the related notes thereto  included  elsewhere in
this Report.
<TABLE>
<CAPTION>
<S>                                                 <C>          <C>          <C>          <C>           <C>

                                                                     Year Ended March 31,
                                                    1999           1998         1997         1996         1995
                                               ------------------------------------------------------------------
Statement of Operations Data:
Total operating revenues (000s)                     $220,608     $147,142     $116,501      $70,393      $24,595
Total operating expenses (000s)                      195,928      165,697      129,662       76,325       32,692
Operating income (loss) (000s)                        24,680      (18,554)     (13,161)      (5,933)      (8,122)
Net income (loss) (000s)                              30,566      (17,746)     (12,186)      (5,582)      (7,999)
Net income (loss) per share
  basic                                                 2.14       (1.95)       (1.49)       (1.23)       (2.56)
  diluted                                               1.98       (1.95)       (1.49)       (1.23)       (2.56)
Balance Sheet Data:
Cash and cash equivalents (000s)                     $47,289       $3,641      $10,286       $6,359       $3,835
Current assets (000s)                                 94,209       33,999       31,470       25,797        8,270
Total assets (000s)                                  119,620       50,598       44,093       30,990       13,746
Current liabilities (000s)                            68,721       50,324       32,745       25,844        9,529
Long-term debt (000s)                                    435        3,566           56           92          147
Total liabilities (000s)                              75,230       56,272       34,210       26,289       12,104
Stockholders' equity (deficit) (000s)                 44,391       (5,673)       9,883        4,701        1,642
Working capital (deficit) (000s)                      25,488      (16,325)      (1,275)         (47)      (1,259)

Selected Operating Data:
Passenger revenue (1) (000s)                        $214,311     $142,018     $113,758      $68,455      $23,883
Revenue passengers carried (000s)                      1,664        1,356        1,180          758          269
Revenue passenger miles (RPMs) (2) (000s)          1,506,597    1,119,378      839,939      479,887      147,215
Available seat miles (ASMs) (3) (000s)             2,537,503    1,996,185    1,419,720      844,161      357,089
Passenger load factor (4)                              59.4%        56.1%        59.2%        56.8%        41.2%
Break-even load factor (5)                             52.4%        63.1%        65.5%        61.5%        55.0%
Block hours (6)                                       52,789       42,767       32,459       20,783        9,719
Departures                                            25,778       22,257       18,910       14,957        8,779
Average seats per departure                              125          124          118          112          108
Average stage length                                     787          723          636          504          377
Average length of haul                                   905          826          712          633          547
Aircraft miles                                        20,300       16,098       12,032        7,537        3,306
Average daily block hour utilization (7)                 9.6          9.5         10.3          9.9          8.7
Yield per RPM ( 8) (cents)                             14.22        12.69        13.54        14.26        16.22
Total yield per RPM (9) (cents)                        14.64        13.15        13.87        14.67        16.71
Total yield per ASM (10) (cents)                        8.69         7.37         8.21         8.34         6.89
Expense per ASM (cents)                                 7.72         8.30         9.13         9.04         9.16
Expense per ASM excluding fuel (cents)                  6.82         7.13         7.61         7.65         7.73
Passenger revenue per block hour                      $4,060       $3,321       $3,505       $3,294       $2,457
Average fare (11)                                       $123         $100          $92          $88          $88
Average aircraft in service                             15.0         12.3          9.6          5.7          4.1
EBITDAR (12) (000s)                                   58,848        7,437        4,576          942       (5,618)
EBITDAR as a % of revenue                              26.7%         5.1%         3.9%         1.3%       (22.8%)

Note:  We did not begin flight operations until July 1994 (during the fiscal year ended March 31, 1995).
</TABLE>


<PAGE>


(1)  "Passenger  revenue"    includes   revenues  for  non-revenue   passengers,
     administrative  fees,  and revenue  recognized  for unused tickets that are
     greater than one year from issuance date.
(2)  "Revenue  passenger  miles,"  or  RPMs,  are  determined by multiplying the
     number of fare-paying  passengers  carried by the distance  flown.
(3)  "Available  seat  miles," or ASMs, are determined by multiplying the number
     of seats available for passengers by the number of miles flown.
(4)  "Passenger load factor" is determined by dividing revenue passenger miles
     by available seat miles.
(5)  "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
(6)  "Block  hours" represent  the time  between  aircraft  gate  departure  and
     aircraft gate arrival.
(7)  "Average  daily  block hour  utilization"  represents the total block hours
     divided by the weighted average number of aircraft days in service.
(8)  "Yield per RPM" is  determined  by  dividing  passenger revenues by revenue
     passenger  miles.
(9)  "Total Yield per RPM" is determined by dividing  total  revenues by revenue
     passenger miles.
(10) "Total  Yield per ASM" is  determined  by dividing  passenger  revenues by
     available seat miles.
(11) "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.
(12) "EBITDAR",  or  "earnings  before  interest,  income  taxes,  depreciation,
     amortization and aircraft rentals," is a supplemental financial measurement
     we and many airline industry analysts use in the evaluation of our business
     However,  EBITDAR  should  only  be  read  in  conjunction  with all of our
     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 our  operating performance  or to cash  flows  from operating
     activities (as determined in accordance with generally accepted  accounting
     principles) as a measure of liquidity.

Item 7:  Management's Discussion and Analysis of Financial Condition and Result
         of Operations

Selected Operating Statistics

       The  following  table  provides  our  operating   revenues  and  expenses
expressed as cents per total available seat miles ("ASM") and as a percentage of
total operating revenues,  as rounded,  for the years ended March 31, 1999, 1998
and 1997.
<TABLE>
<CAPTION>
<S>                                    <C>           <C>         <C>           <C>        <C>         <C>

                                                1999                      1998                     1997
                                      ------------------------  -----------------------  -----------------------
                                          Per          %            Per           %          Per          %
                                         total        of           total         of         total        of
                                          ASM       Revenue         ASM        Revenue       ASM       Revenue


      Revenues:
          Passenger                       8.44        97.2%         7.11       96.5%        8.01         97.6%
          Cargo                           0.19         2.2%         0.15        2.1%        0.14          1.7%
          Other                           0.06         0.6%         0.11        1.4%        0.06          0.7%
                                      -----------  -----------  -----------  ----------  -----------  ----------
      Total revenues                      8.69       100.0%         7.37      100.0%        8.21        100.0%


      Operating expenses:
          Flight operations               3.12        35.9%         3.32       45.1%        3.71         45.2%
          Aircraft and traffic servicing  1.35        15.5%         1.54       20.9%        1.75         21.3%
          Maintenance                     1.42        16.4%         1.59       21.6%        1.76         21.4%
          Promotion and sales             1.40        16.1%         1.47       19.9%        1.52         18.5%
          General and administrative      0.36         4.2%         0.32        4.3%        0.33          4.0%
          Depreciation and amortization   0.07         0.7%         0.06        0.9%        0.08          0.9%
                                      ===========  ===========  ===========  ==========  ===========  ==========
      Total operating expenses            7.72        88.8%         8.30      112.6%        9.13        111.3%
                                      ===========  ===========  ===========  ==========  ===========  ==========

      Total ASMs (000s)                2,537,503                 1,996,185                1,419,720

</TABLE>


Results of  Operations - Year Ended March 31, 1999  Compared to Year Ended March
31, 1998

General

       We are a  scheduled  airline  based in  Denver,  Colorado.  We  currently
operate  routes  linking our Denver hub to 19 cities in 15 states  spanning  the
nation  from  coast to coast.  At  present,  we use up to seven  gates at Denver
International  Airport ("DIA") for  approximately 92 daily flight departures and
arrivals.  During the year ended March 31, 1999, we added  Atlanta,  Georgia and
Dallas/Ft.  Worth,  Texas to our route  system  and  re-entered  the San  Diego,
California and Las Vegas,  Nevada markets. On June 14, 1999 we commenced service
in the Denver-Portland, Oregon market.

       Organized in February 1994, we commenced flight  operations as a regional
carrier in July 1994 with two leased Boeing 737-200 jet aircraft.  We have since
expanded  our fleet to 20 leased jets as of June 1999,  including  eight  Boeing
737-200s  and twelve  larger  Boeing  737-300s.  During the year ended March 31,
1999,  we added two  additional  leased Boeing  737-300  aircraft and one Boeing
737-200A to our fleet.

       On June 30, 1997,  we signed an Agreement and Plan of Merger ("the Merger
Agreement")  providing  for our  merger  (the  "Merger")  with  Western  Pacific
Airlines.  Pursuant to the Merger Agreement,  a "code share" marketing  alliance
between us and Western  Pacific  went into  effect on August 1, 1997,  in effect
integrating  the route  networks of the two airlines.  On September 29, 1997, we
both  mutually  agreed to  terminate  the Merger  Agreement  and the  code-share
arrangement.  The  separation  of the two  carriers  required us to  implement a
costly  restructuring  of our  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.  The Merger  Agreement and our
competition  with Western Pacific  adversely  affected our results of operations
for the year ended March 31, 1998.

       As a result of the  expansion  of our  operations  and the  cessation  of
service by Western  Pacific during the year ended March 31, 1999, our results of
operations  are not  necessarily  indicative  of  future  operating  results  or
comparable to the prior year ended March 31, 1998.

       Small  fluctuations  in  our  yield  per  RPM  or  expense  per  ASM  can
significantly  affect  operating  results because we, like other airlines,  have
high  fixed  costs 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 our liquidity,  cash
flows and results of operations.

Results of Operations

       We had net income of  $30,566,000 or $1.98 per diluted share for the year
ended March 31, 1999 as compared to a net loss of $17,746,000 or $1.95 per share
for the year ended  March 31,  1998.  During the year  ended  March 31,  1999 as
compared to the prior comparable period, we 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.  Our cost per ASM  declined to  7.72(cent)  during the year ended
March 31, 1999 from 8.30(cent) for the prior comparable period, principally as a
result of lower fuel prices and improved operating efficiencies and economies of
scale as our fixed costs were spread across a larger base 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 year ended March 31,
1999, our break-even load factor was 52.4% compared to the passenger load factor
achieved of 59.4%. For the year ended March 31, 1998, our break-even load factor
was  63.1%  compared  to the  achieved  passenger  load  factor  of  56.1%.  Our
break-even load factor decreased from the prior  comparable  period largely as a
result of an increase  in our  average  fare to $123 during the year ended March
31,  1999 from $100  during the year ended  March 31,  1998,  an increase in our
total  yield per RPM from  13.15(cent)  for the year  ended  March  31,  1998 to
14.64(cent) for the year ended March 31, 1999, and a decrease in our expense per
ASM to 7.72(cent) for the year ended March 31, 1999 from 8.30(cent) for the year
ended March 31, 1998.

Revenues

       Our revenues are highly sensitive to changes in fare levels. Fare pricing
policies have a significant impact on our revenues. Because of the elasticity of
passenger  demand,  we believe that increases in fares will result in a decrease
in passenger demand in many markets. We 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 our markets, we believe that
we must, in most cases,  match those  competitive fares in order to maintain our
market  share.  Passenger  revenues  are  seasonal  in  leisure  travel  markets
depending  on  the  markets'   locations  and  when  they  are  most  frequently
patronized.

       Our average fare for the years ended March 31, 1999 and 1998 was $123 and
$100, respectively.  We believe that the increase in the average fare during the
year ended March 31, 1999 over the prior comparable  period was largely a result
of  our  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 825 miles for the year ended March 31, 1998 to 905 miles for the year ended
March 31,  1999.  We also  experienced  higher  average  fares in certain of our
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 $214,311,000 for the year
ended March 31, 1999 compared to $142,018,000 for the year ended March 31, 1998,
or an increase of 50.9%. We carried  1,664,000  revenue  passengers for the year
ended March 31, 1999  compared to 1,356,000 for the year ended March 31, 1998 or
an increase of 22.7%.  We had an average of 15 aircraft in our fleet  during the
year ended March 31, 1999  compared  to an average of 12.3  aircraft  during the
year ended March 31, 1998, an increase of 22%, and ASMs increased 541,318,000 or
27.1%.

       Cargo  revenues,  consisting  of revenues  from freight and mail service,
totaled  $4,881,000  and $3,009,000 for the years ended March 31, 1999 and 1998,
respectively,   representing   2.2%  and  2.0%  of  total  operating   revenues,
respectively, or an increase of 62.2%. 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 $1,415,000 and $2,115,000 or .6% and 1.4%
of total operating revenues for each of the years ended March 31, 1999 and 1998,
respectively. Other revenues were higher during the year ended March 31, 1998 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
our code  share  partner.  We  recognized  approximately  $1,007,000  in  ticket
handling fees  associated  with our code share  agreement  with Western  Pacific
during the year ended March 31,  1998.  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
$195,928,000  and  $165,697,000  for the years ended March 31, 1999 and 1998 and
represented 88.8% and 112.6% of total revenue, respectively.  Operating expenses
decreased as a percentage of revenue  during the year ended March 31, 1999 as we
experienced  significantly lower fuel prices and improved operating efficiencies
and  economies  of scale as our fixed costs were spread  across a larger base of
operations.

       Flight  Operations.   Flight  operations   expenses  of  $79,247,000  and
$66,288,000  were 35.9% and 45.1% of total revenue for the years ended March 31,
1999 and 1998,  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 $22,758,000 for 41,082,000  gallons used and $23,332,000 for 33,098,000
gallons used resulted in an average fuel cost of 55.4(cent)  and  70.5(cent) per
gallon and represented 28.7% and 35.2% of total flight  operations  expenses for
the years ended March 31, 1999 and 1998, respectively. The average fuel cost per
gallon decreased for the years ended March 31, 1999 and 1998 from the comparable
prior period due to an overall decrease in the market price of fuel. Fuel prices
are  subject to change  weekly as we do not  purchase  supplies  in advance  for
inventory.  Fuel consumption for each of the years ended March 31, 1999 and 1998
averaged 778 and 774 gallons per block hour, respectively.

