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, 1998

                                    Commission File Number: 0-20360

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

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


                                          220 Edison Way
                                        Reno, Nevada 89502
                            (Address of principal executive offices)
 
 
                                           (702) 954-5000
                        (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
         -----                   -----
     The Registrant had 10,845,970 shares of $0.01 par value common stock
     outstanding at October 31, 1998.

<PAGE>
 
                                               RENO AIR, INC.
   
                                                    INDEX

                                                                 




PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Balance Sheets - September 30, 1998 and December 31, 1997             4

         Statements of Operations -
         Three-month and Nine-month Periods Ended September 30, 1998 and 1997  5

         Statements of Cash Flows -
         Nine-month Periods Ended September 30, 1998 and 1997                  6

         Notes to Financial Statements                                         7

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations                                                10

PART II. OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds                            19

Item 6.  Exhibits and Reports on Form 8-K                                     19

SIGNATURES                                                                    19

<PAGE>
<TABLE>
                                                             Reno Air, Inc.
                                                             Balance Sheets
                                              at September 30, 1998 and December 31, 1997
                                                  (in thousands, except for share data)
<CAPTION>
                                                       September 30,           December 31,
                                                          1998                     1997
                                                       -------------           ------------
                                                       (unaudited)              (audited)
<S>                                                    <C>                     <C>        
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                           $   28,207               $   29,058
   Short-term investments                                   1,175                      129
   Accounts receivable, net                                23,665                   24,808
   Inventories and operating supplies                       3,843                    2,983
   Prepaid expenses and other                              26,120                   29,700
                                                        ---------                ---------
     Total current assets                                  83,010                   86,678

PROPERTY AND EQUIPMENT:
   Flight equipment                                        71,370                   85,993
   Ground property and equipment                           18,392                   15,870
                                                        ---------                ---------
                                                           89,762                  101,863
   Less-Accumulated depreciation                          (23,703)                 (21,399)
                                                        ---------                ---------
     Property and equipment, net                           66,059                   80,464

RESTRICTED CASH AND INVESTMENTS                             3,922                    5,122

DEPOSITS AND OTHER NONCURRENT ASSETS                       23,954                   21,145
                                                       ----------               ----------
                                                       $  176,945               $  193,409
                                                       ==========               ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable                                    $   15,508              $    19,611
   Accrued liabilities                                     16,849                   25,894
   Air traffic liability                                   29,291                   27,025
   Current maturities of long-term debt                     5,658                    7,867
                                                       ----------              -----------
     Total current liabilities                             67,306                   80,397

LONG-TERM DEBT                                             50,520                   62,584

OTHER NONCURRENT LIABILITIES                               17,918                   15,704

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
  Series A Cumulative Convertible Exchangeable 
     Preferred Stock;  $.001 par value: 10,000,000 
     shares authorized; Issued and outstanding 
     1,436,000 shares at September 30, 1998 and 
     December 31, 1997 ($25.00 per share liquidation 
     preference )                                                1                       1
   Common stock, $.01 par value: 30,000,000 
     shares authorized; Issued and outstanding 
     10,843,470 shares at September 30, 1998 
     and 10,542,075 shares at December 31, 1997                108                     105
   Additional paid-in capital                               65,971                  66,825
   Accumulated deficit                                     (24,879)                (32,207)
                                                        ----------              ----------
      Total shareholders' equity                            41,201                  34,724
                                                        ----------              ----------
                                                        $  176,945              $  193,409
                                                        ==========              ==========
</TABLE>
                              SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
<TABLE>
                                                            Reno Air, Inc.
                                                       Statements of Operations
                                              For the Three-Month and Nine-Month Periods
                                                   Ended September 30, 1998 and 1997
                                                 (in thousands, except for share data)
                                                                (unaudited)
<CAPTION>
                                                     Three-month periods ended      Nine-month periods ended
                                                          September 30,                   September 30,
                                                     --------------------------     ------------------------
                                                           1998           1997           1998          1997
                                                           ----           ----           ----          ----
<S>                                                  <C>           <C>            <C>           <C>    

OPERATING REVENUES
  Passenger                                          $    95,808     $    99,583   $   278,899    $   275,346
  Other                                                    5,250           5,759        14,768         17,408
                                                     -----------     -----------   -----------    -----------
     Total operating revenues                            101,058         105,342       293,667        292,754
                                                                                                         
OPERATING EXPENSES:
  Salaries, wages and benefits                            16,269          17,943        51,400         50,129
  Aircraft fuel and oil                                   13,465          17,603        41,717         51,844
  Aircraft leases                                         17,308          18,023        52,194         52,139
  Aircraft maintenance                                     8,382           9,094        29,856         24,742
  Handling, landing and airport fees                       9,399          10,306        29,889         29,473
  Advertising, marketing and sales                         7,009           6,900        20,565         21,974
  Commissions                                              4,924           5,619        13,931         15,582
  Facility leases                                          3,558           3,664        11,237         10,254
  Insurance                                                  585           1,497         3,446          4,720
  Communications                                           1,035           1,358         4,066          4,099
  Depreciation                                             1,589           2,610         5,428          7,312
  Restructuring charges                                        -               -         2,212              -
  Other                                                    6,249           6,275        20,215         19,164
                                                     -----------     -----------   -----------     ----------
     Total operating expenses                             89,772         100,892       286,156        291,432
                                                     -----------     -----------   -----------     ----------
OPERATING INCOME                                          11,286           4,450         7,511          1,322

NONOPERATING INCOME (EXPENSE):
  Interest expense                                        (1,425)         (1,210)       (4,401)        (3,530)
  Interest income                                            589             532         2,129          1,558
  Gains from sales of property & equipment                 3,064           1,279         3,064          1,279
  Other, net                                                (249)           (254)         (975)          (605)
                                                     -----------     -----------   -----------    -----------
     Total nonoperating income (expense), net              1,979             347          (183)        (1,298)
                                                     -----------     -----------   -----------    -----------
INCOME BEFORE INCOME TAXES                                13,265           4,797         7,328             24
     Income tax expense (benefit)                              -               -             -              -
                                                     -----------     -----------   -----------    -----------
NET INCOME                                                13,265           4,797         7,328             24
     Preferred Stock Dividends                               807               -         2,421              -
                                                     -----------     -----------   -----------    -----------
NET INCOME APPLICABLE TO COMMON SHARES               $    12,458     $     4,797   $     4,907    $        24
                                                     ===========     ===========   ===========    ===========
                                                                                                             
