UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


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

                                    FORM 10-Q

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


           X  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          ---            SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended March 31, 2002

                                       OR

              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          ---            SECURITIES EXCHANGE ACT OF 1934

               For the transition period from _______ to ________


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

                          Commission File No. 333-82153

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


                             AIRCRAFT FINANCE TRUST
                             ----------------------
             (Exact name of registrant as specified in its charter)

                                   51-6512392
                        (IRS Employer Identification No.)

                                    DELAWARE
         (State or other jurisdiction of incorporation or organization)

    1100 North Market Street, Rodney Square North, Wilmington, Delaware 19890
                                 (302) 651-1000
          (Address and telephone number of principal executive offices)




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

                          Yes  X                  No
                              ---                    ---

                      This document consists of 23 pages.
<PAGE>

                             Aircraft Finance Trust

            FORM 10-Q - For the Quarterly Period Ended March 31, 2002




                                      INDEX



Part I.       Financial Information                                         Page

         Item 1.    Financial Statements

               a)   Consolidated Balance Sheets - March 31, 2002 and
                    December 31, 2001.........................................3

               b)   Consolidated Statements of (Loss) Income - Three
                    Months Ended March 31, 2002 and March 31, 2001............4

               c)   Consolidated Statement of Changes in Beneficial
                    Interest Holders' Deficit - Three Months Ended
                    March 31, 2002 and Year Ended December 31, 2001...........5

               d)   Consolidated Statements of Cash Flows - Three Months
                    Ended March 31, 2002 and March 31, 2001...................6

               e)   Notes to Consolidated Financial Statements................7

         Item 2.    Management's Discussion and Analysis of
                    Financial Condition and Results of Operations.............9

         Item 3.    Quantitative and Qualitative Disclosures about
                    Market Risk..............................................15


Part II.      Other Information

         Item 6.    Exhibits and Reports on Form 8-K.........................17

         Signatures   .......................................................18


                                       2
<PAGE>

                          Part I. Financial Information
                          -----------------------------

Item 1.       Financial Statements


                     Aircraft Finance Trust and Subsidiaries
                           Consolidated Balance Sheets
                                   (unaudited)
                             (dollars in thousands)

                                                       March 31,    December 31,
                                                          2002          2001
                                                      -----------   ------------
                                     Assets

Cash and cash equivalents                             $    78,169   $    76,729
Restricted cash                                            11,002        10,895
Receivables and other assets                                7,827         7,156
Aircraft, net                                           1,032,846     1,041,199
                                                      -----------   -----------

     Total assets                                     $ 1,129,844   $ 1,135,979
                                                      ===========   ===========

              Liabilities and Beneficial Interest Holders' Deficit

Accounts payable and accrued liabilities              $     6,179   $     4,293
Deferred rental income                                      5,082         5,629
Derivative contracts                                       23,395        32,691
Security and other deposits                                42,842        43,346
Notes payable:
     Class A-1                                            512,500       512,500
     Class A-2                                            265,625       271,171
     Class B                                              119,096       119,096
     Class C                                              106,000       106,000
     Class D                                               64,000        64,000
                                                      -----------   -----------
     Total notes payable                                1,067,221     1,072,767
                                                      -----------   -----------

     Total liabilities                                  1,144,719     1,158,726
                                                      -----------   -----------

Beneficial interest holders' deficit:
     Beneficial interest                                    8,520         9,944
     Accumulated other comprehensive loss                 (23,395)      (32,691)
                                                      -----------   -----------

     Total beneficial interest holders' deficit           (14,875)      (22,747)
                                                      -----------   -----------

     Total liabilities and beneficial interest
        holders' deficit                              $ 1,129,844   $ 1,135,979
                                                      ===========   ===========


                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                       3
<PAGE>


                     Aircraft Finance Trust and Subsidiaries
                    Consolidated Statements of (Loss) Income
                                   (unaudited)
                             (dollars in thousands)


                                                  Three Months     Three Months
                                                     Ended            Ended
                                                 March 31, 2002   March 31, 2001
                                                 --------------   --------------

Revenues:
   Rental and other income from operating
     leases                                         $ 30,530        $ 36,405
   Interest income                                       387           1,289
                                                    --------        --------

       Total revenues                                 30,917          37,694
                                                    --------        --------

Expenses:
   Interest expense                                   17,050          18,878
   Depreciation expense                               10,444          10,977
   Operating expense                                   3,333           4,480
   Administration and other                            1,514           1,472
                                                    --------        --------

       Total expenses                                 32,341          35,807
                                                    --------        --------

Net (Loss) Income                                   $ (1,424)       $  1,887
                                                    ========        ========

                  The accompanying notes are an integral part
                  of these consolidated financial statements.


