UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-Q

 QUARTERLY REPORT UNDER SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934


                For the Quarterly Period Ended September 30, 1996

                         Commission File Number: 0-20360


                                 RENO AIR, INC.
             (Exact name of registrant as specified in its charter)


                                Nevada 88-0259913
        (State or other jurisdiction (IRS Employer Identification Number)
                        of incorporation or organization)


                                 220 Edison Way
                               Reno, Nevada 89502
                    (Address of principal executive offices)


                                 (702) 686-3835
              (Registrant's telephone number, including area code)


        Indicate by check mark whether the  registrant (1) has filed all reports
required to be filed by Section 13 or 15 of the Securities  Exchange Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

Yes  /x/                    No

Number of shares of common stock, $.01 par value, of registrant outstanding
at September 30, 1996: 10,326,646


<PAGE>





                                 RENO AIR, INC.
    ------------------------------------------------------------------------

                                      INDEX



PART I.  FINANCIAL INFORMATION

Item 1.           Financial Statements                            

                  Balance Sheets - September 30, 1996 and
                  December 31, 1995                                3

                  Statements of Operations -
                  Nine Months and Three Months Ended
                  September 30, 1996 and 1995                      4

                  Statements of Cash Flows -
                  Nine Months Ended
                  September 30, 1996 and 1995                      5

                  Notes to Financial Statements                    6

Item 2.           Management's Discussion and Analysis of 
                  Financial Condition and Results of Operations    7

PART II.  OTHER INFORMATION

Item 6.           Exhibits and Reports on Form 8-K                14

                  SIGNATURES                                      15



<PAGE>


<TABLE>
                          PART I. FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS
                                 RENO AIR, INC.
                                BALANCE SHEET AT
                    September 30, 1996 AND DECEMBER 31, 1995
<CAPTION>

                                                                 September 30,  December 31,
                                                                     1996           1995
                                                                  -----------    -----------
                                                                  (unaudited)
                                     ASSETS
<S>                                                             <C>            <C> 
CURRENT ASSETS:
     Cash and cash equivalents ................................ $  26,612,298  $  34,985,808
     Short-term investments ...................................     1,973,793      2,944,188
     Accounts receivable, net .................................    29,179,758     18,237,295
     Inventories and operating supplies .......................     1,831,084      1,298,894
     Prepaid expenses and other ...............................    17,339,038     14,597,564
                                                                  -----------    -----------
               Total current assets ...........................    76,935,971     72,063,749
                                                                  -----------    -----------

PROPERTY AND EQUIPMENT:
     Flight equipment .........................................    60,721,028     11,061,841
     Ground property and equipment ............................     5,521,145      4,839,542
     Less - Accumulated depreciation ..........................    (9,167,581)    (5,212,862)
                                                                  -----------    -----------
                                                                   57,074,592     10,688,521
                                                                  -----------    -----------
RESTRICTED CASH AND INVESTMENT ................................     7,576,126      2,150,327
DEPOSITS AND OTHER ............................................    18,993,674     14,581,326
                                                                  -----------    -----------
                                                                $ 160,580,363  $  99,483,923
                                                                  ===========    ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable ......................................... $  20,434,394  $  17,245,930
     Accrued liabilities ......................................    23,166,248     14,419,993
     Fuel purchase agreement ..................................          --        1,841,226
     Air traffic liability ....................................    29,674,362     18,924,676
     Current maturities of long-term debt .....................     4,935,293        342,061
     Current portion of deferred lease payable ................     1,670,931      1,027,858
                                                                  -----------    -----------
               Total current liabilities ......................    79,881,228     53,801,744
                                                                  -----------    -----------


LONG-TERM DEBT ................................................    50,486,652     28,755,019
                                                                  -----------    -----------

NON-CURRENT LIABILITIES .......................................    11,822,126      8,024,021
                                                                  -----------    -----------