NET INCOME PER COMMON SHARE - BASIC                  $      1.15     $      0.46   $      0.46    $         -
                                                     ===========     ===========   ===========    ===========
NET INCOME PER COMMON SHARE - DILUTED                $      0.78     $      0.39   $      0.45    $         -
                                                     ===========     ===========   ===========    ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-BASIC      10,800,630      10,529,476    10,676,166     10,450,480
                                                     ===========     ===========   ===========    ===========
WEIGHTED AVERAGE COMMON AND POTENTIAL COMMON
SHARES OUTSTANDING-DILUTED                            17,929,940      13,765,123    10,863,863     10,779,612
                                                     ===========     ===========   ===========    ===========

</TABLE>

                                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

<PAGE>
<TABLE>
                                                            Reno Air, Inc.
                                                       Statements of Cash Flows
                                     For the Nine-month Periods ended September 30, 1998 and 1997
                                                          (in thousands)
<CAPTION>
                                                                                Nine-month period ended
                                                                                     September 30,
                                                                                -----------------------
                                                                                  1998           1997
                                                                                  ----           ----
                                                                                      (unaudited)
<S>                                                                             <C>           <C>       
OPERATING ACTIVITIES:
Net income                                                                      $   7,328     $       24
Adjustments to reconcile net income to net cash provided by (used)
in operating activities:
   Depreciation and amortization                                                    5,428          7,312
   Amortization of deferred lease credits                                            (855)        (1,714)
   Gains on sales of property and equipment                                        (3,064)        (1,279)
   Other                                                                              359            623
Changes in operating assets and liabilities:
   Accounts receivable                                                                205        (11,487)
   Inventories and operating supplies                                                 (60)        (1,230)
   Prepaid expenses and other current assets                                        3,580         (7,480)
   Restricted cash                                                                  1,113          1,493
   Deposits and other noncurrent assets                                            (3,282)        (3,603)
   Accounts payable                                                                (4,103)         1,687
   Accrued liabilities                                                             (8,333)           665
   Air traffic liability                                                            2,266         10,084
   Noncurrent liabilities                                                           3,069          1,093
                                                                                ---------      ---------
     Net cash provided by (used) in operating activities                            3,651         (3,812)

INVESTING ACTIVITIES:
   Sales (purchases) of short-term investments, net                                (1,046)           817
   Proceeds from sales of property and equipment                                   44,600          2,750
   Purchases of property and equipment                                            (32,659)       (24,526)
                                                                                 ---------      --------- 
     Net cash provided by (used) in investing activities                           10,895        (20,959)

FINANCING ACTIVITIES:
   Proceeds from exercise of stock options                                          1,297            616
   Proceeds from issuance of notes payable                                              -         18,917
   Payments of preferred stock dividends                                           (2,421)             -
   Repayments of long-term debt                                                   (14,273)        (5,078)
                                                                                ---------      ---------
     Net cash provided by (used) in financing activities                          (15,397)        14,455
                                                                                ---------      ---------
DECREASE IN CASH AND CASH EQUIVALENTS                                                (851)       (10,316)

CASH AND CASH EQUIVALENTS at beginning of  period                                  29,058         16,221
                                                                                ---------      ---------
CASH AND CASH EQUIVALENTS at end of period                                      $  28,207      $   5,905
                                                                                =========      =========
   
</TABLE>


                                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<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  and other
adjustments as discussed  below)  considered  necessary for a fair  presentation
have been  included.  The  results of  operations  for the three and  nine-month
periods ended September 30, 1998, are not necessarily  indicative of the results
that will be realized  for all of 1998.  For further  information,  refer to the
financial  statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997.

Note B - Reclassifications

Certain  reclassifications  have been made to the 1997  financial  statements to
conform to the 1998 presentation.

Note C - Per Share Data

For the three-month and nine-month  periods ended September 30, 1998,  2,088,594
and  8,995,442  shares,   respectively,   issuable  under  potentially  dilutive
securities  are not included in the  computation  of diluted  earnings per share
because stock option and warrant  exercise  prices were greater than the average
market  prices for the  Company's  common stock during  those  periods,  or were
otherwise  anti-dilutive.  Similarly, for the three-month and nine-month periods
ended September 30, 1997,  685,423 and 3,711,226 shares,  respectively,  are not
included in the computation of diluted  earnings per share. 

In 1997,  the Company  adopted  Statement of Financial  Accounting  Standard No.
128,"Earnings  per Share"  ("SFAS  128").  The earnings per common share for the
three-month and nine-month  periods ended September 30, 1997, have been restated
to conform to the reporting requirements of SFAS 128.

Note D - Stock Repurchase Program

In August 1998,  the  Company's  Board of  Directors  authorized  the  Company's
management  to  repurchase  from  time to time up to two  million  shares of its
common stock.  The repurchase may include the 9% convertible  preferred stock or
9%  convertible  debentures,  which shall be  multiplied  by their  common stock
conversion  rates in order to  determine  compliance  with the 2  million  share
maximum. The repurchases will be in either open market or private  transactions.
As of November 16, 1998, no shares or  debentures  have been  repurchased  under
this program.

Note E - Change in Estimates

Based on the results of analytical  studies and related  consultations  with the
manufacturer of certain of its aircraft  engines,  rebidding engine  maintenance
contracts, additional inventory control procedures, reliability analyses and the
appointment of on-site  representatives to supervise engine overhaul work scope,
the Company  updated its estimate of its accrual  rate for  expenses  associated
with  aircraft  engine  overhauls.   The  change  in  estimate  resulted  in  an
approximate $1.3 million reduction in aircraft  maintenance expense in the third
quarter  of 1998.  It is  expected  that this  change in  estimate  will  reduce
aircraft  maintenance  expense  by  approximately  $550  thousand  in the fourth
quarter of 1998.