                                       4
<PAGE>

                     Aircraft Finance Trust and Subsidiaries
    Consolidated Statement of Changes in Beneficial Interest Holders' Deficit
                                   (unaudited)
                             (dollars in thousands)


                                           Accumulated
                                       Other Comprehensive  Beneficial
                                           Income (Loss)     Interest    Total
                                           -------------     --------    -----


Balance at December 31, 2001                 (32,691)         9,944    (22,747)

   Comprehensive income:

   Net loss                                     --           (1,424)    (1,424)

   Other comprehensive income:
   Changes in derivative instruments
     Changes in fair value of
       derivatives                             9,296           --        9,296
                                            --------       --------   --------

   Total comprehensive income                                            7,872
                                                                      --------

Balance at March 31, 2002                   $(23,395)      $  8,520   $(14,875)
                                            ========       ========   ========


                   The accompanying notes are an integral part
                  of these consolidated financial statements.


                                       5
<PAGE>

                     Aircraft Finance Trust and Subsidiaries
                      Consolidated Statements of Cash Flows
                                   (unaudited)
                             (dollars in thousands)

                                                   Three Months   Three Months
                                                       Ended          Ended
                                                  March 31, 2002  March 31, 2001
                                                  --------------  --------------

Cash Flows from Operating Activities:
Net (loss) income                                    $ (1,424)      $  1,887
Adjustments to reconcile net income to net
     cash provided by operating activities:
     Depreciation expense                              10,444         10,977
Changes in assets and liabilities:
     Receivables and other assets                        (671)          (601)
     Restricted cash                                     (107)          (525)
     Accounts payable and accrued liabilities             985         (1,057)
     Deferred rental income                              (547)           277
     Security and other deposits                         (504)         2,300
                                                     --------       --------

     Net cash provided by operating activities          8,176         13,258
                                                     --------       --------

Cash Flows from Investing Activities:
Aircraft improvements                                  (1,190)        (2,254)
                                                     --------       --------

     Net cash used in investing activities             (1,190)        (2,254)
                                                     --------       --------

Cash Flows from Financing Activities:
Repayment of notes payable                             (5,546)       (14,112)
                                                     --------       --------

     Net cash used in financing activities             (5,546)       (14,112)
                                                     --------       --------

Net Increase (Decrease) in Cash and Cash
  Equivalents                                           1,440         (3,108)

Cash and Cash Equivalents at Beginning of
  Period                                               76,729         76,658
                                                     --------       --------

Cash and Cash Equivalents at End of Period           $ 78,169       $ 73,550
                                                     ========       ========


Supplemental Cash Flow Information:
     Cash paid for interest expense                  $ 16,908       $ 18,981
                                                     ========       ========

     Non-Cash Investing Activities:
       Aircraft improvements accrued but not paid    $    901       $   --
                                                     ========       ========

                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                       6
<PAGE>

                     Aircraft Finance Trust and Subsidiaries
                   Notes to Consolidated Financial Statements
                                   (unaudited)

                                 March 31, 2002


Note 1 - Organization

         Aircraft  Finance Trust is a special purpose  statutory  business trust
that was formed on April 13, 1999 under the laws of Delaware.  Aircraft  Finance
Trust and its three subsidiaries  (collectively  "Aircraft Finance") were formed
to conduct certain limited activities,  including buying,  owning,  leasing, and
selling commercial jet aircraft and related activities.

         On May 5, 1999, Aircraft Finance completed a securitization transaction
in which it received  proceeds  from a private  placement  offering of notes and
from the issuance of beneficial  interest  certificates and simultaneously  paid
for the acquisition of 36 commercial jet aircraft.