SHAREHOLDERS' EQUITY:
     Common stock, $.01 par value, 30,000,000 shares 
        authorized, 10,326,646 and 9,974,800 shares 
        issued and outstanding at September 30, 1996 
        and December 31, 1995, respectively ..................        103,267         99,748
     Additional paid - in capital .............................    32,599,480     31,413,623
     Accumulated deficit ......................................   (14,312,390)   (22,610,232)
                                                                  -----------    -----------
               Total shareholders' equity .....................    18,390,357      8,903,139
                                                                  -----------    -----------
                                                                $ 160,580,363  $  99,483,923
                                                                  ===========    ===========

    The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
                                 RENO AIR, INC.
                            STATEMENTS OF OPERATIONS
                             FOR THE NINE MONTHS AND
                 THREE MONTHS ENDED September 30, 1996 AND 1995
                                   (unaudited)
<CAPTION>

                                                     Nine months ended          Three months ended
                                                       September 30,               September 30,
                                                 1996             1995         1996             1995
                                              -------------   -----------  -------------   -------------
<S>                                           <C>           <C>            <C>             <C> 
OPERATING REVENUES:
     Passenger .............................. $ 251,856,374 $ 180,275,133  $  96,673,915   $  70,188,887              $
     Other ..................................    12,600,027    10,423,631      4,046,723       4,093,865
                                              ------------- -------------  -------------   -------------
               Total operating revenues .....   264,456,401   190,698,764    100,720,638      74,282,752
                                              ------------- -------------  -------------   -------------

OPERATING EXPENSES:
     Salaries, wages and benefits ...........    40,586,441    30,687,095     15,544,614      11,046,995
     Aircraft fuel and oil ..................    48,269,372    32,516,175     18,894,508      12,086,041
     Aircraft leases ........................    44,713,350    36,745,832     16,233,471      12,762,232
     Maintenance ............................    19,705,815    12,478,398      7,575,312       5,767,659
     Handling, landing and airport fees .....    25,633,437    18,597,212      9,340,724       6,796,052
     Advertising, sales and distribution ....    23,346,141    14,477,064      8,662,966       5,825,415
     Commissions ............................    14,881,212    12,537,524      5,560,222       5,175,305
     Facility leases ........................     8,320,222     6,672,370      2,946,754       2,235,107
     Insurance ..............................     5,858,525     4,971,294      1,905,683       1,816,662
     Communications .........................     3,245,184     2,551,311      1,227,978         922,806
     Depreciation and amortization ..........     3,976,289     1,869,916      1,608,953         678,168
     Other ..................................    17,571,256    13,223,676      6,940,512       4,632,436
                                              ------------- -------------  -------------   -------------
               Total operating expenses .....   256,107,244   187,327,867     96,441,697      69,744,878
                                              ------------- -------------  -------------   -------------

OPERATING INCOME ............................     8,349,157     3,370,897      4,278,941       4,537,874

NON-OPERATING INCOME (EXPENSE):
     Interest expense .......................    (2,842,636)   (1,190,155     (1,190,227)       (419,460)
     Interest income ........................     2,227,819     1,396,360        775,433         570,998
     Other, net .............................       900,278    (1,849,852      1,083,140        (103,157)
                                              ------------- -------------  -------------   -------------

NET INCOME BEFORE INCOME TAXES ..............     8,634,618     1,727,250      4,947,287       4,586,255

INCOME TAX PROVISION ........................       336,776          --          199,455            --
                                              ------------- -------------  -------------   -------------

NET INCOME ..................................     8,297,842     1,727,250      4,747,832       4,586,255

PREFERRED STOCK DIVIDEND ....................          --         131,427           --           127,196
                                              ------------- -------------  -------------   -------------

NET INCOME APPLICABLE TO COMMON STOCK ....... $   8,297,842     1,595,823      4,747,832       4,459,059              $
                                              ============= =============  =============   =============

