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 June 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              (IRS Employer Identification Number)
of 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
     ---                ---

Number of shares of common stock,  $.01 par value, of registrant  outstanding at
July 31, 1998: 10,753,175.
<PAGE>
                                 RENO AIR, INC.

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

                                      INDEX



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

         Condensed Balance Sheets - June 30, 1998 and
         December 31, 1997                                                     3

         Statements of Operations -
         Three Month and Six Month Periods Ended June 30, 1998 and 1997        4

         Statements of Cash Flows -
         Six Months Ended June 30, 1998 and 1997                               5

         Notes to Financial Statements                                         6

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

PART II. OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds                             14

SIGNATURES                                                                    16
<PAGE>
                                 Reno Air, Inc.
                            Condensed Balance Sheets
                     at June 30, 1998 and December 31, 1997
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                      June 30,      December 31,
                                                                        1998            1997
                                                                    ------------    ------------
                                                                            (unaudited)
<S>                                                                 <C>             <C>         
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                        $     20,811    $     29,058
   Short-term investments                                                    968             129
   Accounts receivable                                                    32,741          24,808
   Inventories and operating supplies                                      3,288           2,983
   Prepaid expenses and other                                             23,265          29,700
                                                                    ------------    ------------
      Total current assets                                                81,073          86,678

PROPERTY AND EQUIPMENT:
   Flight equipment                                                       91,263          85,993
   Ground property and equipment                                          17,333          15,870
                                                                    ------------    ------------
                                                                         108,596         101,863
   Less-Accumulated depreciation                                         (25,112)        (21,399)
                                                                    ------------    ------------
      Property and equipment, net                                         83,484          80,464

RESTRICTED CASH AND INVESTMENT                                             4,454           5,122

DEPOSITS AND OTHER NONCURRENT ASSETS                                      22,920          21,145
                                                                    ------------    ------------
                                                                    $    191,931    $    193,409
                                                                    ============    ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable                                                 $     19,741    $     19,611
   Accrued liabilities                                                    21,921          25,894
   Air traffic liability                                                  36,310          27,025
   Current maturities of long-term debt                                    7,864           7,867
                                                                    ------------    ------------
      Total current liabilities                                           85,836          80,397

LONG-TERM DEBT                                                            58,622          62,584

OTHER NONCURRENT LIABILITIES                                              19,178          15,704

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
   Preferred stock, ($25.00 per share liquidation preference);
      Series A Cumulative Convertible Exchangeable; $.001 par
      value: 10,000,000 shares authorized; issued and outstanding
      1,436,000 shares at June 30, 1998 and December 31, 1997                  1               1
   Common stock, $.01 par value: 30,000,000 shares authorized;
      issued and outstanding 10,749,575 shares at June 30, 1998
      and 10,542,075 shares at December 31, 1997                             107             105
Additional paid-in capital                                                66,330          66,825
Accumulated deficit                                                      (38,143)        (32,207)
                                                                    ------------    ------------
      Total shareholder's equity                                          28,295          34,724
                                                                    ------------    ------------
                                                                    $    191,931    $    193,409
                                                                    ============    ============
</TABLE>
                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
                                       3
<PAGE>
                                 Reno Air, Inc.
                            Statements of Operations
                    For the Six Month and Three Month Periods
                          Ended June 30, 1998 and 1997
                      (in thousands, except for share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                     Six-Months Ended              Three-Months Ended
                                                         June 30,                        June 30,
                                               ----------------------------    ----------------------------
                                                   1998            1997            1998            1997
                                                   ----            ----            ----            ----
<S>                                            <C>             <C>             <C>             <C>         
OPERATING REVENUES
   Passenger revenues                          $    183,091    $    175,762    $     94,172    $     91,468
   Other                                              9,519          11,344           4,612           5,954
                                               ------------    ------------    ------------    ------------
      Total operating revenues                      192,610         187,106          98,784          97,422
                                               ------------    ------------    ------------    ------------
OPERATING EXPENSES:
   Salaries, wages and benefits                      35,131          32,185          17,050          16,863
   Aircraft fuel and oil                             28,163          34,241          13,325          16,163
   Aircraft leases                                   34,886          34,116          17,258          17,513
   Aircraft maintenance                              21,563          15,648          10,280           8,068
   Handling, landing and airport fees                20,490          19,167           9,848           9,789
   Advertising, marketing and sales                  13,556          15,075           6,963           7,609
   Commissions                                        9,007           9,963           4,963           5,063
   Facility leases                                    7,679           6,590           3,679           3,500
   Insurance                                          2,861           3,223           1,452           1,390
   Communications                                     3,031           2,741           1,335           1,443
   Depreciation                                       3,839           4,701           1,971           2,484
   Restructuring charges                              2,212            --               725            --
   Other                                             13,966          12,684           6,875           6,593
                                               ------------    ------------    ------------    ------------
      Total operating expenses                      196,384         190,334          95,724          96,478
                                               ------------    ------------    ------------    ------------
OPERATING INCOME (LOSS)                              (3,774)         (3,228)          3,060             944