In  the  first  quarter  of  1998,  the  Company  changed  its  estimate  of the
depreciable lives of its owned and Stage III compliant aircraft to approximately
25 years from their  original  dates of  manufacture,  and further  applied this
change to its owned  spare  engines  and  aircraft  components.  This  change in
depreciable  lives is  considered  to be more  representative  of the  estimated
useful  lives for this type of flight  equipment  than the  shorter  depreciable
lives  previously used by the Company.  The result of this change in estimate is
expected  to  decrease   depreciation   expense  in  each  quarter  of  1998  by
approximately $1.2 million.
<PAGE>

Note F - Restructuring Charges

Restructuring charges consist of the following amounts (in thousands):
<TABLE>
<CAPTION>

                                                Nine-month
                                               period ended
                                              Sept. 30, 1998
                                              ---------------
<S>                                              <C>    

Provision for employee severance                  $1,391
Write-off of assets and other expenses
   related to station and facility closures          458
Other                                                363
                                                  ------
                                                  $2,212
                                                  ======
</TABLE>

The   restructuring   charges   arose   from   schedule   changes   related   to
under-performing routes, a decrease in the Company's workforce, reduction of the
size of its  operating  fleet  and  the  implementation  of  other  cost  saving
measures.  At September 30, 1998, the outstanding  liabilities  arising from the
restructuring  charges approximated $719 thousand,  which the Company expects to
discharge over the next twelve months.

Note G - Gains from Sales of Aircraft

In the third quarter of 1998,  the Company  realized net gains of  approximately
$3.1  million  from the sale of three  nonoperating  aircraft.  These  gains are
included in nonoperating  income.  The Company acquired two of these aircraft in
the first quarter of 1998 under  conditional sale contracts.  The third aircraft
was  acquired  in 1996 and was leased to another  airline.  The  Company did not
operate any of the three aircraft in passenger revenue service.

Note H - Income Taxes

At December  31,  1997,  the Company had net  operating  loss  carryforwards  of
approximately $31 million for Federal income tax purposes that expire during the
years 2005 through 2012.  Utilization of these  carryforwards may be limited due
to certain  ownership change provisions as enacted by the Tax Reform Act of 1986
and subsequent legislation.

Due to the availability of the aforementioned net operating loss  carryforwards,
the  Company  does  not  anticipate  that it will  have a  material  income  tax
liability for 1998.  Accordingly,  provision was not made for income tax expense
for either the three-month nor nine-month periods ended September 30, 1998.

Note I - Commitments, Subsequent Events and Related Party Transactions

In the third quarter of 1998,  the Company  entered into  agreements to purchase
43.6  million  gallons of jet fuel at an average cost of 52.35 cents per gallon,
inclusive of transportation and federal taxes. These bulk purchases  approximate
52 percent and 63  percent,  respectively,  of the  Company's  anticipated  fuel
requirement  for the  remainder  of 1998 and the first six  months of 1999.  The
Company  has  contracted  to  purchase  the  balance  of its 1998 and 1999  fuel
requirements  under  formula-based  market rate  agreements,  and is  evaluating
further  bulk  fuel  purchases  to  acquire  30  percent  to 60  percent  of its
anticipated fuel requirement for the last half of 1999.

In July and November 1998,  the Company  returned two leased  McDonnell  Douglas
MD-80 series  aircraft to their  lessors,  and expects to return two  additional
leased MD-80  aircraft to their  lessor,  one each in December  1998 and January
1999. All of these returns were or are expected to be completed on the scheduled
expiration of the subject  leases.  The Company has a letter of intent to sell a
spare  aircraft  engine in  December  1998,  and has  entered  into  letters  of
understanding  regarding  the  extension of expiring  leases for two other spare
aircraft  engines.  If  implemented,  the  extensions  would be effective in the
fourth quarter of 1998.
<PAGE>

In July 1998,  the Company and PRA Solutions,  L.L.C.,  an affiliate of Andersen
Worldwide Consulting,  entered into a three-year agreement pursuant to which PRA
Solutions will provide systems for  substantially  all of the Company's  revenue
accounting function.

In August  1998,  the Company  and Express  Vacations  L.L.C.  of Reno,  Nevada,
entered into a three-year  agreement  pursuant to which Express  Vacations  will
manage QQuick Escapes(R), the Company's in-house tour product.

In September 1998, the Company and T. G. Shown Associates, Inc. of Laguna Hills,
California (TGS), entered into a three-year profit-sharing  arrangement by which
TGS will manage the  marketing,  accounting and ground  handling  aspects of the
Company's mail and cargo operations.

In November 1998, the Company entered into a one-year agreement to outsource the
crew accommodations function to Corporate Lodging Consultants, Inc.

Through  October  1998,  the  Company  paid   approximately   $1.5  million  for
advertising  and marketing  services to Winkler  Advertising  of San  Francisco,
California.  Agnieszka Winkler, a member of the Company's Board of Directors, is
an executive officer of the advertising firm.

In the fourth  quarter of 1998,  the  Company  reintroduced  service at Burbank,
California with four daily flights to and from San Jose, California.

<PAGE>

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

General

This  quarterly  and  nine-month  report on Form 10-Q  contains  forward-looking
statements  within the meaning of Section 27A of the Securities and Exchange Act
of 1934,  as amended  (the  "Exchange  Act").  Generally,  such  statements  are
indicated  by  words  or  phrases  such  as  "anticipate,"  "expect,"  "intend,"
"management believes" and similar words or phrases. Such statements are based on
current  expectations and are subject to risks,  uncertainties  and assumptions.
Certain of these risks are described in Item 1, "Cautionary  Statements," in the
Company's  Annual  Report on Form 10-K for the year  ended  December  31,  1997.
Should  one or more of  these  risks or  uncertainties  materialize,  or  should
underlying assumptions prove incorrect,  actual results may vary materially from
those  anticipated,  expected,  intended  or  believed  results.  

The Company's  business is  characterized,  as is true for the airline  industry
generally,  by high fixed  costs  relative  to revenue  and low profit  margins.
Slight  changes in fare levels or load factors can have a substantial  impact on
the  Company's  revenues.  Approximately  one-half of the  Company's  passengers
purchase  tickets  within  the  two-week  period  preceding  the date of travel.
Accordingly,  changes in the Company's  competitive  environment  (for instance,
changes in fares and/or services offered by its  competitors,  many of which are
much larger and have substantially  greater resources than the Company) can have
an immediate  and  significant  negative  financial  impact on the Company.  The
Company's  business is also highly sensitive to general economic  conditions and
any reduction in airline  passenger  traffic (whether general or specific to the
Company) may materially and adversely affect the Company's financial position.