NET INCOME PER COMMON SHARE AND
     COMMON SHARE EQUIVALENT

                       PRIMARY .............. $        0.76 $        0.17  $        0.43   $       0.42
                                              ============= =============  =============   ============
                       FULLY DILUTED ........ $        0.74 $        0.16  $        0.39   $       0.40
                                              ============= =============  =============   ============


WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND
  COMMON SHARE EQUIVALENTS OUTSTANDING

                       PRIMARY ..............    10,896,249     9,580,391     10,993,441     10,615,741
                                              =============   ===========  =============   ============
                       FULLY DILUTED ........    13,893,574     9,814,473     13,874,921     12,406,185
                                              =============   ===========  =============   ============


    The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
                                 RENO AIR, INC.
                            STATEMENTS OF CASH FLOWS
                 NINE MONTHS ENDED September 30, 1996 AND 1995
                                  (unaudited)
<CAPTION>
    
                                                                                        Nine Months
                                                                                           Ended
                                                                                       September 30,
                                                                              ----------------------------
                                                                                   1996            1995
                                                                              ------------    ------------
<S>                                                                           <C>             <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net Income ............................................................. $  8,297,842    $  1,727,250

     Adjustments to reconcile  net income to net cash  provided
       by (used in) operating activities:
       Depreciation and amortization ........................................    4,349,594       1,869,916
       Common stock issued or to be issued for 401(k) Plan ..................      120,000         400,378
       Fair value of incremental consideration on conversion of 7.25% notes .         --         1,391,692
       Common stock issued as payment of interest on 7.25% notes ............         --           101,970
       Gain on sale of assets ...............................................     (944,875)           --
       Increase in accounts receivable ......................................  (10,942,463)     (6,351,721)
       Increase in inventories and operating supplies .......................     (532,190)       (546,432)
       (Increase) decrease in prepaid expenses and other ....................   (2,741,474)        251,755
       Increase in restricted cash ..........................................   (5,425,799)       (347,535)
       Increase in deposits and other .......................................   (4,412,348)       (393,369)
       Increase in account payable ..........................................    3,188,465         632,359
       Increase in accrued liabilities ......................................    8,626,255       1,302,712
       Decrease in fuel purchase agreement ..................................   (1,841,226)    (11,139,267)
       Increase in deferred lease payable ...................................    4,441,177         272,221
       Increase in air traffic liability ....................................   10,749,686       5,970,928
                                                                              ------------    ------------
          Net cash provided by (used in) operating activities ...............   12,932,644      (4,857,143)
                                                                              ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from sale of short-term investments ...........................    2,944,188            --
     Proceeds from sale of assets ...........................................    2,500,000            --
     Purchase of property and equipment .....................................  (39,970,633)     (2,292,440)
     Purchase of short-term investments .....................................   (1,973,793)     (6,486,739)
                                                                              ------------    ------------
          Net cash used in investing activities .............................  (36,500,238)     (8,779,179)
                                                                              ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net proceeds from issuance of 9.00% Senior Convertible Notes ...........         --        27,197,766
     Proceeds from exercise of stock options and warrants ...................    1,189,376         324,205
     Proceeds from issuance of common stock .................................         --         2,378,762
     Proceeds from issuance of preferred stock ..............................         --         2,412,875
     Proceeds from issuance of notes payable ................................   15,183,000         465,511
     Payments on notes payable ..............................................   (1,178,292)     (3,505,978)
     Redemption of preferred stock ..........................................         --        (2,412,875)
     Preferred stock dividend and issuance costs ............................         --          (131,427)
                                                                              ------------    ------------

           Net cash provided by financing activities ........................   15,194,084      26,728,839
                                                                              ------------    ------------

 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...........................   (8,373,510)     13,092,517

 CASH AND CASH EQUIVALENTS, beginning of period .............................   34,985,808       9,103,564
                                                                              ------------    ------------
 CASH AND CASH EQUIVALENTS, end of period ................................... $ 26,612,298    $ 22,196,081
                                                                              ============    ============

    The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>

                                 RENO AIR, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE A - BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting  principles for interim financial information
and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information  and footnotes  required by generally
accepted accounting principles for complete financial statements. In the opinion
of management,  all  adjustments  (consisting of normal  recurring  adjustments)
considered necessary for a fair presentation have been included.  The results of
operations for the nine month and three month periods ended  September 30, 1996,
are not necessarily indicative of the results that will be realized for the full
year.