NONOPERATING INCOME (EXPENSE):
   Interest expense                                  (2,976)         (2,435)         (1,468)         (1,167)
   Interest income                                    1,540           1,026             702             538
   Other, net                                          (726)           (136)           (445)            (91)
                                               ------------    ------------    ------------    ------------
      Nonoperating income (expense), net             (2,162)         (1,545)         (1,211)           (720)
                                               ------------    ------------    ------------    ------------
NET INCOME (LOSS)                                    (5,936)         (4,773)          1,849             224

PREFERRED STOCK DIVIDENDS                             1,614            --               807            --
                                               ------------    ------------    ------------    ------------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK   $     (7,550)   $     (4,773)   $      1,042    $        224
                                               ============    ============    ============    ============
INCOME (LOSS) PER COMMON SHARE AND POTENTIAL
   COMMON SHARE:
   Basic                                       $      (0.71)   $      (0.46)   $       0.10    $       0.02
                                               ============    ============    ============    ============
   Diluted                                     $      (0.71)   $      (0.46)   $       0.10    $       0.02
                                               ============    ============    ============    ============
WEIGHTED AVERAGE COMMON SHARES AND POTENTIAL
   COMMON SHARES OUTSTANDING:
   Basic                                         10,611,431      10,409,315      10,662,191      10,447,698
                                               ============    ============    ============    ============
   Diluted                                       10,611,431      10,409,315      10,963,673      10,767,081
                                               ============    ============    ============    ============
</TABLE>
                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
                                        4
<PAGE>
                                 Reno Air, Inc.
                            Statements of Cash Flows
                     Six Months ended June 30, 1998 and 1997
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                              Six-month Periods Ended
                                                                     June 30,
                                                              -----------------------
                                                                1998           1997
                                                                ----           ----
<S>                                                           <C>            <C>      
OPERATING ACTIVITIES                                                      
Net loss                                                      $ (5,936)      $ (4,773)
Adjustments to reconcile net loss to net cash provided by                 
(used) in operating activities:                                                               
   Depreciation and amortization                                 3,839          4,701
   Common stock issued under the 401(k) plan                       162            261
   Amortization of deferred lease credits                         (570)        (1,324)
   Other                                                           753            225
Changes in operating assets and liabilities:                              
   Accounts receivable                                          (8,184)       (15,658)
   Inventories and operating supplies                             (305)          (586)
   Prepaid expenses and other current assets                     6,435         (4,113)
   Restricted cash                                                 650            455
   Deposits and other noncurrent assets                         (1,971)        (2,147)
   Accounts payable                                                130          3,652
   Accrued liabilities                                          (4,135)        (2,327)
   Air traffic liability                                         9,285         11,695
   Noncurrent liabilities                                        4,044          5,356
                                                              --------       --------
      Net cash provided by (used) in operating activities        4,197         (4,583)
                                                                          