During the first six months of 1998, the Company's  senior  management  team was
reorganized  resulting in eleven former  officers of the Company being  replaced
with six new executive  officers,  each of whom has significant airline industry
experience.  In February 1998, Joseph R. O'Gorman,  a seasoned executive with 32
years of  airline  industry  experience  at  United  Airlines,  USAir,  Air Cal,
Frontier Airlines, and Aloha Airlines,  was appointed Chairman,  Chief Executive
Officer and  President of the  Company.  Under the  direction of Mr.  O'Gorman's
management  team, the Company  commenced a restructuring  program that refocused
the Company's  operations in its primary and core markets in the western  region
of the United  States.  The  strategic  initiatives  included the closure of six
stations,  reallocation  of the Company's  aircraft  capacity to more profitable
markets,  an  approximate  15  percent  reduction  in the  Company's  workforce,
reduction  of the  operating  fleet (to 27  aircraft at  September  30, 1998 and
ultimately  25 aircraft by January 31,  1999),  the  outsourcing  of the revenue
accounting,  tour operator, mail and cargo, and crew accommodation functions and
the  consolidation  of it  reservations  functions  at  its  Las  Vegas,  Nevada
facility. As a result of these initiatives,  the Company incurred  restructuring
charges of $2.2 million during the nine-month period ended September 30, 1998.

In the second quarter of 1998, the Company renewed its marketing  agreement with
American Airlines, Inc. relating to Reno Air's distribution of American Airlines
AAdvantage(R) frequent flyer miles on Reno Air flights within the western region
and to and from Chicago. The revised agreement shall continue indefinitely,  but
may be terminated by either party upon seven months notice to the other.  In the
third quarter, the Company renewed its leases with American Airlines relating to
certain landing slots at John Wayne Airport in Orange County, California.

In September 1998, the Company and Midwest Express  Holdings Inc. entered into a
letter of intent  regarding a code-sharing  agreement,  and in October 1998, the
Company   entered   into  a  code-share   agreement   with   Canadian   Airlines
International.  The agreement with Midwest Express is expected to take effect in
the first quarter of 1999 and generally will connect  passengers from certain of
Midwest Express' Midwestern  destinations to certain of the Company's West Coast
destinations. The marketing agreement with Canadian Airlines became effective in
November  1998 and will allow for  code-sharing  on certain of the Company's and
Canadian  Airlines'  flights between  California,  Nevada and British  Columbia,
Canada.
<PAGE>

In  November  1998,  the  Company  notified  Qantas  Airways  of its  intent  to
terminate,  as of January 1, 1999, a limited code-sharing  agreement it has with
Qantas for  flights  between  San  Francisco  and Los  Angeles.  The  Company is
continuing to negotiate with Qantas and has negotiated with other  international
airlines  regarding  the  possibility  of  code-sharing  in West  Coast  gateway
airports.

The Company believes that it is highly beneficial for it to enter into new or to
continue  and expand the scope of  existing  strategic  alliances,  code-sharing
agreements, or business combinations,  with domestic and international airlines.
There  can  be  no  assurance  that  the  Company  will  be  successful  in  the
implementation of additional  code-sharing,  alliance,  or business  combination
arrangements. In the fourth quarter of 1998, the Company reintroduced service at
Burbank, California with four daily flights to and from San Jose, California. 

In an effort to  streamline  operations,  the Company has entered into  numerous
outsourcing arrangements.  In July 1998, the Company and PRA Solutions,  L.L.C.,
an  affiliate  of  Andersen  Worldwide  Consulting,  entered  into a  three-year
agreement  pursuant to which PRA Solutions will provide  systems for much of the
Company's revenue accounting function commencing in the fourth quarter of 1998.

In August  1998,  the Company  and Express  Vacations  L.L.C.  of Reno,  Nevada,
entered into a three-year  agreement  pursuant to which Express  Vacations  will
manage QQuick Escapes(R),  the Company's in-house tour product.  

In September 1998, the Company and T. G. Shown Associates, Inc. of Laguna Hills,
California (TGS) entered into a three-year  profit-sharing  arrangement by which
TGS will manage the  marketing,  accounting and ground  handling  aspects of the
Company's mail and cargo operation. In November 1998, the Company entered into a
one-year  agreement with Corporate  Lodging  Consultants,  Inc. to outsource its
crew accommodations function.

In October  1998,  the  Company  announced  that it will close its Reno,  Nevada
reservations   facility  in  December  1998  and  consolidate  its  reservations
functions at its Las Vegas,  Nevada facility.  The Company  anticipates that the
consolidation will result in cost savings exceeding $1 million annually. The 135
Reno based employees  affected by this closure have been offered other positions
within the Company.

The outsourcing of the revenue  accounting,  tour operator,  mail and cargo, and
crew  accommodations  functions as discussed above,  should permit the Company's
management to concentrate its efforts on the Company's core operations.

In April  1997,  the  Company's  flight  attendants  became  represented  by the
International  Brotherhood  of Teamsters  ("IBT"),  and in September  1997,  the
Company's pilots became represented by the Air Line Pilots Association ("ALPA").
The Company,  IBT and ALPA have commenced  contract  negotiations.  Although the
Company  and  ALPA,   and  the  Company  and  IBT,   have  reached   preliminary
understandings on certain  non-economic  issues,  management cannot predict when
such  negotiations  might be  finalized  or the  extent to which  the  resultant
contracts  will contain  provisions  significantly  different than the Company's
current work and pay  policies.  Organization  of the Company's  employees might
restrict the  Company's  flexibility  in dealing with such  employees  and could
result in a material  increase in its labor costs and decreases in productivity.
None of the Company's other employees are represented by a union.

In the  third  quarter  of 1998,  the  Company  realized  nonoperating  gains of
approximately $3.1 million from the sales of three aircraft, which aircraft were
surplus to the Company's  needs and had not been  operated in passenger  revenue
service.

In the first nine months of 1998, the Company  returned four leased  aircraft to
the lessor and returned a fifth leased  aircraft in November  1998.  The Company
will return two additional leased aircraft to their lessor, one each in December
1998 and January 1999. All of these  aircraft  returns were or will be completed
on the scheduled expiration of the subject leases.