       Aircraft lease expenses totaled  $32,958,000 (14.9% of total revenue) and
$24,330,000  (16.5% of total  revenue)  for the years  ended  March 31, 1999 and
1998,  respectively,  or an  increase of 35.5%.  The  increase is largely due to
higher lease expenses for larger and newer Boeing 737-300  aircraft added to the
fleet  which  resulted in the  increase in the average  number of aircraft to 15
from 12.3, or 22%, for the years ended March 31, 1999, respectively.

       Aircraft  insurance  expenses totaled  $2,425,000 (1.1% of total revenue)
for the years ended March 31,  1999 and 1998  offset by a profit  commission  of
$153,000 for the policy  period ended June 6, 1998.  The profit  commission  was
earned  because we had no aircraft  hull  insurance  claims during the 1997-1998
policy year.  Aircraft insurance expenses for the year ended March 31, 1998 were
$2,989,000 (2% of total revenue).  Aircraft  insurance  expenses  decreased as a
percentage  of  revenue  as a result  of  competitive  pricing  in the  aircraft
insurance  industry,  our  favorable  experience  rating  since we began  flight
operations  in July 1994 and  economies  of scale due to the  increase  in fleet
size.

       Pilot and flight  attendant  salaries  before  payroll taxes and benefits
totaled  $10,653,000 and $8,708,000 or 5% and 6.1% of passenger revenue for each
of the years ended March 31, 1999 and 1998,  or an increase of 22.3%.  Pilot and
flight  attendant  compensation  increased  principally  as a  result  of a  22%
increase  in the  average  number of  aircraft  in  service,  general  wage rate
increases,  and an  increase  of 23.4% in block  hours.  We pay 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 we are not in the process of adding
aircraft  to our  system,  pilot  and  flight  attendant  expense  per  aircraft
normalizes.  With a scheduled passenger operation, and with salaried rather than
hourly crew compensation,  our 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  $34,147,000  and  $30,685,000  (an  increase of 11.3%) for the years ended
March 31, 1999 and 1998, respectively,  and represented 15.5% and 20.9% of total
revenue.  These include all expenses  incurred at airports served by us, 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 year ended  March 31,  1999 over the year ended  March 31,
1998 as a result of our rental costs (in particular, the gate rentals at DIA and
other cities where we added  additional  frequencies),  which are largely  fixed
costs,  remaining  relatively  constant as compared to the  increase in revenue.
Additionally,  we began our 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 our route system.

       Maintenance.  Maintenance  expenses of $36,090,000 and  $31,791,000  were
16.4% and 21.6% of total  revenue  for the years  ended March 31, 1999 and 1998,
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.  Effective  March 1999, we began to conduct certain
aircraft  heavy  maintenance   checks  in-house  which  we  expect  will  reduce
maintenance  expenses in future years.  During the quarter ended March 31, 1999,
we reduced our accrued  maintenance  expenses for these heavy maintenance checks
by  approximately  $1,100,000 as a result of the reduced costs  associated  with
performing these heavy maintenance  checks in-house.  Maintenance cost per block
hour was $684 and $743 per block  hour for the years  ended  March 31,  1999 and
1998,  respectively.  Maintenance  costs per block hour decreased as a result of
six new  aircraft we added to our fleet  during the past two years,  by bringing
certain aircraft heavy maintenance checks in-house, the fixed rental cost of the
hangar facility being spread over a larger aircraft fleet offset by FAA mandated
corrosion inspections on our 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.  We believe  that these costs will
continue to normalize as we add additional aircraft to our fleet.

       Promotion and Sales. Promotion and sales expenses totaled $35,621,000 and
$29,329,000  and were 16.1% and 19.9% of total revenue for the years ended March
31,  1999  and  1998,   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. Our
promotion and sales expenses for the year ended March 31, 1998 included expenses
as a result of the code share  agreement  with Western  Pacific,  under which we
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.  We did not have any code share agreements during the year ended March
31,  1999  that had as large of an  impact  on our  expenses  as the code  share
agreement  with Western  Pacific.  Promotion and sales  expenses  decreased as a
percentage  of  revenue  for the year  ended  March  31,  1999  over  the  prior
comparable period largely as a result of the increase in revenue.

       Promotion  and sales  expenses  per  passenger  decreased  to $21.41 from
$21.63 for year ended March 31, 1999, 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  our  reservations
requirements.  These  increased costs were offset by a decrease in travel agency
commissions.  During April 1998, we reduced travel agency commissions to 8% from
10%,  matching an 8%  commission  instituted by our  competitors  in the fall of
1997.  Additionally,  our 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 5.6% for the year ended March 31,
1999 from 7.6% for the year ended March 31, 1998.

       Advertising expenses of $3,900,000 were 1.8% of passenger revenue for the
year ended March 31, 1999,  compared to $3,048,000 or 2.2% of passenger  revenue
for the year  ended  March 31,  1998.  As new  cities  are  added to our  flight
schedule,  advertising and marketing  promotions are designed and implemented to
increase  awareness of our 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 year ended March 31, 1998
we competed with Western Pacific for the low fare market which required a higher
volume of advertising.

       General and Administrative.  General and administrative  expenses for the
years  ended  March  31,  1999  and  1998  totaled  $9,163,000  and  $6,353,000,
respectively,  and were  4.2% and 4.3% of  total  revenue,  respectively.  These
expenses  include the wages and benefits for our 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  for the year ended  March 31,  1999 were
accrued  bonuses and  related  payroll  taxes for our  employees  which  totaled
approximately  $1,830,000.  This  was the  first  time we  paid  bonuses  to our
employees. Included in general and administrative expenses during the year ended
March 31, 1998 were unusual expenses of approximately  $500,000  associated with
the terminated Merger Agreement with Western Pacific.

       Depreciation and Amortization.  Depreciation and amortization expenses of
$1,659,000 and $1,251,000  were  approximately  .8% and .9% of total revenue for
the years ended March 31, 1999 and 1998,  respectively.  These expenses  include
depreciation  of office  equipment,  ground station  equipment,  and other fixed
assets. 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 $406,000
for the year ended March 31, 1999  compared to $808,000 for the year ended March
31, 1998.  Interest income increased from $722,000 to $1,556,000 during the year
ended March 31, 1999 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 expenses increased to $701,000 from
$324,000  during the year ended March 31, 1999 from the prior year.  In December
1997,  we  sold  $5,000,000  of  10%  senior  notes.  In  connection  with  this
transaction,  we 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  associated  with the senior  secured notes totaled
$568,000  and  $263,000  during  the  years  ended  March  31,  1999  and  1998,
respectively.  See Note 4 to the Financial  Statements.  Other, net nonoperating
expense was  $449,000 for the year ended March 31, 1999  compared to other,  net
nonoperating  income of $410,000 for the year ended March 31, 1998.  Other,  net
nonoperating  expense  for the year ended March 31,  1999  includes  $486,000 of
unamortized  deferred loan and warrant costs  associated with the senior secured
notes that remained at the time we prepaid the debt.

       Income Tax Benefit:  We  recognized  an income tax benefit of  $5,480,000
primarily  attributable to the probable  realization of our remaining income tax
loss carryforwards for which a valuation allowance had been previously recorded.
As a result of our profitability for the year ended March 31, 1999 and projected
taxable income for the year ending March 31, 2000, a valuation  allowance was no
longer considered necessary.

       Expenses per ASM. Our expenses per ASM for the years ended March 31, 1999
and 1998 were  7.72(cent)  and  8.30(cent),  respectively,  or a decrease of 7%.
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  increase in average  ASMs per
aircraft as we added aircraft with greater seating capacity  compared to earlier
fleet  additions.  Expenses  per ASM  excluding  fuel  for the year  ended  were
6.82(cent) and 7.13(cent), respectively, or a decrease of 4.3%. 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 us on  five  of our  Boeing  737-200  aircraft,  the
expenses  per ASM for us are  higher  by 11%  when  compared  with  the 120 seat
alternative  used by many carriers.  Our average seats per aircraft for the year
ended March 31, 1999 were 125 as compared to 124 seats per aircraft for the year
ended March 31, 1998, with the increase in our Boeing 737-300 aircraft.


Results of  Operations - Year Ended March 31, 1998  Compared to Year Ended March
31, 1997

General

       During the year ended March 31,  1998,  we added four new Boeing  737-300
aircraft to our fleet.  As a result of these new aircraft  fleet  additions,  we
added service to Boston, Massachusetts in September 1997, Baltimore, Maryland in
November 1997 and New York (LaGuardia), New York in December 1997. We terminated
service to Las Vegas,  Nevada in August 1997 and San Diego,  California  and St.
Louis, Missouri in November 1997.

       In June 1997, we signed the Merger  Agreement  with Western  Pacific.  In
September 1997, we mutually agreed to terminate the Merger Agreement. On October
5, 1997,  Western  Pacific  filed for  protection  under  Chapter 11 of the U.S.
Bankruptcy  Code.  Western  Pacific,  which originally began service to and from
Colorado  Springs,  Colorado,  commenced  service from DIA on June 29, 1997.  On
February 4, 1998,  Western  Pacific ceased flight  operations and has since been
engaged in liquidating its business.

       As a result of our  expansion of  operations  during the year ended March
31, 1998,  our results of operations  are not  necessarily  indicative of future
operating results or comparable to the prior year ended March 31, 1997.

Results of Operations

       We  incurred  a net loss of  $17,746,000  or $1.95 per share for the year
ended March 31, 1998 as compared to a net loss of $12,186,000 or $1.49 per share
for the year ended March 31, 1997.  We believe that our  operating  results were
adversely  affected  during  the  year  ended  March  31,  1998 by a code  share
agreement with Western  Pacific which,  in connection  with the proposed  merger
with Western Pacific,  was effective August 1, 1997. The code share was designed
to  coordinate  our schedule  with Western  Pacific's  schedule at DIA. The code
share  agreement  was  terminated  effective  November 15, 1997 as a part of the
mutual  termination  of the  Merger  Agreement.  As a  result  of  the  schedule
implemented under the code share agreement,  we had flights scheduled in certain
markets that were not at peak travel times.  This arrangement did not benefit us
as an  independent  airline.  As a  result  of the  termination  of  the  Merger
Agreement and code share agreement,  we introduced a new, independent  schedule,
terminated service to San Diego,  California and St. Louis,  Missouri, and added
routes to  Baltimore,  Maryland  and to New York  City's La  Guardia  Airport in
November and December 1997.  Competition  from Western Pacific on several of our
routes adversely affected our yields and load factors. Additionally,  during the
year  ended  March 31,  1998 as  compared  to the prior  comparable  period,  we
experienced higher average aircraft lease expenses on our newer aircraft, higher
maintenance  expenses associated with our in-house  maintenance  operation which
began in  September  1996,  and  unusual  general  and  administrative  expenses
associated with the Western Pacific merger.

Revenues

       General. Airline revenues are  primarily  a  function  of the  number  of
passengers  carried and fares  charged by the airline.  We believe that revenues
will  gradually  increase  in a new market over a 60 to 120 day period as market
penetration is achieved.  We added three new markets during the year ended March
31, 1998 and four new markets during the year ended March 31, 1997.

       During the years  ended  March 31,  1998 and 1997,  we faced  significant
competitive actions by two airlines that maintained hubs at DIA. During the year
ended March 31, 1997, we competed with United  Airlines with respect to fare and
other competitive actions.  During the year ended March 31, 1998, we, as well as
competing  with United  Airlines for passenger  traffic and on fares,  also were
forced to compete  with  Western  Pacific in six of our  markets  where  Western
Pacific was  offering  extremely  low fares in an effort we believe was targeted
toward  increasing  load  factor  and  revenues.  The  effect  upon  us of  this
competition  during the year ended March 31, 1997 was a low average fare and, to
a lesser degree,  fewer passengers carried,  and during the year ended March 31,
1998 fewer  passengers  carried and with a slight downward effect on the average
fare. Western Pacific discontinued all flight operations on February 4, 1998 and
has since been engaged in liquidating its business.

       Our  average  fares for the years ended March 31, 1998 and 1997 were $100
and $92,  respectively.  We believe that the increase in the average fare during
the year ended  March 31,  1998 over the prior  comparable  period was largely a
result of our focus on increasing business travelers, an increase in the average
length of haul and stage  length,  and  reduced  fare  competition  from  United
Airlines,  offset by low pricing by Western Pacific.  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  decreases  to 8%
October  1, 1998 and to 7.5% on  October 1,  1999.  The  per-flight-segment  fee
increased to $2 effective  October 1, 1998, $2.25 effective  October 1, 1999 and
thereafter increases in annual amounts of 25 cents until it reaches $3 effective
October 1, 2002.

       Passenger Revenue.  Passenger revenues totaled  $142,018,000 for the year
ended March 31, 1998 compared to $113,758,000 for the year ended March 31, 1997,
or an increase of 24.8%. Competition increased dramatically during the months of
July through January 1998 when Western Pacific began  operations at DIA and even
more  significantly  during the months of October 1997 through January 1998 once
our merger and code share agreements with Western Pacific were terminated.  This
increased  competition had a negative impact on the number of revenue passengers
we carried.  The number of revenue passengers carried was 1,356,000 for the year
ended March 31, 1998  compared to 1,181,000 for the year ended March 31, 1997 or
an increase of 14.9%.  We had an average of 12.3 aircraft in service  during the
year ended  March 31,  1998  compared  to an average of 9.6  aircraft in service
during  the year  ended  March  31,  1997  resulted  in an  increase  in ASMs of
576,465,000 or 40.6%.

       For the year ended March 31, 1998, our break-even  load  factor was 63.1%
compared to a passenger load factor of 56.1%. For the year ended March 31, 1997,
our  break-even  load factor was 65.5%  compared  to a passenger  load factor of
59.2%.  Our break-even load factor  decreased from the prior  comparable  period
largely as a result of an increase  in our average  fare to $100 during the year
ended March 31, 1998 from $92 during the year ended March 31, 1997.