Note 2 - Basis of Presentation

         The accompanying  unaudited consolidated financial statements have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America and the rules and  regulations  of the  Securities  and
Exchange Commission for interim financial statements. Accordingly, these interim
statements do not include all of the information  and  disclosures  required for
annual  financial  statements.  In the opinion of  management,  all  adjustments
(consisting  solely of adjustments of a normal recurring nature) necessary for a
fair presentation of these interim results have been included.  All intercompany
accounts  and  transactions  have been  eliminated.  The results for the interim
periods are not  necessarily  indicative of the results that may be expected for
the year ended December 31, 2002. Certain financial  statement items in the 2001
Quarter have been reclassified to conform to the 2002 Quarter presentation.

         These interim  unaudited  consolidated  financial  statements should be
read in conjunction with Aircraft Finance's  consolidated  financial  statements
and  accompanying  notes included in the Annual Report on Form 10-K for the year
ended December 31, 2001 filed with the Securities and Exchange Commission.

Use of Estimates

         The  preparation of financial  statements in conformity with accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities  and disclosures of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during  the  reporting  period.  While  management  believes  that the
estimates and related  assumptions  used in the preparation of the  consolidated
financial  statements  are  appropriate,  actual results could differ from those
estimates.   Significant   estimates   are  made  in  the   assessment   of  the
collectibility of receivables, depreciable lives and estimated salvage values of
leased  aircraft and  estimates of expected  maintenance  and overhaul  costs in
connection with certain leases of aircraft.



                                       7
<PAGE>

Note 3 - Risks and Uncertainties

         On  September  11,  2001,  terrorists  hijacked and crashed four United
States commercial  aircraft,  with attendant  significant loss of life, property
damage  and  economic   disruption.   Any  additional   terrorist  attacks,  the
anti-terrorist activity in Afghanistan and throughout the world, any military or
economic  responses by the United  States,  including  any changes to the United
States  aircraft  industry by way of law,  regulation or otherwise,  may further
increase  airline  costs  and  cause  further  declines  in air  travel  demand.
Consequently,  Aircraft  Finance's  lessees are likely to incur higher costs and
lower revenues, which are expected to adversely impact their financial position.

         These  events  may also  affect  the  ability  of  airlines  to  obtain
insurance  or  otherwise  comply with terms of their  leases.  The  inability to
obtain  insurance  and  non-compliance  with other lease  terms could  result in
aircraft  groundings.  Any such actions may further impair a lessee's  financial
condition and ability to pay rent. Accordingly,  these conditions,  particularly
should they  continue,  may impair the  ability of Aircraft  Finance to re-lease
aircraft on a timely  basis and at  favorable  rates and may reduce the value of
the aircraft for possible sale.  These factors may have an adverse effect on the
amount  and  timing of  payments  that will be made by  Aircraft  Finance on the
Notes.


Note 4 - New Accounting Pronouncements

SFAS 144

         In October  2001,  the  Financial  Accounting  Standards  Board  issued
Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the
Impairment or Disposal of Long-Lived  Assets".  SFAS 144, which is effective for
fiscal  years  beginning  after  December  15,  2001  with  earlier  application
encouraged,  addresses financial  accounting and reporting for the impairment or
disposal of long-lived assets. This Statement  supersedes SFAS 121,  "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
of", and the accounting and reporting provisions of Accounting  Principles Board
("APB")  Opinion No. 30,  "Reporting  the Results of Operations -- Reporting the
Effects of Disposal of a Segment of a Business,  and Extraordinary,  Unusual and
Infrequently  Occurring Events and Transactions",  for the disposal of a segment
of a business (as  previously  defined in that  Opinion).  This  Statement  also
amends  APB No.  51,  "Consolidated  Financial  Statements",  to  eliminate  the
exception to  consolidation  for a subsidiary  for which control is likely to be
temporary.   Aircraft   Finance  adopted  SFAS  144  on  January  1,  2002.  The
implementation  of SFAS No. 144 is not  expected  to have a  material  impact on
Aircraft Finance's financial position, results of operations or cash flows.