NOTE B - INCOME PER COMMON SHARE

Income per share is  computed by dividing  the net income  available  for common
stock by the weighted  average number of shares of common stock and common stock
equivalents assumed outstanding during the period.

NOTE C - EQUIPMENT PURCHASES AND RELATED DEBT

In   February   1996,   the   Company   purchased  an  MD-87  aircraft  that  it
previously  leased.  The  purchase  was  partially  financed by the sellers with
approximately  $10.4 million of debt secured by the aircraft  payable over seven
years and  bearing  interest  at LIBOR  plus 2%. On July 2,  1996,  the  Company
purchased an MD-83 aircraft from BWIA  International  Airways Limited  ("BWIA").
The purchase was  partially  financed with  approximately  $12.1 million of debt
secured by the aircraft  payable  over four years and bearing  interest at LIBOR
plus 2.6%.  The  aircraft  was leased back to BWIA until June 2, 1997,  at which
point the Company intends to add the aircraft to its  operations.  Rental income
and related  ownership costs for the BWIA aircraft are included in the statement
of operations as  non-operating  income  (expense).  In the first nine months of
1996,  the  Company  purchased  four spare  engines and MD-90 spare parts for an
aggregate purchase price of approximately $13 million,  of which an aggregate of
$5 million was financed with  repayment  over a period of three to five years at
interest  rates  equal  to  LIBOR  plus  from  2.85% to  3.15%.  Of this  amount
approximately  $2 million was financed by the seller.  Seller financing has been
excluded from the  statements of cash flows for the nine months ended  September
30, 1996.

NOTE D - SALE OF ASSETS

     In  September  1996,  the  Company  sold a spare  JT8D-219  engine for $2.5
million  and  recognized  a gain on sale of  $945,000.  This gain is included in
non-operating income.


<PAGE>




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


         This   Management's    Discussion   and   Analysis   contains   certain
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of 1933 and  Section  21E of the  Securities  Exchange  Act of 1934.  Actual
results could differ materially from those forward-looking statements.

         In the first nine months of 1996,  the Company  significantly  expanded
its operations with the addition to its fleet of three MD-90 aircraft, two MD-83
aircraft and one MD-87 aircraft and an increase in aircraft  utilization.  As of
September 30, 1996, the Company operated 29 aircraft, as compared to 23 aircraft
at the close of 1995. The Company has no commitments for additional  aircraft in
the fourth quarter of 1996 and management  intends to slow the Company's rate of
growth in 1997 (as  compared  to  1996),  although  such  policy  may  change in
response to industry conditions or new opportunities.

     The 10% federal excise tax on airline  tickets,  which expired December 31,
1995, was reinstated effective August 27, 1996. The tax was in part passed on to
consumers  through  higher  gross  fares.  The extent it was passed on cannot be
determined  due to the wide number of fare changes in the industry,  both before
and after  imposition of the tax.  However,  as a result of  reimposition of the
tax,  fare  sales,  and the  traditionally  weak  traffic  demands in the fourth
quarter, the Company's yields are currently below their levels prevailing in the
third  quarter of 1996.  

     Extension  of the tax  beyond  December  31,  1996,  will  require  further
legislation. The Company cannot predict whether the tax will be extended, or the
impact on its  financial  results  if the tax is not  extended.  Certain  of the
Company's  larger  competitors have lobbied for imposition of a user fee in lieu
of the federal excise tax. Management believes that a user fee would likely have
a greater  negative  impact to the Company than the federal excise tax,  because
the Company has lower average fares and a shorter average stage length (and thus
more  passengers  and departures per day) than industry  average.  However,  the
impact of a user fee would  depend on the  structure  of the fee, and the extent
the fee can be passed on to consumers.