INVESTING ACTIVITIES:                                                     
   Sales (purchases) of short-term investments                    (839)           939
   Purchases of property and equipment                          (7,039)        (4,257)
                                                              --------       --------
       Net cash used in investing activities                    (7,878)        (3,318)
FINANCING ACTIVITIES:                                                     
   Proceeds from exercise of stock options and warrants          1,013            517
   Proceeds from issuance of notes payable                        --            3,003
   Payments of preferred stock dividends                        (1,614)          --
   Repayments of long-term debt                                 (3,965)        (2,365)
                                                              --------       --------
      Net cash provided by (used) in financing activities       (4,566)         1,155
                                                              --------       --------
DECREASE IN CASH AND CASH EQUIVALENTS                           (8,247)        (6,746)
CASH AND CASH EQUIVALENTS at beginning of  period               29,058         16,221
                                                              --------       --------
CASH AND CASH EQUIVALENTS at end of period                    $ 20,811       $  9,475
                                                              ========       ========
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
                                        5
<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  six-month
periods ended June 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

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

For the  three-month and six-month  periods ended June 30, 1998 and 1997,  other
common  shares of 8,285,982 and  4,049,248  shares,  and 9,892,662 and 4,932,279
shares,  respectively,  issuable under potentially  dilutive  securities are not
included in the  computation of diluted  earnings (loss) per share because their
exercise  prices were greater than the average  market  prices for the Company's
common stock during those periods (with respect to outstanding stock options and
warrants), or were otherwise anti-dilutive.

Note D - Change in Estimate

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 used previously by the Company.  The result of this change was to decrease
depreciation  expense in the first and second quarters of 1998 by  approximately
$1.2 million per  quarter.  It is  estimated  that the change will  subsequently
reduce  depreciation  expense  by  approximately  $1.2  million  in  each of the
remaining quarters of 1998.
                                        6
<PAGE>
Note E - Restructuring Charges

Restructuring charges consist of the following amounts (in thousands):
<TABLE>
<CAPTION>
                                               Three-month      Three-month
                                              period ended      period ended
                                              June 30, 1998    March 31, 1998     Total
                                              -------------    --------------     -----
<S>                                               <C>               <C>           <C>   
Provision for employee severance                 $  336            $1,055        $1,391
Write-off of assets and other expenses
   related to station and facility closures         170               288           458
Other                                               219               144           363
                                                 ------            ------        ------
                                                 $  725            $1,487        $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.

Note F - Commitments, Contingencies and Subsequent Events

In May 1998, the Company entered into an agreement for the sale of two McDonnell
Douglas MD-80 aircraft with a US based air carrier. These aircraft were acquired
by the  Company in the first  quarter of 1998  pursuant  to a  conditional  sale
contract arrangement with an affiliate of the aircraft manufacturer.  Neither of
these  aircraft were operated by the Company in revenue  service.  In July 1998,
one of these aircraft was  simultaneously  purchased by the Company  pursuant to
the  conditional  sale and resold to the third  party.  The second  aircraft  is
expected to be sold to the third party on or about September 30, 1998.

In December  1997 and January  1998,  the Company  entered  into  agreements  to
purchase  14 million  gallons of jet fuel,  of which  approximately  5.8 million
gallons were  remaining for delivery at June 30, 1998 at an average cost of 56.1
cents per gallon,  including  shipping  charges and federal taxes. In the second
quarter of 1998, the Company  entered into other similar  agreements to purchase
10.3  million  gallons of jet fuel at an average  cost of 43.1 cents per gallon,
inclusive  of shipping  charges and federal  taxes.  Management  believes  these
advance  purchase  agreements  will  provide  approximately  33  percent  of the
Company's  estimated fuel requirements for the remainder of 1998. The Company is
currently  under  contract for most of its remaining fuel  requirements  for the
balance of the 1998 fiscal year at formula  based market  rates.  Management  is
presently  evaluating the  possibility of fixing current  formula based contract
rates for its remaining 1998 fuel  requirements  and purchasing a portion of its
1999 fuel requirements.