       Our load factor decreased to 56.1% for the year ended March 31, 1998 from
59.2% the prior comparable  period. We believe that our load factor for the year
ended  March 31,  1998 was  adversely  affected by  increased  competition  from
Western  Pacific  and the  ramp-up  effect  from  new  routes  we  added  during
September, November and December 1997.

       Cargo  revenues,  consisting  of  revenues from freight and mail service,
totaled  $3,009,000  and $1,956,000 for the years ended March 31, 1998 and 1997,
representing 2.1% and 1.7% of total operating revenues, respectively.

       Other  revenues, comprised principally of interline handling fees, liquor
sales and excess baggage fees,  totaled  $2,115,000 and $786,000 or 1.4% and .7%
of total  operating  revenues  for the  years  ended  March  31,  1998 and 1997,
respectively.  The  increase  for the year ended  March 31,  1998 over the prior
comparable period is due to the increase in 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 our code share partner.  We recognized  approximately
$1,007,000 in ticket handling fees associated with our code share agreement with
Western  Pacific  during the year ended March 31,  1998.  The costs which offset
this revenue are included in sales and promotion expenses.

Operating Expenses

       Total  operating  expenses  increased  to 112.6% of revenue  for the year
ended March 31, 1998  compared to 111.3% of revenue for the year ended March 31,
1997. Operating expenses increased as a percentage of revenue as our revenue was
adversely effected by lower load factors caused by increased  competition and we
also  experienced  higher  average  aircraft  lease expenses on our newer larger
aircraft,  higher maintenance  expenses associated with our in-house maintenance
operation which began in September 1996, and unusual general and  administrative
expenses associated with the Western Pacific merger.

       Flight Operations.   Flight   operations   expenses  of  $66,288,000  and
$52,650,000 were 45.1% and 45.2% of total revenue for years ended March 31, 1998
and 1997, respectively, or an increase of 25.9%.

       Aircraft fuel costs  of  $23,332,000  for  33,098,000  gallons  used  and
$21,551,000  for  25,926,000  gallons  used  resulted in an average fuel cost of
70.5(cent) and 83.1(cent)  per gallon and  represented  35.2% and 40.9% of total
flight  operations  expenses  for the  years  ended  March  31,  1998 and  1997,
respectively.  The  average  fuel cost per gallon  decreased  for the year ended
March 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 we do not purchase
supplies in advance for inventory.  Fuel  consumption  for the years ended March
31, 1998 and 1997  averaged  774 and 799  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 length of haul.

       Aircraft lease expenses, excluding  short-term  aircraft lease  expenses,
totaled  $24,330,000  (16.5% of total revenue) and  $16,704,000  (14.3% of total
revenue)  for the years  ended  March 31,  1998 and  1997,  respectively,  or an
increase of 45.7%. The increase is partially attributable to the increase in the
average number of aircraft in service to 12.3 from 9.6, or 28.1%,  for the years
ended March 31,  1998 and 1997,  respectively,  and largely due to higher  lease
expenses for larger and newer Boeing  737-300  aircraft  added to the fleet.  In
August  1996,  we entered into  short-term  lease  agreements  in order to add a
partial  spare to our fleet to improve our on-time  performance  and  completion
factors and to substitute for aircraft in our fleet that were out of service for
scheduled  maintenance.  Total expenses  associated  with the  short-term  lease
agreements  totaled  $3,359,000 for the months of August 1996 through March 1997
and none during the year ended March 31,  1998.  Because of the  increase in our
fleet  size,  we use at certain  times up to one of our  aircraft as a spare and
schedule most of our major  maintenance  cycles to coincide with lesser traveled
months.

       Aircraft  insurance  expenses  totaled $2,989,000 (2.0% of total revenue)
and  $2,638,000  (2.3% of total  revenue) for the years ended March 31, 1998 and
1997,  respectively,  or an  increase  of  13.3%.  Aircraft  insurance  expenses
decreased as a percentage of revenue as a result of  competitive  pricing in the
aircraft  insurance  industry,  our favorable  experience  rating since it began
flight  operations  in July 1994 and  economies  of scale due to the increase in
fleet size.

       Pilot and flight attendant  salaries totaled $8,708,000 and $6,671,000 or
6.1% and 5.9% of passenger  revenue for the years ended March 31, 1998 and 1997,
respectively,  or an increase of 30.5%. Pilot and flight attendant  compensation
increased  principally  as a result of a 28.1% increase in the average number of
aircraft in service and an  increase of 31.8% in block  hours.  During the years
ended March 31, 1998, we added four leased  aircraft to our fleet and during the
year ended March 31, 1997, we added three leased  aircraft to our fleet.  We pay
pilot and flight  attendant  salaries for training,  consisting of approximately
six and three  weeks,  respectively,  prior to  scheduled  increases in service,
causing the compensation  expense for the years ended March 31, 1998 and 1997 to
appear high in relationship  to the average number of aircraft in service.  When
we are not in the process of adding aircraft to our system, we expect that pilot
and flight  attendant  expense per  aircraft  will  normalize.  With a scheduled
passenger operation, and with salaried rather than hourly crew compensation, our
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  $30,685,000  and  $24,849,000 for the years ended March 31, 1998 and 1997,
respectively,  and represented  20.9% and 21.3% of total revenue.  These include
all expenses  incurred at airports  served by us, 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 year ended  March 31, 1998 over the year ended March 31, 1997 as a result of
our rental costs (in particular,  gate rentals at DIA),  which are largely fixed
costs,  remaining relatively constant as compared to the increase in revenue and
more of our "above  wing"  (including  passenger  check-in  at ticket  counters,
concourse gate operations and cabin cleaning)  operations being performed by our
personnel  rather than by third party  suppliers.  We began our own "above wing"
operations at Los Angeles  International  Airport in June 1996, Chicago (Midway)
in July  1996,  Seattle-Tacoma  in August  1996,  and El Paso,  Texas  effective
October  1996.  Aircraft and traffic  servicing  expenses will increase with the
addition of new cities;  however, the increased existing gate utilization at DIA
is expected to reduce per unit expenses.

       Maintenance.  Maintenance  expenses  of  $31,791,000 and $24,946,000 were
21.6% and 21.4% of total  revenue  for the years  ended March 31, 1998 and 1997,
respectively.  These include all maintenance, labor, parts and supplies expenses
related  to the  upkeep of the  aircraft.  Routine  maintenance  is  charged  to
maintenance   expense  as  incurred  while  major  engine  overhauls  and  heavy
maintenance checks are accrued each quarter. Maintenance cost per block hour was
$743 and  $769 for the  years  ended  March  31,  1998 and  1997,  respectively.
Maintenance  costs per block  hour  decreased  as a result of lower  maintenance
costs  associated  with the four new  aircraft  we added to our fleet this year.
Continental  Airlines had been providing routine aircraft  maintenance  services
for us at Denver but  discontinued  this service in September 1996. As a result,
we hired our own aircraft mechanics to perform routine maintenance and subleased
a portion of a hangar from Continental at DIA in which to perform this work. The
performance  of this  work by us,  together  with the cost of  leasing  adequate
hangar  space,  initially  increased  our  maintenance  cost per block hour.  We
believe  that these  costs  will  continue  to  normalize  as we add  additional
aircraft to our fleet.

       During the years ended March 31, 1998 and 1997,  we revised the timing of
our  scheduled  maintenance  and related  estimates  for our engine  maintenance
reserves.  The revised  estimate  resulted in an additional  reserve  accrual of
approximately $1,034,000 and $765,000,  respectively,  which approximates $24.17
and $23.57 of the total maintenance cost per block hour of $743 and $769 for the
years ended March 31, 1998 and 1997, respectively.

       Promotion and Sales. Promotion and sales expenses totaled $29,329,000 and
$21,526,000  and were 20.7% and 18.9% of  passenger  revenue for the years ended
March 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 are
included in these costs.  The  promotion and sales  expenses per passenger  were
$21.63 and $18.24 for the years ended March 31, 1998 and 1997, respectively. Our
promotion and sales expenses per passenger  increased largely as a result of the
code share agreement with Western  Pacific,  under which we incurred  additional
communications,  computer reservation,  credit card and interline handling fees,
and increased  advertising  expenses.  These  expenses were offset,  in part, by
interline  handling fees earned which are included in other  revenues.  We offer
mileage credits on Continental  Airlines  OnePass mileage  program.  Our expense
associated  with the OnePass program has increased from $317,000 or 27(cent) per
passenger  for the year  ended  March  31,  1997 to  $584,000  or  43(cent)  per
passenger for the year ended March 31, 1998.  Our OnePass  expense has increased
as it has  become  more  mature and more  passengers  have  become  aware of our
participation  in the OnePass  program.  Additionally,  the increase in business
travelers,  who  generally  participate  in mileage  programs  more than leisure
travelers, has also caused an increase in the OnePass expense.

       Advertising expenses of $3,048,000 and $2,482,000  were 2.2% of passenger
revenue for the years ended March 31, 1998 and 1997, respectively.

       General and  Administrative. General and administrative  expenses for the
years ended March 31, 1998 and 1997 totaling $6,353,000 and $4,618,000 were 4.3%
and 4.0% of total revenue,  respectively.  These expenses  include the wages and
benefits for our 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 year ended  March 31,  1998 are  unusual  expenses  of  approximately
$513,000 associated with the terminated merger agreement with Western Pacific.

       Depreciation and  Amortization.  Depreciation and amortization expense of
$1,251,000 and $1,072,000  were  approximately  .9% of total revenue for each of
the years ended March 31, 1998 and 1997,  respectively.  These expenses  include
depreciation  of office  equipment,  ground station  equipment,  and other fixed
assets. Amortization of start-up and route development costs are not included as
these expenses have been expensed as incurred.

       Nonoperating Income (Expenses).  Total net  nonoperating  income  totaled
$808,000  for the year ended  March 31, 1998  compared to $975,000  for the year
ended March 31, 1997, or a decrease of 17.1%.  Interest  income  decreased  from
$1,034,000  to  $722,000  from the  prior  comparable  period  as a result  of a
decrease in cash  associated  with the net loss  incurred  during the year ended
March 31, 1998.  In December  1997, we sold  $5,000,000 of 10% senior notes.  In
connection  with this  transaction,  we issued  warrants to  purchase  1,750,000
shares  of our  Common  Stock.  Total  interest  expense  paid in  cash  and the
accretion of the warrants and deferred loan expenses totaled $263,000 during the
year ended  March 31,  1998.  We had  $410,000  of other net income for the year
ended March 31, 1998 which was  comprised  principally  of $484,000 in insurance
claims for our  telephone  switch  which was  subject to an  electrical  fire in
October 1997, offset by other miscellaneous expenses.

       Expenses per ASM. Our expenses per ASM for the years ended March 31, 1998
and 1997 were  8.30(cent) and 9.13(cent),  respectively,  or a decrease of 9.1%.
Expenses per ASM decreased from the prior  comparable  period as a result of the
economies  of scale as the  fixed  costs  were  spread  across a larger  base of
operations  and the average  ASMs per aircraft  have  increased as we add planes
with more  seating  capacity as compared to our  earlier  fleet  additions.  Our
average  seats  per  aircraft  for the year  ended  March  31,  1998 were 122 as
compared to 118 seats per aircraft for the year ended March 31, 1997.

Liquidity and Capital Resources

       Our balance sheet reflected cash and cash  equivalents of $47,289,000 and
$3,641,000 at March 31, 1999 and 1998,  respectively.  At March 31, 1999,  total
current  assets were  $94,209,000  as compared to  $68,721,000  of total current
liabilities,  resulting in working  capital of  $25,488,000.  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. Our
present  working  capital  is  largely  a result  of the  sale in April  1998 of
4,363,001  shares  of  our  Common  Stock  with  net  proceeds  to  us  totaling
approximately  $13,650,000,  combined with cash flows from operating  activities
during the year ended March 31, 1999.

       Cash provided by operating  activities  for the year ended March 31, 1999
was  $35,956,000.  This is  attributable  to our  net  income  for  the  period,
increases in accounts payable, air traffic liability, other accrued expenses and
accrued  maintenance  expense,  offset by increases in  restricted  investments,
trade receivables,  security,  maintenance and other deposits,  prepaid expenses
and inventories. Cash used by operating activities for year ended March 31, 1998
was $8,158,000. This was largely attributable to our 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 year  ended  March 31,  1999 was
$6,801,000.  We used  $4,313,000 for capital  expenditures  for ground  handling
equipment,  rotable  aircraft  components,  maintenance  equipment  and aircraft
leasehold  costs and  improvements.  We used cash of $944,000 for initial  lease
acquisition  security deposits for one aircraft  delivered during the year ended
March 31,  1999 and for three  fiscal  year 2000  deliveries.  Additionally,  we
secured two aircraft  delivered in December  1998 with letters of credit and for
one  aircraft  delivered  in April  1999  totaling  $1,544,000.  Our  restricted
investments  increased  $1,544,000 to collateralize the letters of credit.  Cash
used by investing  activities for the year ended March 31, 1998 was  $3,648,000,
largely a result of capital  expenditures  for rotable  aircraft  components and
aircraft  leasehold costs and  improvements  for the aircraft  delivered in May,
August and  September  1997 and February  1998.  Additionally,  we secured lease
obligations  for the aircraft  delivered  in August 1997 and February  1998 with
letters of credit totaling $1,500,000.  In turn, we received $650,000 during the
year ended  March 31,  1998 from the  aircraft  lessor  that was  previously  on
deposit  to  secure  lease  obligations  for  these  aircraft.   Our  restricted
investments increased $1,500,000 to collateralize the letter of credit.