     Fuel prices increased  significantly during the third quarter to an average
of 79 cents per gallon.  Domestically,  the increase was most  pronounced on the
west coast, where the Company purchases  substantially all its fuel. The Company
cannot  predict  changes in the price of fuel.  In the  future,  the Company may
enter into fuel price  hedging  agreements to limit its exposure to sudden price
increases.

         Effective  October 1, the  Company  commenced  service  between  Orange
County  and San  Francisco.  Effective  October  15,  the  Company  commenced  a
code-share  arrangement  with American Eagle,  whereby American Eagle turbo-prop
flights to and from Los Angeles and San Diego are also  marketed  under the Reno
Air "QQ" code.

<PAGE>

<TABLE>
                          Selected Operating Statistics
<CAPTION>

                                                    Quarter        Quarter                     Quarter
                                                     Ended          Ended                       Ended
                                                 September 30,  September 30,    Percent       June 30,     Percent
                                                    1996            1995        Change (1)       1996      Change (2)
                                                 -------------  -------------  ------------  ------------  ----------
<S>                                               <C>            <C>                <C>        <C>             <C>
 Revenue passengers ...........................   1,390,089      1,140,427           22%       1,298,135        7%  
 Revenue Passenger Miles (RPM) (000) ..........     848,278        636,450           33%         769,876       10%
 Available Seat Miles (ASM) (000) .............   1,239,825        917,581           35%       1,169,078        6%
 Passenger load factor (percent) ..............        68.4           69.4           -1%            65.9        4%
 Breakeven load factor (percent) ..............        65.1           65.0            0%            63.4        3%
 Revenue per passenger mile (cents) ...........        11.4           11.0            4%            11.2        2%
 Passenger revenues per ASM (cents) ...........         7.8            7.6            3%             7.4        5%
 Operating expenses per ASM (cents) ...........         7.8            7.6            3%             7.5        4%
 Aircraft in service at end of period .........          29             22           32%              28        4%
 Total block hours ............................      26,435         20,276           30%          25,254        5%
 Average aircraft length of haul (miles) ......         536            500            7%             537        0%
 Average passenger length of haul (miles) .....         610            558            9%             593        3%
 Average cost of fuel (cen$s per gallon) ......       $0.79          $0.63           26%           $0.74        7%
------------------------------------
(1) Percent change from quarter ended September 30, 1995 to quarter ended September 30, 1996. 
(2) Percent change from quarter ended June 30, 1996 to quarter ended September 30, 1996.
</TABLE>
<TABLE>
<CAPTION>


                                                Nine Months Ended     Nine Months Ended      Percent
                                                September 30, 1996    September 30, 1995    Change (1)
                                                ------------------    ------------------    ----------
<S>                                                     <C>                  <C>               <C>
 Revenue passengers ...........................         3,786,877             2,992,427         27%
 Revenue Passenger Miles (RPM) (000) ..........         2,263,359             1,568,575         44%
 Available Seat Miles (ASM) (000) .............         3,356,248             2,493,802         35%
 Passenger load factor (percent) ..............              67.4                  62.9          7%
 Breakeven load factor (percent) ..............              65.2                  62.3          5%
 Revenue per passenger mile (cents) ...........              11.1                  11.5         -3%
 Passenger revenues per ASM (cents) ...........               7.5                   7.2          4%
 Operating expenses per ASM (cents) ...........               7.6                   7.5          1%
 Aircraft in service at end of period .........                29                    22         32%
 Total block hours ............................            72,447                56,254         29%
 Average aircraft length of haul (miles) ......               541                   489         11%
 Average passenger length of haul (miles) .....               598                   524         14%
 Average cost of fuel (cen$s per gallon) ......             $0.74                 $0.60         23%
------------------------------------
(1)  Percent change from nine months ended September 30, 1995 to nine months ended September 30, 1996.
</TABLE>