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

General

The Company's  business is  characterized,  as is true for the airline  industry
generally,  by  high fixed costs  relative to revenues  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  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.

This  quarterly  and  six-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.

During the first six months of 1998, the Company's  senior  management  team was
entirely  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  airlines  including  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 which  refocused the Company's  operations in its primary
and core  markets in the western  portion 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 28
aircraft (at June 30, 1998),  and the outsourcing of the revenue  accounting and
tour operator functions. As a result of these initiatives,  the Company incurred
restructuring  charges of $2.2  million in the  six-month  period ended June 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 the American
AAdvantage(R)  frequent flyer miles on certain flights.  Under the revised terms
of  the  agreement,  the  agreement  shall  continue  indefinitely,  but  may be
terminated  by either party upon seven months  notice to the other.  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 or code-sharing  agreements
with domestic and  international  airlines.  There can be no assurance  that the
Company will be successful in the implementation of additional  code-sharing and
alliance agreements.

The Company has begun a comprehensive  year 2000 compliance  program designed to
ensure that its computer systems and applications  will properly manage calendar
dates beyond the year 1999. The Company believes that it has allocated  adequate
resources for this purpose and expects that its own year 2000 conversion program
will be completed on a timely  basis.  While there can be no assurance  that the
systems of outside  parties upon which the Company  relies will be  successfully
converted on a timely basis, the Company is working with its vendors to identify
potential problems.  Accordingly, a failure by either the Company or one or more
of such outside  parties to convert  their  systems may have a material  adverse
impact on the Company's operations and financial position.

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.

By outsourcing of the revenue accounting and tour operation  functions presently
managed by the  Company,  and as  described  in the two  immediately  preceeding
paragraphs,  the  Company  expects to  achieve  revenue  enhancement  and permit
management  to refocus its efforts on its core  competencies  in  operating  the
airline.

In May 1998, the Company entered into an agreement for the sale of two McDonnell
Douglas MD-80 aircraft with a US based air carrier. These aircraft were acquired
by the  Company in the first  quarter of 1998  pursuant  to a  conditional  sale
contract arrangement with an affiliate of the aircraft manufacturer.  Neither of
these  aircraft were operated by the Company in revenue  service.  In July 1998,
one of these aircraft was  simultaneously  purchased by the Company  pursuant to
the  conditional  sale  agreement  and  resold to the third  party.  The  second
aircraft is expected to be sold on or about September 30, 1998.

                                        8
<PAGE>
In the first six months of 1998, the Company  returned three leased  aircraft to
the lessor  thereof,  and returned a fourth  leased  aircraft in July 1998.  The
Company  expects to return two additional  leased aircraft to the lessor in late
1998. All aircraft  returns were effected or are to be effected upon  expiration
of the related leases.

The management  team is jointly  focused on increasing unit revenue and reducing
unit costs by among other things,  working more  effectively with fewer workers,
technological  enhancements of Company  systems,  more efficient  utilization of
aircraft and crews and by operating in 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, aircraft cleanliness,  improving
reservations service and by providing a convenient schedule into markets served.

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 Airline Pilots Association  ("ALPA").
The Company is  negotiating a contract with the IBT and  anticipates  commencing
contract talks with ALPA in the near future.  Management cannot predict when any
contracts  might be entered  into,  or the extent to which such  contracts  will
contain  terms  different  from  the  Company's  current  work  and  pay  rules.
Unionization of the Company's employees will restrict the Company's  flexibility
in dealing with such employees,  and could result in a material  increase in its
labor costs. None of the Company's other employees are represented by a union.