       Cash provided by financing  activities for the years ended March 31, 1999
and 1998 was  $14,493,000 and  $5,161,000,  respectively.  During the year ended
March 31, 1999, we sold  4,363,001  shares of our Common Stock through a private
placement  to  an  institutional  investor.   Gross  proceeds  to  us  from  the
transaction were approximately $14,180,000, of which we received net proceeds of
approximately  $13,650,000.  We issued a warrant to this  investor  to  purchase
716,929 shares of our Common Stock at a purchase price of $3.75 per share.  This
warrant  expires in April  2002.  Additionally,  during the year ended March 31,
1999,  we received  $1,900,000  from the  exercise of Common  Stock  options and
warrants.  During the year ended March 31, 1998,  we received  $435,000 from the
exercise of Common Stock options.  In December  1997, we sold  $5,000,000 of 10%
senior secured notes. In connection with this transaction, we issued warrants to
purchase 1,750,000 shares of Common Stock at $3.00 per share.

       We  lease 20  Boeing  737  type  aircraft  under  operating  leases  with
expiration dates ranging from 1999 to 2006. Under these leases, we were required
to make cash  security  deposits or issue  letters of credit to secure the lease
obligations.  At  March  31,  1999,  we had  made  cash  security  deposits  and
outstanding letters of credit totaling $5,549,000 and $3,644,000,  respectively.
Accordingly, our restricted cash balance includes $5,549,000 which collateralize
the  outstanding  letters  of  credit.   Additionally,   we  make  deposits  for
maintenance  of  these  aircraft.  At  March  31,  1999  and  1998,  we had made
maintenance deposits of $18,673,000 and $11,466,000, respectively.

       We had issued to certain of our  aircraft  lessors  warrants  to purchase
395,000 shares of our Common Stock at an aggregate purchase price of $2,391,600.
During May 1999 and June 1999,  aircraft lessors exercised all of these warrants
and we received $2,391,600. To the extent that the aircraft lessors were able to
realize  certain  profit margins on their  subsequent  sale of our Common Stock,
they were required to refund a portion of the cash  security  deposits they were
holding.  As a result  of  their  sale of our  Common  Stock,  $486,000  in cash
security deposits were returned to us during the month of May 1999.

       Five of our leased  aircraft are not  compliant  with  FAA  Stage 3 noise
regulations. As their leases expire in 1999 we are replacing these aircraft with
Stage 3 compliant  aircraft.  We have entered into lease  agreements  to lease a
Boeing  737-300  aircraft and two Boeing  737-200  advanced  aircraft to replace
three of the  non-Stage 3 compliant  aircraft and have signed  letters of intent
for two Boeing 737-200 advanced  aircraft to replace the remaining two non-Stage
3 compliant  aircraft,  however,  delivery  delays could cause us to temporarily
reduce our fleet size and therefore adversely affect our revenues.

       We are exploring  various means to increase revenues and reduce expenses.
We have performed ad hoc charters and will consider them in the future depending
on  the  availability  of our  fleet.  We are  considering  revenue  enhancement
initiatives  with new  marketing  alliances.  We began our 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 us
to perform these operations  necessitated  capital expenditures of approximately
$800,000.  Effective March 1, 1999, we began to conduct  certain  aircraft heavy
maintenance  checks in-house which we expect will 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 fully operational by the end of the fiscal year
ending March 31, 2000, and an in-house revenue accounting system.

       We  currently sublease  from Continental  Airlines, on a preferential-use
basis,  four  departure  gates on Concourse A at DIA. In addition,  we use, on a
non-preferential  use basis, another three gates under the direct control of the
City and County of Denver  ("CCD").  Our sublease  with  Continental  expires on
February 29, 2000, as does Continental's lease with CCD for these four gates and
an additional six gates it leases on Concourse A.  Continental  has an option to
renew its lease for five years and reduce its lease  obligation  to three  gates
and related space.  United  Airlines,  which  occupies all of DIA's  Concourse B
gates,  has a right of first  refusal  on any of the ten  Continental  gates for
which  Continental  does not  renew  its  lease.  Continental's  lease and lease
renewal  option for gates on  Concourse  A, as well as  United's  right of first
refusal on Continental's Concourse A gates, are provided for in a 1995 agreement
between CCD, Continental and United (the "1995 Agreement"). We have requested of
CCD a lease,  effective March 1, 2000, for the four gates we currently  sublease
from  Continental and an additional  four gates  contiguous to those we now use.
However,  our request is  contingent  upon the  implementation  of a rate making
methodology  for DIA terminal  facilities  that  remedies what we consider to be
unfair and discriminatory aspects of the current methodology,  as established by
the  1995  Agreement.   Under  the  present   methodology  costs  related  to  a
non-functioning  Concourse A automated  baggage system and associated  equipment
and space  ("AABS") are  allocated  exclusively  to Concourse A, causing  rental
rates on Concourse A to be higher than those on DIA's  Concourse C. Our sublease
for Concourse A gates with Continental, which expires in February 2000, provides
that Continental  pays, on our behalf,  a significant  portion of the AABS costs
that would otherwise be payable by us under the current rate-making methodology.

       CCD  has  indicated that it is considering  alternative means of treating
AABS costs upon  expiration of the  Continental  lease in February 2000. CCD and
the signatory airlines at DIA, including us, are discussing  possible changes to
the rate-making methodology to deal with the AABS costs, although CCD has stated
that  absent  an  agreement  with a  majority-in-interest  of the DIA  signatory
airlines, CCD will unilaterally impose a solution to the issue. Unless the issue
is  resolved  by  agreement  of all or at least a majority  in  interest  of the
affected parties, there is a significant possibility that the 1995 Agreement, or
any  rate-making  methodology  unilaterally  imposed by CCD,  will be subject to
litigation.  In these  circumstances,  there is uncertainty  with respect to the
number and location of gate  facilities  at DIA that will be available to us, as
well  as the  rates  and  charges  that  we will  be  required  to pay for  such
facilities  after  February  2000. If we were required to operate at fewer gates
than we have  requested or if the  rate-making  methodology  is not amended,  it
could have a material adverse effect on our business and results of operations.

       Our goal is to continue to lease additional  aircraft to serve additional
cities and to add flights on existing routes from Denver. We added routes to San
Diego,  California,  Atlanta,  Georgia,  Dallas/Ft.  Worth, Texas and Las Vegas,
Nevada during the year ended March 31, 1999 and Portland,  Oregon effective June
14, 1999. We believe that expanding our 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 our  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 our  business,  and  competition  within the airline
industry  which often requires quick reaction by management to changes in market
conditions, we may require additional capital to further expand our 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 year ended March 31, 1999,  we have  incurred  substantial
operating  losses  since  our  inception.   In  addition,  we  have  substantial
contractual  commitments for leasing and maintaining  aircraft.  We believe that
our existing cash balances coupled with improved  operating results are and will
be adequate to fund our operations at least through March 31, 2000.

Year 2000 Compliance

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

       We have  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.

       We rely on third party business and government  agencies to provide goods
and services which are critical to our  operations,  including the FAA, the DOT,
local airport  authorities  including DIA, utilities,  communication  providers,
financial  institutions  including credit card companies and fuel suppliers.  We
are reviewing,  and have initiated formal communications with, these third party
service providers to determine their Year 2000 readiness, the extent to which we
are vulnerable to any failure by such third parties to remediate their Year 2000
problems and to resolve such issues to the extent practicable.

       All  internal  systems  are in the testing and  remediation  phases.  The
customer  reservations  and  ticketing  system  and the credit  card  processing
system, for example, have already been tested and remediated.  These systems are
outsourced  and the costs of  modifying  and  testing  these  systems  are being
absorbed by the third party provider. Our general accounting and payroll systems
have  been  upgraded  to new  versions  that are  certified  as being  Year 2000
compliant  at an  insignificant  cost to us.  Our  crew  and  dispatch  training
records,  aircraft  maintenance  records and inventory  control are in the final
stages of being  automated  from  manual  systems to computer  systems  that are
certified as being Year 2000 compliant. The Boeing Company has verified that the
computer  systems on the aircraft  type  operated by us are or will be Year 2000
compliant  before the year 2000. We plan to complete the testing and remediation
phases by September 30, 1999, and the contingency  planning phase by October 31,
1999.

       We have utilized existing  resources with the exception of four temporary
personnel  and have  incurred  $60,000 of  expenses to  implement  our Year 2000
project as of March 31, 1999. The total remaining costs of the Year 2000 project
are  expected  to  be  insignificant  and  will  be  funded  through  cash  from
operations.  The costs and the dates on which we  anticipate  completion  of the
Year 2000  project are based on our best  estimates.  There can be no  guarantee
that these estimates will be achieved and actual results could differ materially
from those anticipated.

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

Item 7A:  Quantitative and Qualitative Disclosures About Market Risk

       The risk inherent in our market risk sensitive  position is the potential
loss arising from an adverse change in the price of fuel as described below. The
sensitivity analysis presented does not consider either the effects that such an
adverse  change may have on overall  economic  activity  or  additional  actions
management  may take to mitigate our exposure to such a change.  Actual  results
may differ from the amounts  disclosed.  At the present  time, we do not utilize
fuel price hedging  instruments to reduce our exposure to  fluctuations  in fuel
prices.

       Our  earnings are  affected by changes in the price and  availability  of
aircraft fuel. Market risk is estimated as a hypothetical 10 percent increase in
the average  cost per gallon of fuel for the fiscal  year ended March 31,  1999.
Based on fiscal  year 1999  actual  fuel  usage,  such an  increase  would  have
resulted in an increase to aircraft fuel expense of approximately  $2,300,000 in
fiscal year 1999. Comparatively, based on projected fiscal year 2000 fuel usage,
such an  increase  would  result in an  increase  to  aircraft  fuel  expense of
approximately  $3,100,000 in fiscal year 2000.  The increase in exposure to fuel
price  fluctuations  in  fiscal  year  2000 is due to our plan to  increase  our
average aircraft fleet size and related gallons purchased.

Item 8:  Financial Statements

       Our financial  statements are filed as a part of this report  immediately
following the signature page.

Item  9:  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

       We have not,  during the past three  years and  through  the date of this
report,  had a change in our independent  certified public  accountants or had a
disagreement  with such  accountants  on any  matter of  accounting  principles,
practices or financial statement disclosure.


                                    PART III

Item 10:  Directors and Executive Officers of the Registrant.

       The information required by this Item is incorporated herein by reference
to the data under the heading  "Election of Directors" in the Proxy Statement to
be used in connection with the solicitation of proxies for our annual meeting of
shareholders to be held on September 9, 1999. We will file the definitive  Proxy
Statement with the Commission on or before July 29, 1999.


Item 11.  Executive Compensation.

       The information required by this Item is incorporated herein by reference
to the data under the heading "Executive Compensation" in the Proxy Statement to
be used in connection with the solicitation of proxies for our annual meeting of
shareholders to be held on September 9, 1999. We will file the definitive  Proxy
Statement with the Commission on or before July 29, 1999.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

       The information required by this Item is incorporated herein by reference
to the data under the heading "Voting  Securities and Principal Holders Thereof"
in the Proxy Statement to be used in connection with the solicitation of proxies
for our annual meeting of  shareholders to be held on September 9, 1999. We will
file the  definitive  Proxy  Statement with the Commission on or before July 29,
1999.

Item 13.  Certain Relationships and Related Transactions.

       The information required by this Item is incorporated herein by reference
to the data under the heading  "Related  Transactions" in the Proxy Statement to
be used in connection with the solicitation of proxies for our annual meeting of
shareholders to be held on September 9, 1999. We will file the definitive  Proxy
Statement with the Commission on or before July 29, 1999.


                                                  PART IV


Item 14(a):  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

Exhibit
Numbers           Description of Exhibits

 3.1          Amended and Restated Articles of Incorporation of the Company.(12)

 3.2          Amended Bylaws of the Company (June 9, 1997). (5)

 4.1          Specimen Common Stock certificate of the Company. (1)

 4.2          The  Amended  and Restated  Articles of Incorporation  and Amended
              Bylaws of the Company are included as Exhibits 3.1 and 3.2.

 4.3          Form of Warrant. (1)

 4.4          Rights Agreement, dated as of February 20, 1997, between  Frontier
              Airlines,  Inc.  and  American  Securities  Transfer & Trust, Inc,
              including the form of Rights Certificate and the Summary of Rights
              attached thereto as Exhibits A and B,  respectively,  incorporated
              by reference to Frontier  Airlines,  Inc.  Registration  Statement
              on Form 8-A dated March 11, 1997. (6)

 4.4(a)       Amendment to Rights Agreement dated June 30, 1997. (5)

 4.4(b)       Amendment to Rights Agreement dated December 5, 1997. (13)

10.1          Office Lease. (1)

10.2          Office Lease Supplements and Amendments. (5)

10.2(a)       Addendum to Office Lease (10)

10.2(b)       Office Lease Supplements and Amendments (13)

10.3          1994 Stock Option Plan. (1)

10.4          Amendment No. 1 to 1994 Stock Option Plan. (2)

10.4(a)       Amendment No. 2 to 1994 Stock Option Plan (5)

10.5          Registration Rights Agreement. (1)

10.6          Sales Agreement. (1)

10.7          Airport Use and Facilities Agreement, Denver International Airport
              (2)

10.8          Aircraft Lease Agreement dated as of July 26, 1994. (2)

10.8(a)       Assignment  and  Assumption Agreements  dated as of March 28, 1997
              and  March  20,  1997 between  USAirways,  Inc. and First Security
              Bank, National Association ("Trustee") and Frontier Airlines, Inc.
              (5)

10.8(b)       Amendment  No.  1,  dated  June 5, 1997, to Lease  Agreement dated
              as  of  July  26, 1994 between  Frontier  Airlines, Inc. and First
              Security Bank, National Association. (5)

10.9          Code Sharing Agreement. (5)

10.10         Aircraft Lease Agreement dated as of October 20, 1995 (MSN 23177).
              (3)

10.11         Aircraft Lease Agreement dated as of October 20, 1995 (MSN 23257).
              (3)

10.12         Aircraft Lease Agreement dated as of May 1, 1996. (3)

10.13         Aircraft Lease Agreement dated as of June 3, 1996. (3)

10.13(a)      Amendment  No.1 to Aircraft  Lease  Agreement  dated as of June 3,
              1996.(10)