The  Company  has a  tentative  agreement  to sell a spare  aircraft  engine  in
December  1998,  and has entered into  letters of  understanding  regarding  the
extensions of leases for two other spare aircraft engines.  If implemented,  the
extensions would be effective in the fourth quarter of 1998.
<PAGE>

The Company's  management team is jointly focused on increasing unit revenue and
reducing unit costs by among other things,  working more  effectively with fewer
employees,  investing in  technological  enhancements of the Company's  systems,
more  efficient  utilization  of  aircraft  and flight  crews and by  allocating
capacity to more profitable markets. The Company is also seeking to increase its
percentage of business  travelers,  who typically pay higher fares, by enhancing
on-time  performance,   customer  service,   aircraft   cleanliness,   improving
reservations  service and by  providing  convenient  schedules to the markets it
serves.

Year 2000 Compliance

The  Company's  operations,  like  those  of  its  competitors,  are  critically
dependent upon computer technology, and certain of this technology is vulnerable
to failure because of its inability to correctly recognize dates beyond the year
1999. The Company has undertaken a five-phase  program (the "Year 2000 Program")
to ensure that its computer systems and those systems of its significant vendors
(as applicable,  and including certain governmental  agencies (e.g., the Federal
Aviation  Administration))  will be completely  functional by the Year 2000. The
Year 2000 Program is  comprised  of five phases  which are:  Planning/Awareness;
Inventory;  Assessment;  Renovation;  and Certification.  The Planning/Awareness
phase was  completed in the first  quarter of 1998,  the purpose of which was to
familiarize certain Company employees on the objectives of the Year 2000 Program
and to train them to undertake an inventory of the  Company's  systems and those
of its  vendors.  The  Inventory  phase was  completed  in August  1998,  and it
identified  approximately  1,700  internal  systems  (comprised  of hardware and
software) and 25 vendor  relationships  ("systems") for which  assessments  were
considered  necessary.  The Assessment  phase was completed in October 1998, and
based on the results of these analyses,  the systems identified at the Inventory
phase were  classified  as to their  criticality  to the  Company's  operations,
whether or not they are Year 2000 compliant,  to what extent corrective  actions
are required to ensure such  compliance,  and at what costs to the Company.  The
Renovation phase is underway and consists of modifying and/or replacing internal
systems  (some of which  were  previously  designated  for  replacement)  and of
continually  monitoring  the actions of its vendors in order to  ascertain  that
their  systems will be Year 2000  compliant on a timely  basis.  It is currently
estimated  that the  Renovation  phase will be completed by the end of the first
quarter  of  1999.  During  the  Certification  phase,  which is  scheduled  for
completion in July 1999, the corrective actions  undertaken by the Company,  and
those  corrective  actions of its  vendors,  will be  documented  and tested for
reliability. Not including the costs associated with internal labor, the Company
estimates that its costs to successfully  complete its Year 2000 Program will be
approximately $650 thousand, substantially all of which will be incurred in 1999
and will be  funded by cash  generated  from  operations.  The  Company  is also
developing contingency backup plans for its most critical systems, with emphases
first  on  passenger  safety  and then  business  continuity.  The  costs of the
Company's  Year 2000  Program and the  ability to meet the target  dates for its
completion, or, consequently to effectively implement a contingency backup plan,
are based on management's best estimates and assumptions,  including assumptions
regarding those related plans of its vendors. However, there can be no assurance
that these estimates and  assumptions  can be achieved,  and the actual outcomes
may  differ  materially  from  those  anticipated.  Accordingly,  failure by the
Company or possibly any of its vendors to  successfully  and timely  implement a
Year  2000  program  may  have a  materially  adverse  affect  on the  Company's
business, operating results and financial condition.

<PAGE>

                                          Selected Operating Statistics
<TABLE>
<CAPTION>

                                                              Three-month periods       Percent     Nine-month periods     Percent
                                                              ended September 30,        change     ended September 30,     change
                                                              -------------------       -------     -------------------    -------
                                                                1998         1997                    1998         1997
                                                                ----         ----                    ----         ----

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

Revenue passengers (1)                                      1,403,906    1,518,293       (7.5)   4,081,898      4,196,111    (2.7)
Revenue passenger miles (RPMs - thousands) (2)                814,069      876,278       (7.1)   2,369,589      2,401,404    (1.3)
Available seat miles (ASMs - thousands) (3)                 1,183,048    1,253,986       (5.7)   3,549,342      3,532,581     0.5
Passenger load factor (percent) (4)                             68.81        69.88       (1.5)       66.76          67.98    (1.8)
Breakeven load factor (percent) (5)                             59.86        66.51      (10.0)       65.59          67.97    (3.5)
Revenue per RPM ("yield" - cents) (6)                           11.77        11.36        3.6        11.77          11.47     2.6
Unit operating revenue per ASM (cents)                           8.54         8.40        1.7         8.27           8.29    (0.2)
Unit operating cost per ASM (cents)                              7.59         8.05       (5.7)        8.06           8.25    (2.3)
Aircraft in service at end of period                               27           30      (10.0)          27             30   (10.0)
Average passenger journey (miles)                                 580          577        0.5          581            572     1.6
Average aircraft stage length (miles)                             515          511        0.8          520            514     1.2
Average cost of fuel per gallon (cents) (7)                     57.38        69.23      (17.1)       60.82          74.54   (18.4)
Full time equivalent employees at end of period                 1,777        2,159      (17.7)       1,777          2,159   (17.7)
Average daily aircraft utilization (revenue block hours)        10.07         9.95        1.2        10.12           9.85     2.7
Block hours (revenue)                                          25,684       27,453       (6.4)      77,996         78,497    (0.6)

(1) The number of trip segments flown by fare-paying passengers.
(2) The number of miles flown by fare-paying passengers.
(3) The aircraft miles flown on each flight segment multiplied by  the number of seats available for revenue on those segments.
(4) RPMs divided by ASMs.
(5) The passenger load factor that would have resulted in  the Company breaking even on  a net income  basis during the period,
    assuming yield and operating costs remain constant.  The breakeven load factors for the three and nine-month periods ended
    September 30, 1998 include dividends declared and paid on the Company's Series A Preferred Stock of $0.81 million and $2.4
    million, respectively.  Additionally, the breakeven load factor for such nine-month period  includes restructuring charges
    of  $2.2  million.  Not including  the preferred stock dividends and restructuring charges, the respective  breakeven load
    factors for the three and nine-month periods ended September 30, 1998 are 59.3 percent and 64.5 percent.
(6) Passenger revenues divided by RPMs.
(7) Jet fuel price per gallon, excluding into-plane and similar service charges.
</TABLE>

<PAGE>
<TABLE>

The following table sets forth the components of the Company's operating expenses expressed as unit operating
cost per available seat mile for the three-month and nine-month periods ended September 30, 1998 and 1997.