                          Selected Operating Statistics
<TABLE>
<CAPTION>
                                                           Six-month period    Percent   Three-month period   Percent
                                                            ended June 30,     change      ended June 30,     change
                                                            --------------     ------      --------------     ------
                                                           1998        1997               1998        1997
                                                           ----        ----               ----        ----
<S>                                                     <C>         <C>        <C>     <C>         <C>        <C>  
Revenue passengers (1)                                  2,677,992   2,677,818     --   1,340,100   1,404,943   (4.6)
Revenue passenger miles (RPMs - thousands) (2)          1,555,520   1,525,126    2.0     784,660     802,508   (2.2)
Available seat miles (ASMs - thousands) (3)             2,366,294   2,278,595    3.8   1,174,028   1,161,784    1.1
Passenger load factor (percent) (4)                         65.74       66.93   (1.8)      66.83       69.08   (3.3)
Breakeven load factor (percent) (5)                         68.45       68.75   (0.4)      66.09       68.91   (4.1)
Revenue per revenue passenger mile ("yield" - cents) (6)    11.77       11.52    2.2       12.00       11.40    5.3
Passenger revenue per ASM (cents)                            7.74        7.71    0.4        8.02        7.87    1.9
Total operating unit revenue per ASM (cents)                 8.14        8.21   (0.9)       8.41        8.39    0.2
Unit operating cost per ASM (cents)                          8.30        8.35   (0.6)       8.15        8.30   (1.8)
Aircraft in service at end of period                           28          30   (6.7)         28          30   (6.7)
Average passenger journey (miles)                             581         570    1.9         586         571    2.6
Average aircraft stage length (miles)                         522         515    1.4         524         513    2.1
Average cost of fuel per gallon (cents) (7)                  64.4        82.0  (21.5)       61.3        71.2  (13.9)
Full time equivalent  employees at end of period            1,942       2,223   (8.5)      1,942       2,223   (8.5)
Average daily aircraft utilization (revenue block hours)    10.14        9.79    3.6        9.90        9.57    3.4
Block hours (revenue)                                      52,310      51,042    2.5      25,503      26,111   (2.3)
</TABLE>
(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
     six-month periods ended June 30, 1998 include  dividends  declared and paid
     on the Company's Series A Preferred Stock and restructuring charges of $.73
     million and $2.2 million,  respectively.  Not including the preferred stock
     dividends and restructuring  charges, the respective breakeven load factors
     for the three and  six-month  periods  ended June 30, 1998 are 65.0 percent
     and 67.1 percent.
(6)  Passenger revenues divided by RPMs.
(7)  Jet fuel  price  per  gallon,  excluding  into-plane  and  similar  service
     charges.
                                        9
<PAGE>
The  following  table  sets  forth the  components  of the  Company's  operating
expenses  expressed as unit cost per available seat mile for the three-month and
six-month periods ended June 30, 1998 and 1997.

                                             Unit Cost per Available Seat Mile
                                                          (cents)

                                           Six-month period   Three-month period
                                            ended June 30,      ended June 30,
                                           ----------------   ------------------

                                            1998      1997      1998      1997
                                            ----      ----      ----      ----
Salaries, wages and benefits                1.48      1.41      1.45      1.45
Aircraft fuel and oil                       1.19      1.50      1.13      1.39
Aircraft leases                             1.47      1.50      1.47      1.51
Aircraft maintenance                        0.91      0.69      0.88      0.69
Handling, landing and airport fees          0.87      0.84      0.84      0.84
Advertising, marketing and sales            0.57      0.66      0.59      0.65
Commissions                                 0.38      0.44      0.42      0.44
Facility leases                             0.32      0.29      0.31      0.30
Insurance                                   0.12      0.14      0.12      0.12
Communications                              0.13      0.12      0.12      0.12
Depreciation                                0.16      0.21      0.17      0.21
Restructuring charges                       0.09      --        0.06      --
Other                                       0.61      0.55      0.59      0.58
                                            ----      ----      ----      ----
Total unit cost per available seat mile     8.30      8.35      8.15      8.30
                                            ====      ====      ====      ====
                                       10
<PAGE>
                              Results of Operations

Reno Air realized net income of $1.8 million before  preferred  stock  dividends
but including  restructuring charges of $725 thousand for the three-month period
ended June 30, 1998. Net income applicable to common stock for the quarter ended
June 30, 1998 was $1.04 million,  or $0.10 per common share (on both a basic and
diluted  basis).  The Company  incurred a net loss applicable to common stock of
$7.6 million for the six-month period ended June 30, 1998,  after  restructuring
charges of $2.2 million and preferred stock  dividends of $1.6 million.  For the
same three-month and six-month  periods of 1997, the Company realized net income
(loss)  applicable  to  common  stock  of  $224  thousand  and  ($4.8)  million,
respectively.  There was no preferred  stock  outstanding  during the comparable
six-month period of 1997.