10.14         Aircraft Lease  Agreement  dated as of June 12, 1996.  Portions of
              this  Exhibit  have  been  excluded  from  the  publicly available
              document and  an  order  granting  confidential  treatment  of the
              excluded material has been received.  (3)

10.15         Operating  Lease  Agreement  dated  November 1, 1996  between  the
              Company and First Security Bank,  National  Association.  Portions
              of  this  Exhibit  have  been excluded from the publicly available
              document  and  an  order  granting  confidential  treatment of the
              excluded material has been received.  (4)

10.16         Aircraft Lease Agreement (MSN 28760) dated as of December 12, 1996
              between  the  Company  and Boullion Aircraft Holding Company, Inc.
              Portions  of  this  Exhibit  have been excluded from the  publicly
              available  document and  an order granting confidential  treatment
              of the excluded material has been received. (4)

10.16(a)      Amendment No. 1 to  Aircraft  Lease   Agreement  (MSN 28760) dated
              May 20, 1997. Portions of this Exhibit have been excluded from the
              publicly available  document  and  an  application  for  an  order
              granting confidential treatment of the excluded material  has been
              made. (5)

10.17         Aircraft Lease Agreement (MSN 28662) dated as of December 12, 1996
              between  the  Company and Boullion  Aircraft Holding Company, Inc.
              Portions of this Exhibit have been excluded from the  publicly
              available   document and an order granting confidential  treatment
              of the excluded material has been received. (4)

10.17(a)      Amendment No. 1 to  Aircraft  Lease  Agreement  (MSN 28662)  dated
              May 20, 1997. Portions of this Exhibit have been excluded from the
              publicly  available  document  and  an  a pplication  for an order
              granting confidential treatment of the excluded material  has been
              made. (5)

10.18         Aircraft  Lease  Agreement  (MSN 28563) dated as of March 25, 1997
              between  the  Company and General  Electric  Capital  Corporation.
              Portions of this Exhibit have  been  excluded  from  the  publicly
              available document  and  an  application  for  an  order  granting
              confidential treatment of the excluded material has been made. (5)

10.19         Space  and  Use Agreement with Continental  Airlines,  as amended.
              Portions of  this Exhibit  have  been  excluded  from the publicly
              available document  and  an  application  for  an  order  granting
              confidential treatment of the excluded material has been made. (5)

10.20         Letterof Understanding with Continental Airlines dated  August 16,
              1996.  Portions  of  this  Exhibit  have  been  excluded  from the
              publicly available  document  and  an  application  for  an  order
              granting  confidential treatment of the excluded material has been
              made.  (5)

10.21         Service Agreement between Frontier Airlines, Inc and Greenwich Air
              Services,  Inc. dated May 19, 1997.  Portions of this Exhibit have
              been  excluded  from  the  publicly  available  document   and  an
              application for an order  granting  confidential  treatment of the
              excluded material has been made.  (5)

10.22         Agreement  between  Frontier Airlines,  Inc. and Dallas Aerospace,
              Inc.  dated  April 17, 1997.  Portions  of this  Exhibit have been
              excluded from the publicly available document and  an  application
              for an order  granting  confidential  treatment  of  the  excluded
              material has been made.  (5)

10.23         General  Services  Agreement  between Frontier  Airlines, Inc. and
              Tramco, Inc. dated as of August 6, 1996. (5)

10.24         General  Terms Engine Lease Agreement  between  Frontier Airlines,
              Inc. and Terandon Leasing Corporation dated as of August 15, 1996,
              as assigned to U.S. Bancorp  Leasing and Financial on February 19,
              1997. Portions  of  this  Exhibit  have  been  excluded  from  the
              publicly  available   document  and  an  application  for an order
              granting  confidential  treatment of  the  excluded  material  has
              been made. (5)

10.25         Lease  Agreement  between  Frontier  Airlines,  Inc. and  Aircraft
              Instrument  and  Radio  Company, Inc,  dated  December  11,  1995.
              Portions of this Exhibit have  been  excluded  from  the  publicly
              available  document  and  an  application  for  an order  granting
              confidential treatment of the excluded material has been made. (5)

10.26         Agreement and  Plan of  Merger  between Western Pacific  Airlines,
              Inc. and Frontier Airlines, Inc. dated June 30, 1997.  (5)

10.26(a)      Agreement dated as of  September 29, 1997 between  Western Pacific
              Airlines, Inc. and Frontier Airlines, Inc. (7)

10.27         Security  Agreement  with Wexford Management LLC dated December 2,
              1997. (8)

10.28         Amended and Restated Warrant Agreement with Wexford Management LLC
              dated as of February 27, 1998. (12)

10.29         Amended  and  Restated R egistration Rights Agreement with Wexford
              Management LLC dated as of February 27, 1998. (12)

10.30         Securties Purchase  Agreement  with B III Capital  Partners,  L.P.
              dated as of April 24, 1998. (9)

10.31         Registration Rights  Agreement  with B III Capital  Partners, L.P.
              dated as of April 24, 1998. (12)

10.32         Warrant  Agreement with The Seabury Group, LLC dated as of May 26,
              1998. (12)

10.33         Registration Rights Agreement with The Seabury Group, LLC dated as
              of May 26, 1998. (12)

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

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. (11).

10.36         Aircraft Sublease Agreement (MSN 28734) dated as  of  December 14,
              1998  between  Indigo  pacific  AB,  Sublessor,  and  the Company,
              Sublessee. (11)

10.37         Aircraft Lease Agreement (MSN 23004) dated as of February 26, 1999
              between First Security Bank, N.A.,  Lessor, and Frontier Airlines,
              Inc.,  Lessee.  Portions of this  exhibit have been excluded  from
              the publicly available document  and  an application  for an order
              granting  confidential treatment of the excluded material has been
              made. (13)

10.38         Aircraft Lease Agreement (MSN 23007) dated as of February 26, 1999
              between First Security Bank,  N.A.  Lessor  and Frontier Airlines,
              Inc.,  Lessee.  Portions of this  exhibit have been excluded  from
              the publicly available document and  an  application  for an order
              granting confidential treatment of  the excluded material has been
              made. (13)

10.39         Aircraft  Lease  Agreement (MSN 26440)  dated as of March 15, 1999
              between Indigo Aviation AB (publ),  Lessor, and Frontier Airlines,
              Inc.,  Lessee.  Portions of this  exhibit have been excluded  from
              the publicly available   document and an application  for an order
              granting  confidential treatment of the excluded material has been
              made. (13)

10.40         Aircraft  Lease  Agreement (MSN 24569)  dated as of April 16, 1999
              between C.I.T. Leasing Corporation, Lessor, and Frontier Airlines,
              Inc.,  Lessee.  Portions of this  exhibit have been excluded  from
              the  publicly   available document and an application for an order
              granting  confidential treatment of the excluded material has been
              made. (13)

10.41         Aircraft  Lease   Agreement  (MSN 24856)  dated as of June 2, 1999
              between Indigo Aviation  AB  (publ), Lessor and Frontier Airlines,
              Inc.,  Lessee.  Portions of this  exhibit have been excluded  from
              the  publicly  available  document and an application for an order
              granting confidential treatment of  the excluded material has been
              made. (13)

10.42         Severance  Agreement  dated March 10, 1999 between the Company and
              Samuel D. Addoms. (13)

10.43         Space and Use Agreement between Continental Airlines, Inc. and the
              Company. (13)

23.1          Consent of KPMG LLP  (13)

27.1          Financial Data Schedule (13)


(1)      Incorporated by reference from the Company's  Registration Statement on
         Form SB-2,  Commission File No. 33-77790-D,  declared effective May 20,
         1994.
(2)      Incorporated  by reference  from the  Company's  Annual  Report on Form
         10-KSB, Commission File No. 0-4877, filed on June 29, 1995.
(3)      Incorporated  by reference  from the  Company's  Annual  Report on Form
         10-KSB, Commission File No. 0-4877, filed on June 24, 1996.
(4)      Incorporated by reference from the Company's  Quarterly  Report on Form
         10-QSB, Commission File No. 0-4877, filed on February 13, 1997.
(5)      Incorporated  by reference  from the  Company's  Annual  Report on Form
         10-KSB, Commission File No. 0-24126, filed July 14, 1997.
(6)      Incorporated  by reference from the Company's  Report on Form 8-K filed
         on March 12, 1997.
(7)      Incorporated  by  reference from the Company's Report on Form 8-K filed
         on October 1, 1997.
(8)      Incorporated  by reference from the Company's  Report on Form 8-K filed
         on December 12,  1997.
(9)      Incorporated  by reference from the  Company's Report on Form 8-K filed
         on May 4, 1998.
(10)     Incorporated  by  reference  from  the  Company's  Report on Form 10-Q,
         Commission File No. 0-24126, filed on November 13, 1998.
(11)     Incorporated  by  reference  from the  Company's  Report on Form  10-Q,
         Commission File No. 0-24126, filed on February 12, 1999.
(12)     Incorporated  by reference  from the  Company's  Report on Form 10-K/A,
         Commission file No. 0-24126, filed July 9, 1998.
(13)     Filed herewith.


Item 14(b):  Reports on Form 8-K.

       No reports on Form 8-K were filed  during  the  quarter  ended  March 31,
1999.




<PAGE>



                                   SIGNATURES

       Pursuant  to the  requirements  of Section 13 or 15(d) of the  Securities
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: June 21, 1999                           By: /s/ Samuel D. Addoms
                                                  ------------------------------
                                              Samuel D. Addoms, Principal
                                              Executive Officer and Principal
                                              Financial Officer


Date: June 21, 1999                           By: /s/ Elissa A. Potucek
                                                  ------------------------------
                                              Elissa A. Potucek, Vice President,
                                              Controller, Treasurer and
                                              Principal Accounting Officer

       Pursuant to the requirements of the Securities Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.


Date: June 21, 1999                           /s/ Samuel D. Addoms, Director
                                              ----------------------------------
                                              Samuel D. Addoms, Director


Date: June 21, 1999                           /s/ William B. McNamara, Director
                                              ----------------------------------
                                              William B. McNamara, Director


Date: June 21, 1999                           /s/ Paul Stephen Dempsey, Director
                                              ----------------------------------
                                              Paul Stephen Dempsey, Director


Date: June 21, 1999                           /s/ B. LaRae Orullian, Director
                                              ----------------------------------
                                              B. LaRae Orullian, Director


Date: June 21, 1999                           /s/  D. Dale Browning, Director
                                              ----------------------------------
                                              D. Dale Browning, Director


Date: June 21, 1999                           /s/  James B. Upchurch, Director
                                              ----------------------------------
                                              James B. Upchurch, Director


Date: June 21, 1999                           /s/  B. Ben Baldanza, Director
                                              ----------------------------------
                                              B. Ben Baldanza, Director





 <PAGE>






                          Independent Auditors' Report



The Board of Directors and
   Stockholders
Frontier Airlines, Inc.:


We have audited the accompanying balance sheets of Frontier Airlines, Inc. as of
March 31, 1999 and 1998, and the related statements of operations, stockholders'
equity,  and cash  flows for each of the years in the  three-year  period  ended
March  31,  1999.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Frontier Airlines,  Inc., as of
March 31, 1999 and 1998,  and the results of its  operations  and its cash flows
for each of the  years  in the  three-year  period  ended  March  31,  1999,  in
conformity with generally accepted accounting principles.




                                    KPMG LLP

Denver, Colorado
June 2, 1999, except as to
  Note 11, which is as of June 16, 1999


<PAGE>
<TABLE>
<CAPTION>


FRONTIER AIRLINES, INC.
Balance Sheets
March 31, 1999 and 1998
<S>                                                                             <C>             <C>

                                                                               March 31,       March 31,
                                                                                  1999           1998
                                                                             --------------- --------------
Assets
Current assets:
    Cash and cash equivalents                                               $    47,289,072  $   3,641,395
    Restricted investments                                                        4,000,000      4,000,000
    Trade receivables, net of allowance for doubtful accounts of $199,960
        and $139,096 at March 31, 1999 and 1998, respectively                    16,930,038     11,661,323
    Maintenance deposits (note 3)                                                13,018,466      9,307,723
    Prepaid expenses                                                              5,439,834      3,843,694
    Inventories                                                                   1,203,916      1,164,310
    Deferred tax assets (note 5)                                                  6,041,576        -
    Deferred lease and other expenses                                               285,636        380,975
                                                                             --------------- --------------
            Total current assets                                                 94,208,538     33,999,420

Security, maintenance and other deposits (note 3)                                11,834,457      7,633,143
Property and equipment, net (note 2)                                              8,733,778      5,579,019
Deferred lease and other expenses                                                   267,762        780,429
Restricted investments                                                            4,575,760      2,606,459
                                                                             --------------- --------------
                                                                            $   119,620,295  $  50,598,470
                                                                             =============== ==============

Liabilities and Stockholders' Equity
Current liabilities:
    Accounts payable                                                        $    14,011,238  $  13,664,750
    Air traffic liability                                                        28,887,692     18,910,441
    Other accrued expenses                                                       10,781,509      5,157,640
    Accrued maintenance expense (note 3)                                         14,933,568     12,537,228
    Current  portion of  obligations  under capital  leases
    (note 3)                                                                        106,833         54,346
                                                                             --------------- --------------
            Total current liabilities                                            68,720,840     50,324,405

Senior secured notes payable (note 4)                                              -             3,468,138
Accrued maintenance expense (note 3)                                              6,042,958      2,381,354
Deferred tax liability (note 5)                                                      30,928        -
Obligations   under  capital  leases,   excluding   current
portion (note 3)                                                                    434,920         97,757
                                                                             --------------- --------------
            Total liabilities                                                    75,229,646     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; 16,141,172 and 9,253,563 shares issued and
        outstanding at March 31, 1999 and 1998, respectively                         16,141          9,253
    Additional paid-in capital                                                   58,054,844     37,954,584
    Unearned ESOP shares (note 8)                                                  (609,375)       -
    Accumulated deficit                                                         (13,070,961)   (43,637,021)
                                                                             --------------- --------------
                                                                                 44,390,649     (5,673,184)
                                                                             --------------- --------------
Commitments and contingencies (notes 3, 6, 10 & 11)
                                                                            $   119,620,295  $  50,598,470

                                                                             =============== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>

<TABLE>
<CAPTION>


FRONTIER AIRLINES, INC.