Note 5 - Derivative Financial Instruments

Interest Rate Swap Agreements

         As of March 31,  2002,  Aircraft  Finance was a party to five  interest
rate swap agreements. Three were entered into on May 5, 1999 and two on July 15,
2000. The total aggregate gross notional principal amount of these interest rate
swaps is $785 million at March 31, 2002. Under the agreements,  Aircraft Finance
will pay a fixed rate of interest  on the  notional  amount to the  counterparty
and, in turn, the  counterparty  will pay Aircraft Finance a rate of interest on
the notional amount based on LIBOR. The one-month LIBOR rate with respect to the
Swaps (and the Notes) was 1.90% as of both March 31, 2002 and December 31, 2001.
On March 31, 2002, the fair value of these interest rate swaps was approximately
($23.4)  million  compared to ($32.7)  million on December 31, 2001.  Due to the
potential  volatility of LIBOR,  the fair value of Aircraft  Finance's  interest
rate swap agreements is also subject to volatility.  The change in fair value of

                                       8
<PAGE>

the interest rate swaps was due to changes in market  interest  rates as well as
the  expiration  of two swap  agreements,  as discussed  below.  This change was
recorded  in other  comprehensive  income in the equity  section of the  balance
sheet.

         Two of Aircraft  Finance's swap agreements expired on January 15, 2002.
The notional amounts of these two swap agreements totaled $80 million.

         The following  table  presents,  as of March 31, 2002, a summary of the
terms  of  Aircraft  Finance's  interest  rate  swap  agreements:   (dollars  in
thousands)

  Fixed      Rate to be           Rate to be
 Notional  paid by Aircraft   received by Aircraft     Maturity        Estimated
  Amount        Finance            Finance               Date         fair value
  ------        -------            -------               ----         ----------
$175,000        5.56%               LIBOR           October 15, 2002   $ (3,245)
 345,000        5.65%               LIBOR           January 15, 2004    (11,097)
 230,000        5.71%               LIBOR          November 15, 2004     (7,392)
  20,000        7.14%               LIBOR           October 15, 2002       (554)
  15,000        7.17%               LIBOR               May 15, 2005     (1,107)
                                                                       --------
                                                                       $(23,395)
                                                                       ========


Note 6 - Restructured Leases

         During the three months ended March 31, 2002 ("2002 Quarter"), Aircraft
Finance entered into restructuring  agreements for six aircraft.  Because of the
nature  of  restructuring  and as  permitted  by SFAS No.  13:  "Accounting  for
Leases",  the effect of the restructuring was accounted for  prospectively.  The
effect on the 2002 Quarter revenue due to the  restructurings  was a decrease of
$1.2 million compared to revenue had the restructurings not occurred.


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

         On May 5, 1999,  Aircraft Finance issued $1,209 million of Asset Backed
Notes (the  "Initial  Notes").  The Initial  Notes were issued in five  classes:
Class A-1,  Class  A-2,  Class B,  Class C and Class D. The  Initial  Notes were
issued  simultaneously  with the  execution of an agreement  for the sale of the
beneficial  interest of Aircraft  Finance  for $39 million and an  agreement  to
acquire 36  commercial  jet  aircraft for $1,196  million.  On January 20, 2000,
Aircraft  Finance  completed an exchange offer whereby  Aircraft  Finance issued
four  classes  of new notes (the  "Exchange  Notes")  in  exchange  for the four
corresponding  classes of the Initial Notes. The terms of the Exchange Notes are
identical  in all  material  respects  to the  Initial  Notes,  except  that the
Exchange Notes are registered under the Securities Act of 1933, as amended.  The
Class D Notes remain  unchanged.  $3 million of the Class A-2 Initial  Notes was
not tendered in the exchange offer and remain outstanding.

         Aircraft  Finance is a special  purpose  entity,  which  owns  aircraft
subject to operating leases.  Aircraft  Finance's  business consists of aircraft
leasing  activities.  Aircraft  Finance  may  also  engage  in  acquisitions  of
additional  aircraft  and sales of  aircraft.  Any  acquisitions  of  additional
aircraft and the related issuance of additional notes will require  confirmation
by the rating  agencies  that they will not lower,  qualify  or  withdraw  their
ratings on the outstanding Notes as a result.  Aircraft Finance's aggregate cash

                                       9
<PAGE>

flows from such activities will be used to service the interest and principal on
the  outstanding  Notes and to make  distributions  of remaining  amounts to the
holders of the beneficial interest  certificates,  after the payment of expenses
incurred by Aircraft Finance.