The improvement in results of operations for the second quarter of 1998 compared
to the 1997 quarter is attributable to a $1.4 million increase in 1998 operating
revenues to $98.8  million and a $.8 million  decrease in operating  expenses to
$95.7 million.

The results of operations for the six-month periods ended June 30, 1998 and 1997
were  adversely  affected  by poor  operating  results in the  respective  first
quarters of 1998 and 1997, caused in part by unusually harsh weather  conditions
in 1998 resulting in higher than normal flight  cancellations and delays in many
of the Company's key west coast markets.

Operating revenues

Operating revenues for the three and six-month periods of 1998 increased by $1.4
million and $5.5 million, respectively,  from the comparable 1997 periods. These
increases were due in part to higher yields on passenger  revenues of 12.0 cents
for the 1998 quarter compared to 11.4 cents in the 1997 quarter,  and 11.8 cents
for the  six-month  period  ended June 30,  1998  compared to 11.5 cents for the
comparable  1997 period.  For the quarter ended June 30, 1998, RPMs decreased by
2.2 percent to 785 million compared to 803 million RPMs in the second quarter of
1997 as a result of the increase in yield and unit revenue.

Unit revenues per available seat mile ("unit  revenue")  increased in the second
quarter of 1998 to 8.41 cents from 8.39 cents in the second  quarter of 1997 due
primarily to an increase in yield as a result of  reallocation  of the Company's
aircraft to more profitable markets.  The second quarter of 1998 includes a $1.9
million  benefit  resulting  from  adjustments to estimated  ticket  breakage on
earned passenger revenues.

Despite the $5.5 million increase in operating revenues for the six-month period
ended June 30, 1998,  unit  revenue for the 1998 period  decreased to 8.14 cents
from 8.21 cents for the comparable 1997 period. This decrease in unit revenue is
attributable  to a  significant  increase in track  charter  operations at lower
yields.  The Company is in the process of eliminating  track charter  operations
and expects to cease all track charter operations by the fall of 1998.

Operating expenses

Operating  expenses for the three-month  period ended June 30, 1998 decreased by
0.8 percent to $95.7 million from the  comparable  1997 quarter which produced a
unit cost per available seat mile of 8.15 cents including  restructuring charges
of $725,000  incurred in the 1998 quarter.  Unit cost for the quarter ended June
30, 1998 was 8.09 cents excluding the restructuring charges and represents a 2.5
percent improvement over unit cost for the second quarter of 1997.

Operating expenses for the six-month period ended June 30, 1998 increased by 3.2
percent to $196.4  million  over the  comparable  1997  period.  The increase in
operating expenses included $2.2 million  attributable to restructuring  charges
incurred  in the period and  resulted  in a unit cost of 8.30 cents  compared to
8.35 cents for the six-month period ended June 30, 1997. The improvement in 1998
unit cost is attributable to a 3.8 percent  increase in ASM's to 2.4 billion for
the 1998 period and management's  efforts to control costs. Before restructuring
charges,  the unit cost for the  six-month  period  ended June 30,  1998 is 8.21
cents, or 1.7 percent less than the comparable unit cost for the 1997 period.

Salaries,  wages and benefits expense  increased by 1.1 percent and 9.2 percent,
respectively,  for the three and six-month periods ended June 30, 1998, from the
comparable 1997 periods. These increases are attributable primarily to a greater
average  number of  employees  for the 1998  periods.  A  restructuring  program
initiated by the Company in the first quarter of 1998 is expected to result in a
reduction of the total number of employees.