                                                                 Unit Cost per Available Seat Mile
                                                                               (cents)
<CAPTION>
                                                          Three-month periods            Nine-month periods 
                                                          ended September 30,            ended September 30,
                                                          -------------------            -------------------
                                                          1998          1997             1998          1997
                                                          ----          ----             ----          ----
<S>                                                       <C>          <C>              <C>            <C> 
Salaries, wages and benefits                              1.38          1.43             1.45          1.42
Aircraft fuel and oil                                     1.14          1.40             1.18          1.47
Aircraft leases                                           1.46          1.44             1.47          1.48
Aircraft maintenance                                      0.71          0.73             0.84          0.70
Handling, landing and airport fees                        0.79          0.82             0.84          0.83
Advertising, marketing and sales                          0.59          0.55             0.58          0.62
Commissions                                               0.42          0.45             0.39          0.44
Facility leases                                           0.30          0.29             0.32          0.29
Insurance                                                 0.05          0.12             0.10          0.13
Communications                                            0.09          0.11             0.11          0.12
Depreciation                                              0.13          0.21             0.15          0.21
Restructuring charges                                        -             -             0.06             -
Other                                                     0.53          0.50             0.57          0.54
                                                         ------        ------           ------       ------
Total unit cost per available seat mile                   7.59          8.05             8.06          8.25
                                                         ======        ======           ======       ======
</TABLE>

<PAGE>
                              Results of Operations

Reno Air realized a record net income of $13.3 million  before  preferred  stock
dividends of $0.81 million for the three-month  period ended September 30, 1998,
compared  to net income of $4.8  million  for the same  period in 1997.  Diluted
earnings  per  share  for the 1998 and  1997  quarters  were  $0.78  and  $0.39,
respectively.  Net income before  preferred  stock  dividends for the nine-month
periods  ended  September  30, 1998 and 1997 was $7.3 million and $24  thousand,
respectively. The net income for the three month period ended September 30, 1998
includes nonoperating gains of $3.1 million. The comparable 1997 period includes
profit sharing expense of $350 thousand and a nonoperating gain of $1.3 million.
The $8.5  million  improvement  in the net income for the third  quarter of 1998
compared  to the 1997  quarter is  attributable  primarily  to an $11.1  million
decrease in 1998 operating expenses and the aforementioned  nonoperating  gains,
offset  in part by a 4.1  percent  decrease  in  operating  revenues.  Operating
revenues and operating  expenses for the nine-month  period ended  September 30,
1998 increased by 0.3 percent and decreased by 1.8 percent,  respectively,  from
the comparable 1997 amounts,  which contributed to the $7.3 million  improvement
in net income.

Operating revenues

At September 30, 1998, the Company had 27 aircraft in revenue  service  compared
to 30 aircraft at September 30, 1997. This reduction in capacity,  together with
a decrease in load factor,  contributed to decreases in revenue  passenger miles
(RPMs) of 7.1 percent to 814 million RPMs, and 1.3 percent to 2.37 billion RPMs,
respectively,  for the three and  nine-month  periods ended  September 30, 1998,
compared to 876  million  RPMs and 2.40  billion  RPMs for the  comparable  1997
periods.  The decrease in 1998 third quarter RPMs caused operating  revenues for
that quarter to decline by $4.3 million to $101.0 million, compared to operating
revenues  of  $105.3  for the third  quarter  of 1997.  However,  as a result of
managements efforts to reschedule its aircraft to more profitable markets,  unit
revenue for the quarter  increased  by 1.7% to 8.54  cents.  For the  nine-month
period ended September 30, 1998, operating revenues increased by $0.9 million to
$293.7 million,  compared to $292.8 million for the respective 1997 period,  due
primarily to a 2.6 percent  improvement in the 1998-period  yield to 11.8 cents.
Unit  revenue for the  nine-month  period  ended  September  30,  1998  declined
slightly to 8.27 cents.  Operating  revenues  for the  nine-month  period  ended
September 30, 1998 include $1.9 million  resulting from adjustments to estimated
ticket breakage on earned passenger revenues.

Operating expenses

Operating expenses for the three-month period ended September 30, 1998 decreased
by 11.0  percent to $89.8  million,  compared  to  operating  expenses of $100.9
million for the third  quarter of 1997.  Although  ASMs for the third quarter of
1998  decreased  by 5.7 percent to 1.2  billion,  the decrease in the 1998 third
quarter operating expenses produced a unit cost per ASM of 7.59 cents,  compared
to a unit  operating  cost of 8.05 cents per ASM for the third  quarter of 1997.
Operating  expenses for the nine-month period ended September 30, 1998 decreased
by 1.8 percent to $286.2  million from $291.4  million for the  comparable  1997
period,  despite  $2.2  million of  restructuring  charges  incurred in the 1998
period.  Unit operating cost per ASM for the nine-month  period ended  September
30, 1998 decreased by 2.3% to 8.06 cents compared to 8.25 cents per ASM for the
same period in 1997. A significant  factor relating to the decrease in operating
expenses for the  three-month  and nine-month  periods ended September 30, 1998,
compared to the 1997  periods,  is the  reduction of the  Company's  fleet to 27
aircraft at September 30, 1998 from 30 aircraft at September  30, 1997,  and the
resultant  decreases  in  departures,  block hours flown and revenue  passengers
carried.
<PAGE>