Statements of Operations

Years Ended March 31, 1999, 1998 and 1997
<S>                                                         <C>             <C>            <C>

                                                              1999            1998           1997
                                                              ----            ----           ----
Revenues:
    Passenger                                           $   214,311,312 $   142,018,392 $  113,758,027
    Cargo                                                     4,881,066       3,008,919      1,956,150
    Other                                                     1,415,332       2,115,326        786,457
                                                          -------------- --------------- --------------

            Total revenues                                  220,607,710     147,142,637    116,500,634
                                                          -------------- --------------- --------------

Operating expenses:
    Flight operations                                        79,247,347      66,288,125     52,650,575
    Aircraft and traffic servicing                           34,146,888      30,684,992     24,849,388
    Maintenance                                              36,090,052      31,790,600     24,945,636
    Promotion and sales                                      35,620,954      29,328,970     21,526,345
    General and administrative                                9,163,045       6,352,977      4,617,982
    Depreciation and amortization                             1,659,429       1,251,364      1,072,160
                                                          -------------- --------------- --------------

            Total operating expenses                        195,927,715     165,697,028    129,662,086
                                                          -------------- --------------- --------------

            Operating income (loss)                          24,679,995     (18,554,391)   (13,161,452)
                                                          -------------- --------------- --------------

Nonoperating income, net:
    Interest income                                           1,556,047         722,380      1,033,508
    Interest expense                                           (700,635)       (324,167)       (20,435)
    Other, net                                                 (448,917)        409,808        (37,953)
                                                          -------------- --------------- --------------

            Total nonoperating income, net                      406,495         808,021        975,120
                                                          -------------- --------------- --------------

Net income (loss) before income tax                          25,086,490     (17,746,370)   (12,186,332)

Income tax benefit (note 5)                                   5,479,570         -               -

                                                          -------------- --------------- --------------
Net income (loss)                                        $   30,566,060  $  (17,746,370) $ (12,186,332)

                                                          ============== =============== ==============

Earnings (loss) per share:
            Basic                                                 $2.14         ($1.95)        ($1.49)
                                                          ============== =============== ==============
            Diluted                                               $1.98         ($1.95)        ($1.49)
                                                          ============== =============== ==============

Weighted average shares of
  common stock outstanding
                                                             14,257,661       9,095,220      8,156,302
                                                          ============== =============== ==============

Weighted average shares of common stock and
  common stock equivalents outstanding
                                                             15,401,435       9,095,220      8,156,302

                                                          ============== =============== ==============
</TABLE>

See accompanying notes to financial statements.
<PAGE>

FRONTIER AIRLINES, INC.

Statements of Stockholders' Equity

Years Ended March 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
<S>                                   <C>           <C>          <C>            <C>           <C>               <C>


                                             Common
                                              Stock               Additional      Unearned                       Total
                                                    Stated         paid-in         ESOP        Accumulated    stockholders'
                                     Shares          value         capital        shares         Deficit         equity
                                 ---------------  ------------   ------------   ------------  --------------  --------------

Balances,
    March 31, 1996                    5,420,640   $ 5,421     $  18,399,918      $   -      $  (13,704,319)    $  4,701,020


Sale of common stock, net of
    offering costs of $279,385          678,733       679         2,720,615          -              -             2,721,294

Exercise of common stock
    warrants, net of issuance
    costs of $55,518                  2,666,133     2,666        13,275,145          -              -            13,277,811

Contribution of common stock to
    employees stock ownership
    plan                                 78,869        78           499,922          -              -               500,000

Issuance of warrants                   -               -            869,110          -              -               869,110

Net loss                               -               -              -              -         (12,186,332)     (12,186,332)
                                 ---------------  ------------   ------------   ------------  --------------  --------------

Balances,
  March 31, 1997                      8,844,375     8,844        35,764,710          -         (25,890,651)       9,882,903


Exercise of common stock
    options                             409,188       409           434,948          -              -               435,357

Warrants issued in conjunction
    with debt                          -               -          1,754,926          -              -             1,754,926

Net loss                               -               -              -              -         (17,746,370)     (17,746,370)
                                 ---------------  ------------   ------------   ------------  --------------  --------------

Balances,
    March 31, 1998                    9,253,563     9,253        37,954,584          -         (43,637,021)      (5,673,184)


Sale of common stock, net of
    offering costs of $525,059        4,363,001     4,363        13,650,331          -              -            13,654,694

Contribution of common stock to
    employees stock ownership
    plan                                275,000       275         1,457,975      (609,375)          -               848,875

Exercise of common stock
    warrants                          1,796,400     1,797         4,360,022          -              -             4,361,819

Exercise of common stock
    options                             453,208       453           631,932          -              -               632,385

Net income                             -               -              -              -
                                                                                                30,566,060       30,566,060
                                 ---------------  ------------   ------------   ------------  --------------  --------------

Balances,
    March 31, 1999                   16,141,172  $ 16,141      $ 58,054,844    $ (609,375)   $ (13,070,961)    $ 44,390,649

                                 ===============  ============   ============   ============  ==============  ==============
</TABLE>

See accompanying notes to financial statements.


<PAGE>

FRONTIER AIRLINES, INC.
<TABLE>
<CAPTION>

Statements of Cash Flows

Years ended March 31, 1999, 1998, and 1997

---------------------------------------------------------------------------------------------------------------

<S>                                                            <C>            <C>            <C>

                                                                  1999            1998           1997
                                                                  ----            ----           ----
Cash flows from operating activities:
    Net income (loss)                                       $  30,566,060   $ (17,746,370) $ (12,186,332)
    Adjustments to reconcile net income (loss) to net cash
        from operating activities:
            Employee  stock   ownership  plan   compensation
                 expense                                          848,600            -           500,000
            Depreciation and amortization                       2,705,255       1,749,097      1,322,916
            Loss on sale of equipment                               3,867          10,334          4,708

            Changes in operating assets and liabilities:
                Restricted investments                           (425,301)     (2,372,326)        82,458
                Trade receivables                              (5,268,715)     (4,209,981)    (1,579,184)
                Security, maintenance and other deposits       (6,968,057)     (3,583,327)    (1,608,524)
                Prepaid expenses                               (1,596,140)       (393,823)      (562,954)
                Inventories                                       (39,606)       (167,208)      (427,926)
                Note receivable                                    -               11,740         10,950
                Deferred tax benefit                           (6,010,648)           -              -
                Accounts payable                                  346,488       5,619,217      3,643,071
                Air traffic liability                           9,977,251       5,851,809      1,858,072
                Other accrued expenses                          5,758,840       1,839,597      1,323,037
                Accrued maintenance expense                     6,057,944       5,233,104      1,151,443
                                                             -------------- --------------- --------------
                     Net cash provided (used) by
                     operating activities                      35,955,838      (8,158,137)    (6,468,265)
                                                             -------------- --------------- --------------

Cash flows used by investing activities:
    Decrease in short-term investments                             -              -            1,168,200
    Aircraft lease deposits                                      (944,000)        207,500     (2,682,250)
    Increase in restricted investments                         (1,544,000)     (1,500,000)      (600,000)
    Capital expenditures                                       (4,313,065)     (2,355,266)    (3,434,789)
                                                             -------------- --------------- --------------
                     Net cash used in investing activities     (6,801,065)     (3,647,766)    (5,548,839)
                                                             -------------- --------------- --------------

Cash flows from financing activities:
    Net proceeds from issuance of common stock and warrants    15,550,085         435,357     15,999,455
    Proceeds from sale of senior secured notes                    -             5,000,000         -
    Principal payments on senior secured notes                   (941,841)          -             -
    Cash payments for debt issuance costs                         -              (227,500)        -
    Proceeds from short-term borrowings                           179,664         202,810         95,911
    Principal payments on short-term borrowings                  (179,664)       (212,622)       (96,540)
    Principal payments on obligations under capital leases       (115,340)        (37,200)       (54,523)
                                                             -------------- --------------- --------------
        Net cash provided by financing activities              14,492,904       5,160,845     15,944,303
                                                             -------------- --------------- --------------

        Net increase (decrease) in cash and
        cash equivalents                                       43,647,677      (6,645,058)     3,927,199

Cash and cash equivalents, beginning of period                  3,641,395      10,286,453      6,359,254
                                                             -------------- --------------- --------------

Cash and cash equivalents, end of period                     $ 47,289,072   $   3,641,395   $ 10,286,453
                                                             ============== =============== ==============
</TABLE>

See accompanying notes to financial statements.



<PAGE>


FRONTIER AIRLINES, INC.

Notes to Financial Statements

March 31, 1999


 (1)    Nature of Business and Summary of Significant Accounting Policies

        Nature of Business

        Frontier  Airlines,  Inc. (the "Company") was  incorporated in the State
        of Colorado on February 8, 1994 and  is  a  scheduled  airline  based in
        Denver, Colorado which currently  serves cities on  the  west  and  east
        coasts, as well as intermediate cities in  relatively close proximity to
        Denver.  The Company commenced airline operations on July 5, 1994.

        Airline  operations  have high fixed costs and are highly  sensitive  to
        various factors  incuding the actions of competing  airlines and general
        economic factors.

        Preparation of Financial Statements

        The  preparation  of financial  statements in conformity  with generally
        accepted accounting principles requires management to make estimates and
        assumptions  that affect the reported  amounts of assets and liabilities
        and disclosure of contingent  assets and  liabilities at the date of the
        financial  statements and the reported  amounts of revenues and expenses
        during the  reporting  period.  Actual  results  could differ from those
        estimates.

        Cash and Cash Equivalents

        For  financial  statement  purposes,  the  Company  considers  cash  and
        short-term investments with an original maturity of three months or less
        to be cash equivalents.

        Supplemental Disclosure of Cash Flow Information

        Noncash Financing and Investment Activities:

        During the year ended March 31, 1998, the Company issued warrants to its
        lender in connection  with its  $5,000,000  senior secured notes with an
        estimated fair market value totaling $1,645,434,  and issued warrants to
        its financial  advisor in connection with debt and equity financing with
        an estimated fair market value totaling $109,492.  Also during the years
        ended March 31, 1999 and 1998,  the Company  entered into capital  lease
        agreements totaling $504,900 and $97,000, respectively.  During the year
        ended March 31, 1998 the Company exchanged a note receivable for certain
        property and equipment  totaling  $47,000.  In the years ended March 31,
        1997 and 1996, the Company issued  warrants to aircraft  lessors with an
        estimated   fair  market   value   totaling   $869,110   and   $577,200,
        respectively.


<PAGE>


FRONTIER AIRLINES, INC.

Notes to Financial Statements, continued
--------------------------------------------------------------------------------

(1)     Nature of Business and Summary of Significant Accounting Policies
        (continued)

        Interest and Taxes Paid During the Year:

        Cash paid for interest totaled $302,503,  $184,999, and $20,435, for the
        years ended March 31, 1999, 1998 and 1997, respectively. No income taxes
        were paid during the years ended March 31, 1999, 1998, and 1997.


        Restricted Investments

        Restricted  investments  include  certificates  of deposit  which secure
        certain  letters of credit issued  primarily to companies  which process
        credit card sale transactions,  certain airport authorities and aircraft
        lessors.  Restricted  investments are carried at cost,  which management
        believes approximates market value.  Maturities are for one year or less
        and the Company intends to hold restricted investments until maturity.

        Valulation and Qualifying Accounts

        The allowance  for doubtful  accounts was $199,960 and $139,096 at March
        31,  1999  and  1998,  respectively.  Provisions  for bad  debts  net of
        recoveries totaled $386,000,  $267,000, and $160,000 for the years ended
        March 31,  1999,  1998 and 1997.  Deductions  from the  reserve  totaled
        $330,000,  $200,000,  and  $120,000  for the years ended March 31, 1999.
        1998, and 1997, respectively.

        Inventories

        Inventories consist of expendable parts,  supplies and aircraft fuel and
        are stated at the lower of cost or market. Inventories are accounted for
        on a  first-in,  first-out  basis and are charged to expense as they are
        used.

        The  Company  has two  aircraft  parts  agreements  for its  Boeing  737
        aircraft  as  discussed  in note 3, one with  another  air  carrier  and
        another with an aircraft parts supplier.  The Company is required to pay
        a monthly  consignment fee to each of these lessors,  based on the value
        of the consigned parts, and to replenish any such parts when used with a
        like part. At March 31, 1999 and 1998, the Company held consigned  parts
        and supplies in the amount of  approximately  $8,902,000 and $8,161,000,
        respectively, which are not included in the Company's balance sheet.


<PAGE>


(1)     Nature of Business and Summary of Significant Accounting Policies
        (continued)

        Property and Equipment

        Property and equipment are carried at cost. Major additions, betterments
        and renewals are capitalized.  Depreciation and amortization is provided
        for on a straight-line basis to estimated residual values over estimated
        depreciable lives as follows:

        Flight equipment                            5-10 years
        Improvements to leased aircraft             Life of improvements or term
                                                    of lease,  whichever is less
        Ground property, equipment, and
        leasehold improvements                      3-5 years or term of lease


        Assets  utilized  under capital  leases are amortized over the lesser of
        the lease  term or the  estimated  useful  life of the  asset  using the
        straight-line  method.  Amortization  of capital  leases is  included in
        depreciation expense.

        Maintenance

        Routine maintenance and repairs are charged to operations as incurred.