                                       11
<PAGE>
Aircraft fuel and oil expense decreased by 17.6 percent and 17.8,  respectively,
for the three and  six-month  periods ended June 30, 1998,  from the  comparable
1997  periods.  The  improvements  were due  primarily to a 9.9 cents per gallon
decrease  in the  average  costs per gallon of fuel to 61.3 cents for the second
quarter  of 1998  compared  to the 1997  quarter  and a 17.6  cent  decrease  to
64.4cents for the first six months of 1998 as compared to the 1997 period.

Aircraft  lease  expense  remained  essentially  unchanged  for  the  three  and
six-month periods ended June 30, 1998,  compared to the respective 1997 periods.
In the first  quarter of 1998,  the Company  added two MD-90  aircraft at higher
monthly lease rates than other leased  aircraft,  but such increased  rents were
offset by the return of three leased MD-80 aircraft  during the first six months
of 1998. The Company also leased spare aircraft engines on a short-term basis in
the second quarter of 1997.

Aircraft  maintenance  expense  increased  by 27.4  percent  and  37.8  percent,
respectively,  for the three and six-month periods ended June 30, 1998, from the
comparable 1997 periods, despite the fact that in the second quarter of 1997 the
Company incurred an unusually high number of unscheduled  engine  removals.  The
1998  increases are  primarily  attributable  to a  significant  increase in the
accrual rates for scheduled engine overhauls and increased fleet utilization.

Handling,  landing and airport  fees  expense  increased  by 0.6 percent and 6.9
percent,  respectively, for the three and six-month periods ended June 30, 1998,
compared to the  respective  1997  periods.  The 1998  increases in expense were
caused by higher  associated  costs for outside  services  and the  operation of
substantially  more track charter  flights in the six-month  1998 period than in
the 1997 period.

Advertising,  marketing  and sales  expense  decreased  by 8.5  percent and 10.1
percent,  respectively, for the three and six-month periods ended June 30, 1998,
from the  comparable  1997  periods,  and were due primarily to decreases in the
Company's expenditures for advertising and promotional items.

Commissions expense decreased by 2.0 percent and 9.6 percent,  respectively, for
the three and six-month  periods ended June 30, 1998,  from the comparable  1997
periods.  The decrease was due to reduced scheduled  passenger  revenues for the
1998 periods,  and the October 1997 reduction in the Company's  standard  travel
agency commission rate to eight percent from ten percent.

Facility leases expense increased by 5.1 percent and 16.5 percent, respectively,
for the three and  six-month  periods ended June 30, 1998,  over the  comparable
1997 periods.  These increases were  attributable  primarily to significant rent
increases  for airport  space in Reno and Las Vegas,  Nevada,  and Los  Angeles,
California.

Insurance  expense  increased by 4.5 percent for the second  quarter of 1998 and
decreased by 11.2 percent for the six-month period ended June 30, 1998, compared
to the  respective  1997  periods.  Such changes were caused by varying  premium
rates for aircraft hull damage and passenger  liability  insurance,  the insured
hull values of the Company's  aircraft and the number of revenue passenger miles
flown.

Communications  expense decreased by 7.5 percent for the second quarter of 1998,
and increased by 10.6 percent for the six-month  period ended June 30, 1998 from
the comparable  1997 periods.  The increase for the six-month  period of 1998 is
attributable to communications  problems the Company encountered upon conversion
to a new computer  reservations system which resulted in longer customer service
calls and hold times.

Depreciation  expense decreased by 20.7 percent and 18.3 percent,  respectively,
for the three and  six-month  periods ended June 30, 1998,  from the  comparable
1997  periods.  The overall net decrease in  depreciation  expense is due to the
change in estimate of depreciable lives of flight equipment.