Other  improvements in 1998 unit costs reflect the continuing  benefits achieved
from a restructuring program that the Company began shortly after Mr. O'Gorman's
appointment  in the first quarter of 1998. In addition,  operating  expenses for
the  three-month  and  nine-month  periods  ended  September  30,  1998  include
reductions in aircraft  maintenance  and  depreciation  expenses  resulting from
changes in the  Company's  accrual  rates for engine  overhauls and the economic
useful lives of its flight  equipment,  offset by restructuring  charges of $2.2
million.  Salaries,  wages and  benefits  expense  decreased  by 9.3 percent and
increased by 2.5 percent,  respectively,  for the three and  nine-month  periods
ended September 30, 1998 from the comparable 1997 periods.  The increase for the
nine-month period of 1998 is attributable  primarily to a greater average number
of employees for that period  compared to the 1997 nine-month  period.  However,
the restructuring  program initiated by the Company in the first quarter of 1998
has  resulted  in a  reduction  in the total  number of  employees  such that at
September 30, 1998, the Company  employed 1,777 full time  equivalent  employees
(FTEs)  compared  to 2,159  FTEs at  September  30,  1997.  Salaries,  wages and
benefits  expense for the 1997 periods  includes  profit sharing expense of $350
thousand.

Aircraft  fuel and oil  expense  decreased  by 23.5  percent  and 19.5  percent,
respectively, for the three and nine-month periods ended September 30, 1998 from
the comparable 1997 periods. The improvements were primarily  attributible to an
11.9 cents per gallon  decrease in the  average  cost per gallon of fuel to 57.4
cents for the third quarter of 1998,  compared to the 1997  quarter,  and a 13.7
cent  decrease to 60.8 cents for the first nine months of 1998,  compared to the
respective 1997 period. The 1998 decreases in aircraft fuel and oil expenses are
also  attributable in part to the fact that the Company  operated fewer aircraft
block hours in the 1998 periods than in the  comparable  1997 periods.  Aircraft
lease expense  decreased by 4.0 percent for the three-month  period and remained
essentially  unchanged  for the  nine-month  period  ended  September  30, 1998,
respectively,  compared to the same 1997 periods. The decrease in the 1998 third
quarter expense is attributable to the fact the during that quarter, the Company
leased  three fewer  aircraft  than in the third  quarter of 1997.  Although the
Company leased fewer aircraft overall during the 1998 nine-month  period than in
the  comparable  1997 period,  two MD-90 aircraft were added to the fleet in the
first quarter of 1998 at higher  monthly  lease rates than the  Company's  other
leased aircraft.  Aircraft  maintenance expense decreased by 7.8 percent for the
1998  quarter,  but  increased by 20.7 percent for the  nine-month  period ended
September 30, 1998,  compared to the respective  1997 periods.  The reduction in
the  1998  third  quarter  maintenance  expense  is  primarily  attributable  to
analytical studies, consultation with the manufacturers of its aircraft engines,
rebidding engine maintenance  contracts,  improved inventory control procedures,
and  improved  supervision  of third party  engine  overhaul  work-scope,  which
resulted in a decrease in the Company's accrual rate for engine  overhauls,  and
to a 6.4%  decrease in block hours flown.  However,  for the  nine-month  period
ended September 30, 1998, the Company incurred  significantly higher maintenance
costs for unscheduled and component repairs and overhauls than in the comparable
1997 period. Handling, landing and airport fees expense decreased by 8.8 percent
and increased 1.4 percent,  respectively,  for the three and nine-month  periods
ended  September 30, 1998,  compared to the same 1997 periods.  The decrease for
the third  quarter of 1998 resulted  primarily  from the reduction in departures
and revenue  passengers  carried during the 1998 quarter,  compared to the third
quarter of 1997.  Although departures and revenue passengers declined during the
nine-month  period  ended  September  30,  1998,  compared to such 1997  period,
increased costs for purchased  services and the operation of substantially  more
track charter flights in the first half of the nine-month  period resulted in an
increase for the overall  nine-month  period.  Advertising,  marketing and sales
expense increased by 1.6 percent and decreased by 6.4 percent, respectively, for
the three and  nine-month  periods ended  September 30, 1998 from the comparable
1997  periods.  The third  quarter 1998  increase is  attributable  to increased
advertising,  passenger  booking and reservations  fees. The overall decrease in
this expense for the nine-month period ended September 30, 1998 is primarily due
to reduced  expenditures for advertising and promotional items and a shortage of
reservation  agents in the early portion of the nine-month  period.  Commissions
expense decreased by 12.4 percent and 10.6 percent,  respectively, for the three
and  nine-month  periods  ended  September  30,  1998 from the  comparable  1997
periods.

<PAGE>

These decreases resulted from reduced scheduled  passenger revenues for the 1998
periods, the reduction, in October 1997, of the Company's standard travel agency
commission  rate to eight  percent  from ten  percent,  and by the  reduction in
certain override commission rates paid in the third quarter of 1998. The Company
does not cap its travel agency commissions. Facility leases expense decreased by
2.9  percent  and  increased  by 9.6  percent,  respectively,  for the three and
nine-month  periods ended  September 30, 1998 from the comparable  1997 periods.
The  decrease for the 1998 third  quarter is  attributable  to the  cessation of
service to six cities earlier in the year,  whereas the overall increase for the
nine-month  period  of  1998  is  attributable  primarily  to  significant  rent
increases  for airport  space in Reno and Las Vegas,  Nevada,  and Los  Angeles,
California.

Insurance expense decreased by 60.9 percent and 27.0 percent,  respectively, for
the three and  nine-month  periods  ended  September  30, 1998,  compared to the
respective  1997 periods.  These  decreases are  attributable to reduced premium
rates for aircraft hull damage and passenger liability insurance,  a decrease in
the  composite  insured hull value of the  Company's  aircraft and the decreases
period over period in revenue  passenger  miles  flown.  Communications  expense
decreased by 23.8 percent and remained  essentially  unchanged for the three and
nine-month periods ended September 30, 1998, respectively,  compared to the same
1997 periods.  The third quarter 1998 decrease is primarily  attributable to the
renegotiation  of  telecommunications  contract rates  completed  earlier in the
year.  Despite the decrease in traffic for the nine-month  period of 1998,  this
expense was  essentially  unchanged  from the 1997 period  primarily  because of
problems  encountered by the Company, in late 1997, with its reservations system
which  resulted in longer  customer  service  calls and hold times.  The service
problems with the  reservations  system were resolved during the summer of 1998.
Depreciation  expense decreased by 39.1 percent and 25.8 percent,  respectively,
for the  three  and  nine-month  periods  ended  September  30,  1998,  over the
comparable 1997 periods. The overall net decrease in depreciation expense is due
to  the  change  in  estimate  of  depreciable  lives  of the  Company's  flight
equipment.  Other  operating  expense was  essentially  unchanged  for the third
quarter of 1998,  but increased by 5.5 percent for the  nine-month  period ended
September  30, 1998 over the  comparable  1997  periods.  The  increase  for the
nine-month period of 1998 is primarily attributable to significant increases for
professional,  technical and other  purchased  services and in the provision for
doubtful accounts receivable.