        Under  the  terms of its  aircraft  lease  agreements,  the  Company  is
        required  to make  monthly  maintenance  deposits  and a  liability  for
        accrued  maintenance  is  established  based on usage;  the deposits are
        applied against the cost of major airframe  maintenance checks,  landing
        gear  and  engine  overhauls.   Deposit  balances   remaining  at  lease
        termination  remain  with the lessor  and any  remaining  liability  for
        maintenance   checks  is   reversed   against   the   deposit   balance.
        Additionally,  a provision is made for the estimated  costs of scheduled
        major  overhauls  required  to  be  performed  on  leased  aircraft  and
        components  under the provisions of the aircraft lease agreements if the
        required  monthly  deposit  amounts are not adequate to cover the entire
        cost of the scheduled maintenance.  Accrued maintenance expense expected
        to be incurred beyond one year is classified as long-term.

        Revenue Recognition

        Passenger,   cargo,   and  other  revenues  are   recognized   when  the
        transportation  is provided or after the tickets expire,  and are net of
        excise  taxes.  Revenues  which have been  deferred  are included in the
        accompanying balance sheet as air traffic liability.


<PAGE>


(1)     Nature of Business and Summary of Significant Accounting Policies
        (continued)

        Passenger Traffic Commissions and Related Expenses

        Passenger traffic commissions and related expenses are expensed when the
        transportation  is  provided  and the  related  revenue  is  recognized.
        Passenger  traffic  commissions and related  expenses not yet recognized
        are included as a prepaid expense.

        Frequent Flyer Awards

        The Company allows its  passengers to accumulate  mileage on Continental
        Airlines' OnePass frequent flyer program.  The cost of providing mileage
        on the  OnePass  program  is based on an agreed  upon  rate per  mileage
        credit, which is paid to Continental Airlines on a monthly basis.

        Income (Loss) Per Common Share

        Basic EPS excludes  dilution and is computed by dividing  income  (loss)
        available  to  common  stockholders  by the  weighted-average  number of
        common  shares  outstanding  for the period.  Diluted EPS  reflects  the
        potential  dilution of securities  that could share in earnings.  Common
        stock  equivalents are excluded from the computation of diluted loss per
        share in 1998 and 1997 as their effect would have been anti-dilutive.

        Income Taxes

        The Company  accounts  for income  taxes  using the asset and  liability
        method. Under that method,  deferred income taxes are recognized for the
        tax   consequences  of  "temporary   differences"  by  applying  enacted
        statutory tax rates  applicable to future years to  differences  between
        the financial  statement  carrying amounts and tax bases of the existing
        assets and  liabilities.  A valuation  allowance  for net  deferred  tax
        assets is provided  unless  realizability  is judged by management to be
        more likely than not. The effect on deferred  taxes from a change in tax
        rates is  recognized in income in the period that includes the enactment
        date.

        Fair Value of Financial Instruments

        The  Company  estimates  the  fair  value  of its  monetary  assets  and
        liabilities  based upon existing  interest  rates related to such assets
        and  liabilities  compared to current rates of interest for  instruments
        with a similar nature and degree of risk. The Company estimates that the
        carrying   value  of  all  of  its  monetary   assets  and   liabilities
        approximates fair value as of March 31, 1999.


<PAGE>



(1)     Nature of Business and Summary of Significant Accounting Policies
        (continued)

        Stock Based Compensation

        The  Company  follows   Accounting   Principles  Board  Opinion  No.  25
        Accounting  for  Stock  Issued  to  Employees  ("APB  25")  and  related
        Interpretations in accounting for its employee stock options and follows
        the disclosure provisions of Statement of financial Accounting Standards
        No. 123 (SFAS No. 123).  Under APB 25, because the exercise price of the
        Company's  employee  stock  options  equals  the  market  price  of  the
        underlying  stock on the  date of  grant,  no  compensation  expense  is
        recognized.  The Company has included the pro forma disclosures required
        by SFAS No. 123 in Note 7.

        Impairment of Long-Lived Assets

        The  Company  records  impairment  losses on  long-lived  assets used in
        operations   when   indicators  of   impairment   are  present  and  the
        undiscounted future cash flows estimated to be generated by those assets
        are less than the assets' carrying amount.

(2)     Property and Equipment, Net

        As of March 31, 1999 and 1998  property and  equipment  consisted of the
        following:

<TABLE>
<CAPTION>
<S>                                                             <C>             <C>
                                                                1999            1998
                                                                ----            ----

    Flight equipment and improvements to leased aircraft  $      7,204,878 $     4,932,024
    Ground property, equipment and leasehold improvements        6,186,490       3,673,363
                                                            ---------------  --------------
                                                                13,391,368       8,605,387
    Less accumulated depreciation and amortization               4,657,590       3,026,368
                                                            ---------------  --------------

    Property and equipment, net                            $     8,733,778 $     5,579,019

                                                            ===============  ==============
</TABLE>

    Property and  equipment  includes  certain  office  equipment  under capital
    leases. At  March 31, 1999 and 1998, office equipment recorded under capital
    leases was  $785,847 and $280,857 and accumulated  amortization was $154,942
    and $113,364, respectively.

<PAGE>



(3)     Lease Commitments

        Aircraft Leases

        At March 31, 1999, the Company  operated 17 aircraft which are accounted
        for under operating  lease  agreements with initial terms ranging from 2
        to 8 years with certain leases that allow for renewal options.  Security
        deposits  related to leased  aircraft at March 31, 1999 and 1998 totaled
        $5,548,750 and $4,604,750 and are included in security,  maintenance and
        other deposits on the balance sheet. Letters of credit issued to certain
        aircraft  lessors  in lieu  of  cash  deposits  and  related  restricted
        investments to secure these letters of credit at March 31, 1999 and 1998
        totaled $3,644,000 and $2,100,000, respectively.

        In addition to scheduled  future minimum lease payments,  the Company is
        generally  required to pay to each aircraft lessor monthly cash deposits
        based on flight hours and cycles operated to provide funding for certain
        scheduled  maintenance  costs of leased  aircraft.  The lease agreements
        provide that the Company shall pay taxes,  maintenance,  insurance,  and
        other operating expenses applicable to the leased property. At March 31,
        1999 and 1998,  aircraft  maintenance  deposits totaled  $18,672,825 and
        $11,466,033,  respectively, and are reported as a component of security,
        maintenance and other deposits on the balance sheet.

        Any  cash  deposits  paid  to  aircraft  lessors  for  future  scheduled
        maintenance  costs to the extent not used  during the lease term  remain
        with the lessors,  and any remaining liability for maintenance checks is
        reversed against the deposit balance. Maintenance deposits are unsecured
        and may be subject to the risk of loss in the event the  lessors are not
        able to satisfy their obligations under the lease agreements.

        Other Leases

        The Company leases an office and hangar space, a spare engine and office
        equipment for its headquarters,  airport facilities,  and certain ground
        equipment.  The Company also leases certain airport gate facilities on a
        month-to-month basis.


<PAGE>



(3)     Lease Commitments (continued)

        At March 31, 1999, commitments under capital and noncancelable operating
        leases (excluding maintenance deposit requirements) with terms in excess
        of one year were as follows:



                                             Capital              Operating
                                             Leases                Leases


    Year ended March 31:
    2000                                    $ 158,452           $ 45,978,116
    2001                                      153,320             34,799,628
    2002                                      153,320             30,256,397
    2003                                      153,320             26,341,587
    2004                                       44,322             25,856,040
    Thereafter                                   -                20,371,397

    Total minimum lease payments            $ 662,734           $183,603,165

    Less amount representing interest        (120,981)
    Present value of obligations under
        capital leases                        541,753
    Less current portion of obligations under
        capital  leases                       106,833
    Obligations under capital leases,
        excluding current portion           $ 434,920



    The   obligations  under  capital  leases  have been  discounted  at imputed
    interest rates ranging from 10% to 13%.

    Rental  expense under operating leases, including month-to-month leases, for
    the years  ended March 31, 1999, 1998 and 1997 was $46,099,140,  $36,573,509
    and $25,336,749, respectively.


<PAGE>



 (4)    Senior Secured Notes

        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 a discount on notes payable and 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

        During the year  ended  March 31,  1999,  Wexford  exercised  all of the
        warrants described above. As permitted 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. The total amount of $5,250,000 from the
        exercise was  comprised of the  following:  payment of accrued  interest
        totaling  $134,971,  then to the outstanding  principal balance totaling
        $4,058,159,  and the remaining  balance in cash to the Company  totaling
        $1,056,870.  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.

        The value of the  outstanding  warrants  amortized  to interest  expense
        prior to the pay-off of the notes totaled  $199,975 and $113,454 for the
        years ended March 31, 1999 and 1998, respectively.  Upon the exercise of
        the warrants by Wexford,  $1,094,042 of unamortized discount was charged
        to  additional  paid-in  capital.  The  deferred  cost of the  remaining
        warrants and other deferred loan costs totaled $485,846 at the repayment
        date  and  was  charged  to  expense  and  is  included  in  other,  net
        non-operating income (expense).


<PAGE>



 (5)    Income Taxes

        Income tax expense (benefit) for the years ended March 31, 1999 consists
of:

                                      Current       Deferred           Total

Year ended March 31, 1999:
U.S. Federal                         $ 531,077     $ (5,244,134)   $ (4,713,057)
State and local                                        (766,513)       (766,513)
                                  ----------------------------------------------
                                     $ 531,077      $(6,010,647)    $(5,479,570)
                                  ==============================================

        There was no income tax expense or benefit in 1998 or 1997.

        The  differences  between the Company's  effective rate for income taxes
        and the federal  statutory  rate are comprised of the items shown in the
        following table:

                                         1999            1998             1997
                                         ----            ----             ----

  Income tax benefit (expense)
    at the statutory rate                (35%)            34%               34%
  (Increase) decrease in valuation
    allowance                             60%            (34%)             (34%)
  State and local income tax, net of
    federal income tax benefit            (3%)             -                 -
                                     ===========================================
                                          22%              -                 -
                                     ===========================================



<PAGE>



 (5)    Income Taxes, continued

        The tax effects of temporary  differences  that give rise to significant
        portions  of the  deferred  tax  assets at March  31,  1999 and 1998 are
        presented below:
<TABLE>
<CAPTION>
<S>                                                                  <C>                <C>

                                                                     1999                 1998
                                                                     ----                 ----
                Deferred tax assets:

                    Net operating loss carryforwards                 $4,548,000          $13,434,000
                    AMT credit carryforward                             525,000           -
                    Start-up cost deferred for
                      tax purposes                                       55,000              108,000
                    Accrued maintenance not
                      deductible for tax purposes                       212,000              899,000
                    Accrued vacation and health
                      insurance liability not
                      deductible for tax purposes                       654,000              527,000
                    Other                                               103,000              110,000
                                                              ------------------  -------------------

                       Total gross deferred tax assets                6,097,000           15,078,000

                       Less valuation allowance                       -                  (14,832,000)
                                                              ------------------  -------------------

                                                                      6,097,000              246,000
                                                              ------------------  -------------------

                Deferred tax liabilities:

                Equipment depreciation and
                      amortization                                      (86,000)            (246,000)

                                                              ==================  ===================
                    Net deferred taxes                               $6,011,000   $          -
                                                              ==================  ===================

</TABLE>


<PAGE>


 (5)    Income Taxes, continued

        The  Company  recognized  an income tax  benefit of  $5,479,570  in 1999
        attributable  to the probable  realization  of its remaining  income tax
        loss  carryforwards for which a valuation  allowance had previously been
        recorded.  The  valuation  allowance for deferred tax assets as of March
        31,  1998 and 1997 was  $14,832,000  and  $8,934,000,  respectively.  In
        assessing the realizability of deferred tax assets, management considers
        whether  it is more  likely  than not that  some  portion  or all of the
        deferred tax assets will not be realized.  The ultimate  realization  of
        deferred tax assets is dependent  upon the  generation of future taxable
        income during the periods in which those  temporary  differences  become
        deductible.  Management considers the scheduled reversal of deferred tax
        liabilities,   projected   future  taxable  income,   and  tax  planning
        strategies  in  making  this   assessment.   Based  upon  the  Company's
        profitibility  in fiscal 1999 and  projections  for fiscal 2000  taxable
        income,  management believes it is more likely than not that the Company
        will realize the benefits of these deductible differences;  accordingly,
        a valuation allowance is no longer considered necessary.  As a result of
        reversing its valuation allowance, the Company expects it will recognize
        income tax  expense  on future  income  based on  statutory  rates.  The
        Company  had  net  operating   loss   carryforwards   of   approximately
        $11,891,000  which  expire in the years  2010 to 2012,  and  alternative
        minimum tax credits of  approximately  $525,000  which are  available to
        reduce future federal  regular income taxes,  if any, over an indefinite
        period.

(6)     Warrants and Rights Dividend

        The  Company  issued  2,670,000  warrants to  purchase  common  stock in
        conjunction  with a private  placement and its initial public  offering.
        Each warrant entitled the warrant holder to purchase one share of common
        stock for $5.00.  These  warrants were subject to redemption at $.05 per
        warrant by the Company on 45 days written  notice if certain  conditions
        were met.  The Company met these  conditions  in May 1996 and on May 14,
        1996, the Company  notified the warrant holders of the Company's  intent
        to exercise  its  redemption  rights with  respect to the  warrants  not
        exercised on or before June 28, 1996.  2,666,133 warrants were exercised
        with net proceeds to the Company totaling $13,275,000.

        At  completion  of the  Company's  initial  public  offering in 1994, an
        underwriter  acquired options to purchase up to 110,000 shares of common
        stock  exercisable  at a price  equal to $5.525 per share.  At March 31,
        1999,  26,400  options were  exercised  with net proceeds to the Company
        totaling $145,860. (See note 11). The underwriters in a secondary public
        offering by the Company in 1995  received a warrant to purchase  119,211
        shares of common  stock at $5.55 per share.  The  options  and  warrants
        issued to  underwriters  in  connection  with the initial and  secondary
        public offerings expire, respectively, on May 20, 1999 and September 18,
        2000.