         Aircraft  Finance's  ability  to  generate  sufficient  cash  from  its
aircraft  assets to service the outstanding  Notes will depend  primarily on the
rental rates it can achieve on leases, the lessees' ability to perform according
to the terms of the leases and the prices it can achieve on any aircraft  sales.
Aircraft  Finance's ability to service the outstanding Notes will also depend on
the  level of  Aircraft  Finance's  operating  expenses,  including  maintenance
obligations  that  are  expected  to  increase  as the  aircraft  age,  and  any
unforeseen liabilities. The indenture governing the Notes requires that Aircraft
Finance maintain a cash reserve balance on deposit in a collections  account and
permits Aircraft  Finance to establish a credit facility,  in order to provide a
source of liquidity for Aircraft Finance's obligations.

         Any statements  contained herein that are not historical facts, or that
might be considered an opinion or projection,  whether expressed or implied, are
meant as, and should be considered,  forward-looking  statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. Forward-looking
statements are based on assumptions  and opinions  concerning a variety of known
and  unknown  risks.  If  any  assumptions  or  opinions  prove  incorrect,  any
forward-looking  statements  made  on  that  basis  may  also  prove  materially
incorrect.  Aircraft Finance assumes no obligation to update any forward-looking
statements to reflect  actual  results or changes in the factors  affecting such
forward-looking statements.

Recent Developments

The Aircraft and Lessees

         In January 2002,  Aircraft  Finance  entered into a restructured  lease
agreement  with a lessee  based in the United  States with respect to a B737-300
aircraft to reduce the rents  starting  from January 2002 and give the lessor an
extension option for 31 months. This aircraft  represents  approximately 2.7% of
the aggregate appraised value at December 31, 2001.

         In  March  2002,  Aircraft  Finance  entered  into  restructured  lease
agreements with a lessee based in Brazil with respect to two B767-200ER aircraft
and one B737-300 aircraft.  These  restructured  agreements allow this lessee to
defer overdue rent payments and maintenance  reserves  retroactively  during the
period from and including June 26, 2001 to and including  October 26, 2001. This
deferral is currently  being repaid with  interest  over eleven  months from the
period beginning October 2001.  Additionally,  the restructured  agreements have
caused a reduction in the rents  starting from  September 26, 2001 to the end of
the  respective  lease terms and an extension of such lease terms for 24 months.
The aircraft with respect to this lessee  represents  approximately  7.8% of the
aggregate appraised value at December 31, 2001.


         In March 2002,  Aircraft  Finance  entered  into a  restructured  lease
agreement  with a lessee based in Mexico with respect to one A320-200  aircraft.
This agreement  allows this lessee to defer rental payments during the period of
December 2001 to March 2002 to be repaid with interest over 24 months  beginning
April  2002.  This  aircraft  represents  approximately  2.6%  of the  aggregate
appraised value at December 31, 2001.

                                       10
<PAGE>


         In March 2002, the B737-300 aircraft formerly leased to British Midland
was delivered to a lessee based in United  Kingdom for a five-year  lease.  This
aircraft  represents  approximately  2.5% of the  aggregate  appraised  value at
December 31, 2001.

         In March  2002,  a Letter of Intent was signed  with a lessee  based in
Egypt for a five-year lease of one MD-83,  which was returned in April 2002 from
a lessee based in Italy.  This  aircraft  represents  approximately  1.8% of the
aggregate appraised value at December 31, 2001.

         In April 2002,  one  B737-400,  previously  repossessed  from City Bird
France, was delivered to a lessee based in Portugal for a three-year lease. This
aircraft  represents  approximately  2.7% of the  aggregate  appraised  value at
December 31, 2001.

         In April 2002,  Aircraft  Finance  entered  into a  restructured  lease
agreement with a lessee based in Ireland with respect to one B737-400  aircraft.
This agreement  allows this lessee to defer rental payments during the period of
November 2001 to February 2002 to be repaid with interest over 7 months starting
from June 2002.  This aircraft  represents  approximately  2.7% of the aggregate
appraised value at December 31, 2001.