Nonoperating income and expense

The  improvement in nonoperating  income  (expense) for the three and nine-month
periods ended  September 30, 1998 over the comparable  1997 periods is primarily
attributable to gains on nonoperating  asset sales realized in the third quarter
of 1998.

Liquidity and capital resources

At September 30, 1998,  Reno Air had  available  cash and cash  equivalents  and
short-term  investments  of $29.4 million  compared to $29.2 million at December
31, 1997. For the nine-month  period ended September 30, 1998, net cash provided
by operating  activities  was $3.7  million,  compared to cash used in operating
activities  of $3.8  million  for the same  period in 1997.  For the  nine-month
period  of 1998,  net  cash  provided  by  (used)  in  investing  and  financing
activities was $10.9 million and ($15.4 million), respectively, principally from
the net  proceeds  from the sales  and  purchases  of  property  and  equipment,
repayments  of  long-term  debt  and  dividends  on  preferred  stock.  For  the
nine-month  period ended September 30, 1997,  cash used in investing  activities
was $21 million, while financing activities provided cash of $14.5 million.

At  September  30,  1998,  the Company had prepaid  fuel of  approximately  $8.6
million representing  approximately  one-half of the Company's  anticipated fuel
consumption  (in gallons) for the fourth quarter of 1998 and 17% of its expected
fuel consumption (in gallons) for the first quarter of 1999.

At September 30, 1998, the Company's all Stage III compliant  fleet consisted of
23 McDonnell  Douglas MD-80 series and five MD-90 series  aircraft.  The Company
owns two of the MD-80  aircraft,  and the  remainder  of its aircraft are leased
under operating leases with remaining terms ranging from less than two months to
approximately  17.25  years.  During the first nine months of 1998,  the Company
acquired two MD-90  aircraft  under  long-term  lease  agreements  and two MD-80
aircraft under  conditional sale agreements.  The latter two MD-80 aircraft were
sold in the third quarter of 1998.
<PAGE>

During that same period the Company  returned four leased MD-80 series  aircraft
and will return two additional  MD-80 aircraft by the end of 1998.  Also, in the
third  quarter of 1998 the Company sold an owned MD-80  aircraft that was leased
to another  airline.  The Company also leases three spare aircraft engines under
medium-term agreements and owns four spare aircraft engines.  Extensions for two
of the engine lease agreements are currently being  negotiated,  and the Company
has entered into a tentative agreement to sell one of its owned spare engines in
December 1998. The Company is in discussions regarding the potential acquisition
in early 1999 of a spare aircraft engine with a list price of approximately $5.6
million to support its fleet of MD-90 aircraft. The Company expects to finance a
substantial portion of the potential acquisition with long-term debt. Under most
of its aircraft leases, the Company is required to prepay  maintenance  deposits
to the lessors based on prescribed  rates and utilization of the aircraft.  Upon
completion of certain  scheduled  maintenance on these aircraft,  these deposits
are  refunded  to the  Company.  In the  fourth  quarter  of 1997,  the  Company
negotiated a waiver of its  requirement to pay maintenance  reserve  deposits on
eight aircraft  leased from  affiliates of The Boeing Company  (Boeing).  Unless
further  waivers of certain  financial  covenants  are  obtained,  or  alternate
commercial  arrangements are reached with Boeing, the Company may be required to
commence paying  maintenance  reserves or pledge additional  collateral on these
eight aircraft in an amount  aggregating  approximately  $800,000 per month, and
potentially retroactive to April 1998. The Company has ongoing negotiations with
Boeing and  believes  there is a  substantial  likelihood  that the Company will
obtain  a  waiver,   modification  or  alternate  arrangement  in  lieu  of  the
requirement to pay maintenance reserves. In February 1998, the Company's line of
credit with a bank was  terminated  by the mutual  agreement of the bank and the
Company. Currently the Company has no existing lines of credit but is evaluating
replacement  facilities with other financial  institutions.  Management believes
that the  Company's  current cash  position,  together  with expected cash flows
generated from improved  operational  results and the  anticipated  net proceeds
from  the  sale of a spare  aircraft  engine,  will be  sufficient  to meet  the
Company's recurring financial  obligations and capital expenditure  requirements
for the next twelve  months.  Nevertheless,  being capital  intensive and highly
leveraged,  the  Company's  financial  results are  sensitive  to many  factors,
including  the price of fuel,  the  actions of  competing  airlines  and overall
general  and  regional  economic  conditions,  any of which can  materially  and
adversely  affect the Company's  liquidity and cash flows.  The Company may also
seek to raise  additional  capital through the sale of equity or debt securities
and  possibly  from the  sales of other  property  and  equipment.  There are no
assurances,  however,  that the Company will be able to raise additional capital
under commercially desirable terms.

<PAGE>
                            PART II OTHER INFORMATION

ITEM 2    CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 6    EXHIBITS AND REPORTS ON FORM 8-K

A. EXHIBITS

10 Material Contracts
  
11 Statement Re:  Computation of Income Per Share for the three-month and
                  nine-month periods ended September 30, 1998 and 1997

27 Financial Data Schedule

B.  REPORTS ON FORM 8-K

August 26, 1998

                                      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 thereto duly authorized.

                                        Reno Air, Inc.


Date:  November 16, 1998              By:  /s/  W. Stephen Jackson
       -----------------              ------------------------------------------
                                           W. Stephen Jackson
                                           Senior Vice President-Finance, 
                                           Treasurer and Chief Financial Officer
                                           (Principal Accounting Officer)