Results of Operations


Nine  Months  Ended  September  30,  1996  Compared  to Nine  Months  Ended
September 30, 1995

          The Company  realized  net income of  $8,297,842  or $.76 per share of
common stock,  for the nine months ended  September 30, 1996, as compared to net
income of  $1,595,823  or $.17 per share of common  stock,  for the nine  months
ended  September 30, 1995.  For the three months ended  September 30, 1996,  the
Company  realized  net income of  $4,747,832  or $.43 per share,  as compared to
$4,459,059  or $.42  per  share,  for the  third  quarter  of 1995.  The  income
improvement is primarily attributable to year-over-year increases in revenue per
available seat mile ("RASM"). The Company's results also reflect a $945,000 gain
on  sale  of a  spare  engine  in the  third  quarter  of  1996,  classified  as
non-operating  income.  A  non-cash,  non-operating  charge of $1.4  million was
recorded  in the second  quarter of 1995  related to the  conversion  of debt to
equity.

         The  significant  improvement  in  results  for the  nine-months  ended
September  30,  1996,  as  compared  to the same  period in the prior  year,  is
primarily  attributable to the improvement in results for the first two quarters
of the year.  The  Company's  results  for the third  quarter of 1996,  although
improved  over results for the same period in 1995,  reflect  higher fuel prices
and  weak  traffic  and sale  fares  in  September,  which  management  believes
reflected industry-wide softness in passenger demand.

          The  Company's  level of  operations,  as measured by  available  seat
miles,  increased  approximately  35% during  the first  nine  months of 1996 as
compared  to the first nine months of 1995,  due to the  addition of aircraft to
the Company's  fleet,  increased  average  aircraft length of haul and increased
aircraft utilization.
<PAGE>

Operating Revenues

         The Company's operating revenues increased 39% in the first nine months
of 1996 as  compared to the same  period in 1995,  due to a 35%  increase in the
scope of the Company's  operations (as measured by available seat miles),  and a
4% increase in RASM.

         The increase in RASM for the nine month period is attributable to a 4.5
percentage point increase in load factor (a 7% increase),  partly offset by a 3%
drop in yield.  Management  believes  passenger  loads  increased year over year
primarily  due to  increased  customer  awareness  of  and  preference  for  the
Company's  product,  a stimulation of passenger demand by fare discounting and a
general  increase in passenger  demand  resulting from a stronger  economy.  The
Company's load factor  increased 4% in the third quarter of 1996 from the second
quarter of 1996 as a result of increased seasonal demand during July and August.

         The Company's yields declined year-over-year primarily because of a 14%
increase  in  the  Company's  average   passenger  length  of  haul,   continued
competitive  pressure,  and the Company's use of promotional fares in connection
with the significant  expansion of its service. In July 1996, Southwest Airlines
initiated  $25 fares for travel from  August 19 through  October 31. The Company
matched these fares only on a highly restrictive  basis,  thereby reducing their
negative impact on the Company's  yields but increasing their negative impact on
the Company's load factor.  In late September,  the Company initiated a $29 fare
sale,  which  fares have been widely  available  and  resulted in a  significant
increase in the Company's load factor in October, although at low yields.
<PAGE>

Operating Expenses

         The Company's operating expenses increased 37% in the first nine months
of 1996 as compared to the first nine months of 1995, resulting in the Company's
average cost per available seat mile  increasing  slightly from 7.5 cents in the
1995  period to 7.6 cents in the first  nine  months of 1996.  Average  cost per
available  seat mile  increased  from 7.5 cents in the second quarter of 1996 to
7.8  cents  in  the  third  quarter  of  1996.  These  increases  are  primarily
attributable  to an  approximately  23% increase in the cost per gallon of fuel.
Excluding  fuel expense,  the  Company's  cost per ASM remained the same for the
nine months ended September 30, 1995 and 1996.