         The events  discussed  above caused a reduction  in Aircraft  Finance's
revenues by $1.2  million in 2002  Quarter  and are likely to decrease  Aircraft
Finance's  revenues  in  the  future  as  well.  Such  reductions  of  revenues,
restructurings,  or any similar future events could  negatively  impact Aircraft
Finance's  ability to timely pay  scheduled  interest  on certain  Note  classes
and/or to repay the  principal of certain Note classes at the expected  maturity
dates of those classes.

Other Developments

         Under the terms of the  indenture,  Aircraft  Finance  is  required  to
obtain annual  appraisals of its aircraft.  In February 2002,  Aircraft  Finance
received  appraisals  of the adjusted base values of the aircraft as of December
31, 2001 from three independent appraisers that are members of the International
Society of  Transport  Aircraft  Trading,  as  required  by the  indenture.  The
aggregate of the average of the three  appraisals (the current  appraised value)
of the aircraft at December 31, 2001 was $1,067.9 million. Such average is below
the assumed  portfolio values set forth in the indenture  relating to the Notes.
This reduction in the appraised value of the portfolio  resulted in an increased
scheduled principal payment to the Class A Notes in March 2002.

         During the three months  ended March 31, 2002,  there were five lessees
on non-accrual  status. With respect to these lessees all six aircraft have been
returned  early and five aircraft have been  subsequently  re-leased.  The total
amount of rent and maintenance reserve payments outstanding under the leases for
the six aircraft from these five lessees amounted to approximately  $6.9 million
as of March 31, 2002. One of these lessees,  based in Brazil, owed approximately
$1.0 million at March 31, 2002 for  outstanding  maintenance  reserve  payments,
after the application of a $1.0 million cash security deposit. The second lessee
based in the United States owed approximately $1.0 million at March 31, 2002 for
outstanding  maintenance  reserve payments after the application of $1.1 million
of cash security  deposits and a letter of credit.  The third  lessee,  based in
Turkey,  owed  approximately $3.4 million at March 31, 2002 for outstanding rent
and maintenance  reserve  payments after the application of $1.3 million of cash
security  deposits,  letters  of  credit,  and  the  sale  of  shares  of  stock
transferred  to  the  lessor.  The  fourth  lessee,   based  in  Belgium,   owed
approximately  $0.5 million at March 31, 2002 for  outstanding  rent.  The fifth
lessee,  based in Canada,  owed approximately $1.0 million at March 31, 2001 for
outstanding rent and maintenance reserve payments.

                                       11
<PAGE>


         As of March 31,  2002,  Aircraft  Finance has repaid  principal  on the
Notes of $141.8  million,  as  compared to $129.6  million  based on revenue and
expense assumptions found in the Offering Memorandum dated April 21, 1999. For a
more  detailed  analysis  of  Aircraft  Finance's  performance  compared  to the
assumptions in the Offering Memorandum, see the unaudited Exhibit 99.1.

         The beneficial  interests in Aircraft Finance were originally purchased
by UniCapital AFT-I, Inc. (51%) and UniCapital AFT-II, Inc. (49%), each of which
were then wholly-owned indirect subsidiaries of UniCapital Air Group, Inc., then
a wholly-owned subsidiary of UniCapital Coporation ("UniCapital").  During 1999,
2000, and 2001,  UniCapital sold all of its ownership of AFT-I, Inc., and AFT-I,
Inc. and AFT-II,  Inc.  sold certain of their  beneficial  interests in Aircraft
Finance to financial services companies. In addition,  during 2001, AFT-II, Inc.
transferred  certain  of  its  remaining  interests  to  AFT-III,  Inc.,  then a
wholly-owned indirect subsidiary of UniCapital.  Also during 2001, AFT-III, Inc.
transferred certain of its remaining interests in Aircraft Finance to one of the
financial services  companies.  On December 11, 2000,  UniCapital and the entity
that  directly  owns  AFT-II,  Inc.  and  AFT-III,   Inc.  filed  petitions  for
reorganization  under  Chapter  11 of the  United  States  Bankruptcy  Code (the
"Bankruptcy  Code") in the U. S. Bankruptcy  Court for the Southern  District of
New York (the  "Bankruptcy  Court").  On January 9, 2002, the  Bankruptcy  Court
entered  a  Confirmation  Order  in  which it  approved  a plan for  Unicapital,
including  substantially all of its direct and indirect subsidiaries,  to emerge
from  reorganization  under Chapter 11 of the Bankruptcy Code. In February 2002,
UniCapital  AFT-I,   Inc.,  then  a  wholly  owned  subsidiary  of  TransCapital
Corporation, sold 1.1% or all of its beneficial interests in Aircraft Finance to
UniCapital Air Group, Inc. and TransCapital  Corporation sold 7.4% or all of its
beneficial  interests in Aircraft  Finance to UniCapital  Air Group,  Inc. As of
March 31, 2002,  financial  services  companies owned 62.5% of Aircraft Finance,
AFT-II,  Inc.  owned 1.6% of  Aircraft  Finance,  AFT-III,  Inc.  owned 27.4% of
Aircraft Finance and UniCapital Air Group,  Inc. owned 8.5% of Aircraft Finance.
As of March 31, 2002, each of AFT-II, AFT-III and UniCapital Air Group, Inc. are
wholly owned subsidiaries of Banc of America Leasing Commercial Markets, LLC, an
affiliate of Bank of America, N.A.