<PAGE>



(6)     Warrants and Rights Dividend, continued

        In October 1995, the Company issued to each of two of its Boeing 737-300
        aircraft  lessors a warrant to purchase  100,000  shares of common stock
        for an aggregate  purchase price of $500,000.  In June 1996, the Company
        issued two warrants to a Boeing 737-200 lessor,  each warrant  entitling
        the lessor to purchase  70,000  shares of common  stock at an  aggregate
        exercise  price of $503,300 per  warrant.  In  connection  with a Boeing
        737-300  aircraft  delivered in August 1997,  the Company  issued to the
        lessor a  warrant  to  purchase  55,000  shares  of  Common  Stock at an
        aggregate  purchase  price of  $385,000.  Warrants  issued  to  aircraft
        lessors, to the extent not earlier exercised,  expire upon expiration of
        the  aircraft  leases in March 2000,  May 2001 and June 2002.  (See note
        11).

        In February  1998, in  connection  with the  $5,000,000  senior notes as
        discussed  in note 4, the  Company  issued a  warrant  to the  lender to
        purchase  1,750,000  shares of the Company's  common stock at a purchase
        price of $3.00 per share, which warrant expires in December 2001. During
        the year  ended  March 31,  1999,  this  warrant  was  exercised  in its
        entirety as discussed in note 4. In May 1998,  the Company issued to its
        financial  advisor,  in connection  with debt and equity  financings,  a
        warrant to purchase  548,000  shares of the Company's  common stock at a
        purchase  price of $3.00 per share,  which warrant  expires in May 2003.
        (See note 11). Of the 548,000  shares,  116,450  were  recognized  as of
        March 31, 1998 as part of the sale of the senior secured notes discussed
        in note 4. The Company  recorded a value of $109,492 for these  warrants
        attributable  to the debt and recorded the value as equity in additional
        paid in  capital  and  deferred  loan  expenses.  The  amount  was fully
        amortized during the year ended March 31, 1999 as discussed in note 4.

        In April 1998,  in  connection  with a private  placement  of  4,363,001
        shares  of  its  common  stock,  the  Company  issued  a  warrant  to an
        institutional investor to purchase 716,929 shares of its common stock at
        a purchase  price of $3.75 per  share,  which  warrant  expires in April
        2002.

        In  February   1997,   the  Board  of  Directors   declared  a  dividend
        distribution  of one common stock  purchase  right for each share of the
        Company's  common  stock  outstanding  on March  15,  1997.  Each  right
        entitles a  shareholder  to purchase one share of the  Company's  common
        stock at a purchase  price of $17.50 per full common  share,  subject to
        adjustment.  The rights are not currently exercisable,  but would become
        exercisable  if certain  events  occurred  relating to a person or group
        acquiring or attempting to acquire 20 percent or more of the outstanding
        shares of the Company's  common stock. The rights expire on February 20,
        2007,  unless  redeemed by the Company  earlier.  Once the rights become
        exercisable, each holder of a right will have the right to receive, upon
        exercise, common stock (or, in certain circumstances,  cash, property or
        other  securities of the Company)  having a value equal to two times the
        exercise price of the right.


<PAGE>



 (7)    Stock Option Plan

        The Company has a stock  option plan  whereby the Board of  Directors or
        its  Compensation  Committee may issue options to purchase shares of the
        Company's  common stock to  employees,  officers,  and  directors of the
        Company.

        Under the plan,  the Company  has  reserved an  aggregate  of  4,250,000
        shares of common stock for issuance pursuant to the exercise of options.
        With certain exceptions, options issued through March 31, 1999 generally
        vest over a five year  period  from the date of grant  and  expire  from
        March 9, 2004 to March 28, 2009.  At March 31, 1999,  1,591,250  options
        are available for grant under the plan.

        A summary of the Plan's  stock option  activity and related  information
        for the years ended March 31, 1999, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
<S>                                                <C>                     <C>                     <C>
                                                   1999                    1998                    1997
                                           --------------------------------------------------------------------------
                                                         Weighted-                Weighted-               Weighted-
                                                          Average                  Average                 Average
                                                         Exercise                 Exercise                 Exercise
                                              Options      Price      Options       Price      Options      Price
                                           --------------------------------------------------------------------------
          Outstanding-beginning of year      1,532,062     $1.56     1,911,250      $1.85      1,731,250    $1.27
          Granted                              717,500     $5.94       30,000       $2.77        180,000    $7.40
          Exercised                           (453,208)    $1.34     (409,188)      $1.06         -           -
          Surrendered                           -            -       (180,000)      $7.40         -           -
          Re-issued                             -            -        180,000       $3.00         -           -
                                            --------------------------------------------------------------------------

                                             1,796,354     $3.35    1,532,062       $1.56      1,911,250    $1.85
                                            ==========================================================================

          Exercisable at end of year         1,103,020     $1.70    1,761,250       $1.39      1,671,250    $1.20

</TABLE>

        Exercise prices for options  outstanding  under the plan as of March 31,
        1999 ranged from $1.00 to $9.00 per option share.  The  weighted-average
        remaining  contractual  life of those options is 7.1 years. A summary of
        the outstanding and exercisable options at March 31, 1999, segregated by
        exercise price ranges, is as follows:
<TABLE>
<CAPTION>
<S>       <C>                  <C>          <C>             <C>                <C>            <C>

           ---------------------------------------------------------------------------------------------------
                                                               Weighted-
                                                                Average
                                               Weighted-       Remaining                        Weighted-
           Exercise Price       Options         Average       Contractual      Exercisable       Average
                Range         Outstanding   Exercise Price  Life (in years)      Options      Exercise Price
           ---------------------------------------------------------------------------------------------------

           $ 1.00 - $ 2.50     800,937           $1.10            5.0            800,937          $1.10
           $ 3.00 - $ 5.06     640,417            3.49            8.3            302,083           3.30
           $ 8.13 - $ 9.00     355,000            8.20           10.0
                           -----------------------------------------------------------------------------------
                             1,796,354           $3.35            7.1          1,103,020          $1.48
                           ===================================================================================
</TABLE>
<PAGE>

(6)      Stock Option Plan, continued

        The  Company  applies  APB  Opinion 25 and  related  Interpretations  in
        accounting  for  its  plans.   Accordingly,   no  compensation  cost  is
        recognized for options granted at a price equal to the fair market value
        of the common  stock.  Pro forma  information  regarding  net income and
        earnings per share is required by SFAS No. 123, which also requires that
        the  information  be  determined as if the Company has accounted for its
        employee  stock options  granted  subsequent to March 31, 1995 under the
        fair value method of that  Statement.  The fair value for these  options
        was estimated at the date of grant using a Black-Scholes  option pricing
        model with the following weighted-average assumptions for 1999, 1998 and
        1997, respectively:  risk-free interest rates of 5.36%, 6.42% and 6.55%,
        dividend  yields of 0%, 0% and 0%;  volatility  factors of the  expected
        market price of the Company's common stock of 69.25%, 64.33% and 58.78%,
        and a  weighted-average  expected  life of the  options of 3.6 years for
        each  year.  Had  compensation   cost  for  the  Company's   stock-based
        compensation plan been determined using the fair value of the options at
        the grant date,  the  Company's pro forma net income (loss) and earnings
        (loss) per share is as follows:
<TABLE>
<CAPTION>
<S>                                                      <C>                  <C>                   <C>

                                                         1999                  1998                  1997
                                                         ----                  ----                  ----
          Net Income:
            As reported                                  $ 30,566,060         $(17,746,370)         $(12,186,332)
            Pro forma                                    $ 30,263,570         $(17,842,594)         $(12,366,532)
          Earnings (loss) per share, basic:
            As reported                                     $    2.14           $    (1.95)           $    (1.49)
            Proforma                                        $    2.12           $    (1.96)           $    (1.52)
          Earnings (loss) per share, diluted:
            As reported                                     $    1.98           $    (1.95)           $    (1.49)
            Proforma                                        $    1.96           $    (1.96)           $    (1.52)
</TABLE>

 (8)    Benefit Plans

        Employee Stock Ownership Plan

        The Company has  established  an Employee  Stock  Ownership  Plan (ESOP)
        which  inures to the  benefit of each  employee of the  Company,  except
        those employees covered by a collective  bargaining  agreement that does
        not provide for participation in the ESOP. Company  contributions to the
        ESOP are  discretionary  and may vary from year to year. In order for an
        employee to receive an allocation of company common stock from the ESOP,
        the  employee  must be employed on the last day of the ESOP's plan year,
        with certain exceptions.  The Company's annual contribution to the ESOP,
        if any, will be allocated among the eligible employees of the Company as
        of the end of each plan year in proportion to the relative  compensation
        (as defined in the ESOP)  earned that plan year by each of the  eligible
        employees.  The ESOP does not provide for contributions by participating
        employees.  Employees will vest in contributions  made to the ESOP based
        upon their years of service  with the  Company.  A year of service is an
        ESOP plan year

<PAGE>

(8)     Benefit Plans, continued

        during  which an employee  has at least 1,000 hours of service.  Vesting
        generally occurs at the rate of 20% per year,  beginning after the first
        year of service,  so that a participating  employee will be fully vested
        after five  years of  service.  Distributions  from the ESOP will not be
        made to  employees  during  employment.  However,  upon  termination  of
        employment  with the Company,  each employee will be entitled to receive
        the vested portion of his or her account balance.

        The initial  Company  contribution to the ESOP was made on June 22, 1995
        and consisted of 137,340 shares of Common Stock,  of which 27,468 shares
        relate to the plan year ended March 31, 1995 and 109,872  shares  relate
        to the period from April 1, 1995 to December 31, 1995.  During the years
        ended  March 31,  1999 and 1997,  the  Company  contributed  275,000 and
        78,869 shares to the plan and none during the year ended March 31, 1998.
        The Company recognized  compensation expense during the year ended March
        31, 1999 and 1997 of $848,600 and $500,000, respectively, related to its
        contribution to the ESOP and none during the year ended March 31, 1998.

        Retirement Savings Plan

        The  Company  has  established  a  Retirement   Savings  Plan  (401(k)).
        Participants   may   contribute   from  1%  to  15%  of  pre-tax  annual
        compensation.  Individual pre-tax participant  contributions are limited
        annually  (not to exceed  $10,000 for calander  year 1998 and $9,500 for
        calander  years  1997  and  1996)  under  the  Internal   Revenue  Code.
        Participants  are immediately  vested in their voluntary  contributions,
        adjusted by any actual earnings and/or losses there on from the specific
        investments.

        Effective  April 1999,  for the plan year ending  December 31, 1999, the
        Company's  Board  of  Directors  elected  to  match  25% of  Participant
        contributions from April 1999 through December 1999. The Company has not
        matched  any  contributions  made  prior to this date.  Future  matching
        contributions,  if any,  will be  determined  annually  by the  Board of
        Directors.  In order to receive the matching contribution,  Participants
        must be  employed  on the last day of the plan year.  Participants  will
        vest in  contributions  made to the 401(k)  upon their  years of service
        with the Company. A year of service is a 401(k) plan year during which a
        participant  has at least  1,000  hours of  service.  Vesting  generally
        occurs at the rate of 20% per year,  beginning  after the first  year of
        service,  so that a Participant will be fully vested after five years of
        service.   Upon  termination  of  employment  with  the  Company,   each
        Participant will be entitled to receive the vested portion of his or her
        account balance.


<PAGE>



(9)     Concentration of Credit Risk

        The  Company  does  not  believe  it  is  subject  to  any   significant
        concentration of credit risk relating to trade receivables. At March 31,
        1999 and 1998, 70% and 60% of the Company's trade receivables  relate to
        tickets sold to  individual  passengers  through the use of major credit
        cards,  travel agencies approved by the Airlines Reporting  Corporation,
        tickets  sold by  other  airlines  and  used by  passengers  on  Company
        flights,  or the United States Postal  Service.  These  receivables  are
        short-term,  generally  being settled shortly after sale or in the month
        following ticket usage.

 (10)   Contingencies

        The Company is party to legal  proceedings and claims which arise during
        the  ordinary  course of  business.  In the opinion of  management,  the
        ultimate  outcome  of these  matters  will not have a  material  adverse
        effect upon the Company's financial position or results of operations.

        The Company uses information  systems in managing and conducting certain
        aspects of its business.  The Company is taking measures to address Year
        2000 compliance of its systems and processes. Failure by the company and
        its key business  partners  (e.g.,  the FAA, DOT,  airport  authorities,
        credit card  companies,  suppliers,  and data providers) to achieve Year
        2000  compliance  on a timely  basis  could have a  significant  adverse
        impact on the  Company's  business  financial  condition  and  operating
        results.

(11)    Subsequent Events

        During April and June 1999, the Company entered into two aircraft leases
        for two aircraft with lease terms of 6 and 7 years, respectively. Annual
        rental expense for these two aircraft total $5,160,000.

        During April and May 1999,  the  underwriter  of the  Company's  initial
        public offering in 1994, exercised the remaining 83,600 options with net
        proceeds to the Company totaling $461,890.

        During May and June 1999,  aircraft lessors  exercised  395,000 warrants
        with net proceeds to the Company totaling $2,391,600. To the extent that
        the aircraft  lessors  were able to realize  certain  profit  margins on
        their  subsequent  sale of the  stock,  they were  required  to refund a
        portion of the cash security deposits they were holding.  As a result of
        their sale of the  Company's  common  stock,  $486,000 in cash  security
        deposits were returned to the Company during the month of May 1999.

        During  June 1999,  a  financial  consultant  exercised  its  warrant to
        purchase  548,000 shares of the Company's common stock with net proceeds
        to the Company totaling $1,644,000.


<PAGE>


(11)    Subsequent Events, continued

        Between April 1, 1999 and June 16, 1999, 65,000 options issued under the
        Company's  Stock  Option Plan were  exercised  with net  proceeds to the
        Company totaling $65,000.

        As a result of these  warrant  and option  exercises,  the  Company  has
        17,232,772 shares of its common stock outstanding as of June 16, 1999.