         Advertising,   sales  and   distribution   expense  per  ASM  increased
year-over-year  due to a greater use of third-party  reservation  services.  The
Company is  establishing  a second  reservation  center in Las  Vegas,  which is
planned to be in  operation  in the second  quarter of 1997,  and is intended to
reduce the Company's third party reservations expense.

         Maintenance  expense  per ASM  increased  by 18% between the nine month
periods  on  account  of both  (i) the  impact  in  1995 of a $1.6  million  net
reduction  in  operating  expense  resulting  from a  credit  to  the  Company's
maintenance  reserves  with  respect to two leased  aircraft  and (ii) a smaller
portion of the Company's fleet continuing to be under manufacturer warranty.

         The  foregoing  increases  were  offset  in part  by cost  efficiencies
resulting  primarily from the expanded  scope of operations,  an 11% increase in
average  aircraft  length of haul and an  approximately  2%  increase in average
daily  aircraft  utilization.  In addition,  the Company  reduced its commission
expense by an increase in the percentage of passengers  booked directly  through
the Company's reservations facility. 

         For the three months ended September 30, 1996, the Company's  operating
expenses  increased  38% over the  comparable  period in 1995,  resulting in the
Company's  average cost per available seat mile increasing to 7.8 cents from 7.6
cents in the prior year's third quarter, primarily on account of the increase in
the cost per gallon of fuel and the other  factors noted above.  Excluding  fuel
expense,  the Company's  cost per ASM was 6.3 cents in the third quarter of 1996
compared to 6.3 cents in the comparable 1995 period.
<PAGE>

         The following chart lists the components of the Company's unit costs:

<TABLE>
<CAPTION>
                                                                 Nine Months Ended
                                                                   September 30,
                                                      -----------------------------------------
                                                         1996           1995       % Change
                                                      ------------  -------------  ------------
 Operating Expenses per Available Seat Mile (cents)
<S>                                                       <C>            <C>         <C>
     Salaries, wages and benefits                         1.21           1.23         -1.6%
     Aircraft fuel and oil                                1.44           1.30         10.8%
     Aircraft leases                                      1.33           1.47         -9.5%
     Maintenance                                          0.59           0.50         18.0%
     Handling, landing and airport fees                   0.76           0.75          1.3%
     Advertising, sales and distribution                  0.70           0.58         20.7%
     Commissions                                          0.44           0.50        -12.0%
     Facility leases                                      0.25           0.27         -7.4%
     Insurance                                            0.17           0.20        -15.0%
     Communications                                       0.10           0.10          0.0%
     Depreciation and amortization                        0.12           0.07         71.4%
     Other                                                0.52           0.53         -1.9%
                                                      ------------  -------------  ------------

                                                          7.63           7.50          1.7%
                                                      ============  =============  ============

</TABLE>


         The Company's  break-even  load factor  increased to 65.2% in the first
nine  months of 1996  from  62.3% in the  first  nine  months of 1995 due to the
decrease in yield and the increase in cost per ASM.

<PAGE>

Liquidity and Capital Resources

          As of September 30, 1996, the Company's  cash,  cash  equivalents  and
short-term  investments totaled $28.6 million, which reflects a decrease of $9.3
million from December 31, 1995. Also, the Company's  working capital declined to
a $2.9 million  deficit at September 30, 1996, as compared to working capital of
$18.3 million at December 31, 1995.  The  decreases in cash and working  capital
are primarily due to the use of cash to purchase assets.  Such purchases include
the downpayments on an MD-87 aircraft, an MD-83 aircraft and four spare engines,
as well as the purchase of MD-90 spare parts and the payments of lease  deposits
on three MD-90 and three MD-80  aircraft.  The  increase in accounts  receivable
from  December  31, 1995 to  September  30, 1996  reflects  the  increase in air
traffic  liability during the period,  resulting from the Company's larger scope
of operation and increased advance ticket sales.