Other operating expense increased by 4.3 percent and 10.1 percent, respectively,
for the three and  six-month  periods ended June 30, 1998,  from the  comparable
1997 periods. Such 1998 period-over-period  increases are attributable primarily
to significant  increases for professional and technical services,  property and
sales taxes and costs  incurred  by the  Company for lost and damaged  passenger
baggage.
                                       12
<PAGE>
Nonoperating income and expense

Nonoperating  income  and  expense  increased  for both the three and  six-month
periods  ended June 30,  1998,  compared to the  comparable  1997 periods and is
primarily attributable to increases in interest expense related to higher levels
of debt outstanding during the 1998 periods.

Liquidity and capital resources

At June  30,  1998,  Reno  Air had  available  cash  and  cash  equivalents  and
short-term  investments  of $21.8 million  compared to $29.2 million at December
31, 1997.  For the  six-month  period ended June 30, 1998,  net cash provided by
operating  activities  was $4.2  million,  compared  to cash  used in  operating
activities of $4.6 million for the same period in 1997. For the 1998 period, net
cash used by  financing  and  investing  activities  was $4.6  million  and $7.9
million, respectively,  principally for the purchases of property and equipment,
repayment of long-term debt and dividends on preferred stock.

At June 30, 1998, the Company's  fleet  consisted of 32 McDonnell  Douglas MD-80
and 90 series  aircraft,  27 of which were  leased.  Three MD-80  aircraft  were
available  for sale and were not being  used in Company  operations.  One of the
three  aircraft held for sale is leased to a third party under a  month-to-month
operating  lease.  Remaining lease terms for the Company's leased aircraft range
from less than one year to approximately  17.5 years. In the first six months of
1998, the Company  acquired two MD-90 aircraft  under  long-term  leases and two
MD-80 aircraft under a conditional  sale agreement.  During that same period the
Company  returned three leased MD-80 series aircraft and returned a fourth MD-80
aircraft in July 1998.  The Company  also plans to return two  additional  MD-80
series aircraft in 1998 upon expiration of the subject leases.  In May 1998, the
Company  entered into an agreement with a third party  involving the sale of two
MD-80  aircraft.  One of these  aircraft  was sold in July  1998,  and the other
aircraft is expected to be sold in September 1998. The Company also leases three
spare aircraft engines.

The Company is in discussions regarding the potential acquisition by the Company
of a spare aircraft engine for its fleet of MD-90 aircraft.

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  proceeds from the sales of certain of its aircraft,
will be sufficient to meet the Company's  recurring  financial  obligations  and
capital  requirements  for the next twelve months.  Nevertheless,  being capital
intensive  and  highly  leveraged,  the  Company's  financial  results  are very
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 sale of property and equipment.  There are
no  assurances,  however,  that the  Company  will be able to  raise  additional
capital under commercially effective terms.

The Company has not  previously  been  required to pay  maintenance  reserves on
eight  aircraft  leased from an affiliate of Boeing.  Unless  waivers of certain
financial  covenants  are obtained or an  alternate  commercial  arrangement  is
reached with Boeing, the Company will be required to commence paying maintenance
reserves or pledging  collateral  on these  eight  leased  aircraft in an amount
aggregating  approximately $800,000 per month, retroactive to April 1, 1998. The
Company is maintaining ongoing  negotiations with Boeing and believes there is a
substantial  likelihood that the Company will obtain a waiver of the requirement
to pay maintenance reserves.
                                       13
<PAGE>
                            PART II OTHER INFORMATION

ITEM 2   CHANGES IN SECURITIES AND USE OF PROCEDURES

None.

ITEM 6   EXHIBITS AND REPORTS ON FORM 8-K

A.   EXHIBITS

11   Statement Re:  Computation  of Income (Loss) Per Share for the  three-month
     and six-month periods ended June 30, 1998 and 1997

27   Financial Data Schedule

B.   REPORTS ON FORM 8-K

None.

                                   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:  August 14, 1998             By:  /s/ W. Stephen Jackson
       ---------------                ------------------------------------------
                                        W. Stephen Jackson
                                        Senior Vice President-Finance, Treasurer
                                        and Chief Financial Officer
                                        (Principal Accounting Officer)
                                       14