         In the  first  nine  months of 1996,  net cash  provided  by  operating
activities  totaled  $12.9  million,  compared  to net  cash  used in  operating
activities  of $4.9  million  for the same  period in 1995.  The  difference  is
primarily  attributable to the increase in cash flow resulting from  realization
of a larger net profit in the  current  year's  period and the  increase  in air
traffic liability.

         Cash used in investing  activities (to purchase property and equipment)
in the first nine months of 1996,  net of proceeds  from the sale of  short-term
investments,  was $36.5  million,  compared to $8.8  million  used in  investing
activities in the first nine months of 1995. The difference  between the periods
is  primarily  attributable  to the  purchases  in 1996 of the  aircraft,  spare
engines and spare parts, as noted above.

          Cash provided by financing  activities  was $15.2 million in the first
nine months of 1996,  arising  from the  financing  of the capital  acquisitions
described above and the exercise of stock options,  compared to cash provided by
financing  activities  of $26.7  million,  resulting  from  sales of common  and
preferred stock, for the comparable period in 1995.
<PAGE>

         The Company's  leased aircraft are leased under  operating  leases with
remaining terms ranging from less than one to 18 years. In the first nine months
of 1996, the Company  purchased one MD-87 aircraft that was previously leased to
it,  and  leased  one MD-87  aircraft,  two MD-83  aircraft  and three new MD-90
aircraft  under  long  term  leases.  The  purchase  of the MD-87  aircraft  was
partially  financed with $10.4  million of debt secured by the aircraft  payable
over seven years and bearing  interest at LIBOR plus 2%. In the third quarter of
1996, , the Company also  purchased an MD-83  aircraft  from British West Indies
Airways ("BWIA") and leased it back to BWIA. The purchase was partially financed
with  approximately  $12.1 million of debt secured by the aircraft  payable over
four years and bearing interest at LIBOR plus 2.6%. The aircraft was leased back
to BWIA  until  June 2,  1997,  at which  point the  Company  intends to add the
aircraft to its operations.

         In the first nine  months of 1996,  the  Company  purchased  four spare
engines and MD-90 spare parts for an aggregate  purchase price of  approximately
$13 million,  of which an aggregate  of $5 million was financed  with  repayment
over a period of three to five years at interest  rates equal to LIBOR plus from
2.85% to 3.15%.  The Company agreed to sell a different spare engine owned by it
in the third quarter of 1996  realizing  non-operating  income of  approximately
$945,000 and cash proceeds of $2.5 million.

         The Company may lease or purchase more aircraft, in connection with the
return of other aircraft in its fleet or as additions to its fleet.  The Company
is constructing a hangar in Reno to facilitate its light maintenance  operations
in Reno;  the hangar is scheduled to be  operational by year end and will have a
total  cost  estimated  at  $3.7  million.   The  Company   intends  to  finance
approximately  $2.5  million of the cost of the  hangar,  but does not have firm
commitments for such financing.

         Management  believes the Company's  cash  position,  together with cash
flow  generated  from  operations,  will be  sufficient  to meet  the  Company's
obligations and capital  requirements for the next twelve months.  Nevertheless,
airline results are highly sensitive to various factors,  including the price of
fuel and the actions of competing  airlines,  either of which can materially and
adversely affect the Company's liquidity and cash flows.  Management may seek to
raise additional funds through sales of equity or debt securities,  on a secured
or unsecured basis.



<PAGE>



                           PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

A.        Exhibits                                                        Page

          11      Statement Re: Computation of Earnings Per Share for the
                  Nine Months and Three Months ended September 30, 1996     16

B.        Reports on Form 8-K.

          None.


<PAGE>



SIGNATURES

Pursuant  to the  requirements  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.

                                 RENO AIR, INC.



DATE:  November 12, 1996                     By:   /s/ PAUL H. TATE
                                                   ----------------
                                                   Paul H. Tate
                                                   as Chief Financial Officer
                                                   and on behalf of Registrant