Results of Operations

         Aircraft  Finance  reported net loss of $1.4  million  during the three
months ended March 31, 2002 (2002  Quarter),  on total revenues of $30.9 million
compared to net income of $1.9  million,  on total  revenues  of $37.7  million,
during the three  months  ended March 31, 2001 (2001  Quarter).  The decrease in
total  revenues is primarily due to lower rental and other income from operating
leases as a result of lease restructurings, off-lease aircraft, as well as lower
interest  income  partially  offset by lower  interest and  operating  expenses.
Aircraft  Finance's revenues consisted of rental and other income from operating
leases and interest income earned on cash balances.

         Rental and other income from  operating  leases during the 2002 Quarter
and the 2001 Quarter was $30.5 and $36.4 million,  respectively. The decrease is
primarily  due to  restructured  leases that result in  reduction or deferral of
rental income and off-lease aircraft during the 2002 Quarter.

         Interest  income  during the 2002 Quarter and the 2001 Quarter was $0.4
million and $1.3  million,  respectively.  The  decrease  in interest  income is
primarily due to lower interest rates earned on cash balances.  Interest  income
is earned on Aircraft Finance's cash balances,  which are invested in short-term
highly liquid investments as permitted by the indenture.  The amount of interest
income  earned  varies  based  upon  the  current  interest  rates  paid on such
investments and the level of cash balances held by Aircraft Finance.

                                       12
<PAGE>


         Interest  expense,  including  interest rate swap  expenditures of $7.7
million,  was $17.1 million  during the 2002 Quarter  compared to $18.9 million,
net of interest rate swap proceeds of $0.1 million during the 2001 Quarter. This
decrease is primarily  due to lower LIBOR rates,  and the  continued  paydown of
outstanding  principal  balances on the Notes,  offset by the  expiration of two
swap agreements in January 2002.  Interest expense is paid on Aircraft Finance's
outstanding  Notes.  The weighted  average interest rate on the Notes during the
2002  Quarter  and the 2001  Quarter  was 6.37%  and  6.74%,  respectively.  The
outstanding  balance  of the  Notes at March 31,  2002 and  March  31,  2001 was
$1,067.2  million and $1,112.7  million,  respectively.  Interest expense varies
based on the actual interest rates on the floating rate Notes, the interest rate
swap costs or proceeds and the outstanding principal balances of the Notes.

         Depreciation  expense  during the 2002 Quarter and the 2001 Quarter was
$10.4  million and $11.0  million,  respectively.  The decrease in  depreciation
expense is primarily due to the write down of the book value of several aircraft
during 2001 that resulted in a reduction of the monthly depreciation expense.

         Operating expense during the 2002 Quarter and the 2001 Quarter was $3.3
million and $4.5  million,  respectively.  The decrease in operating  expense is
primarily due to lower maintenance and repairs expense offset somewhat by higher
direct lease expense due to costs related to redelivery of some aircraft  during
the 2002 Quarter.  Operating expense consists primarily of aircraft  maintenance
expense and lease related  costs.  Many of Aircraft  Finance's  lease  contracts
require the lessee to bear the obligation for maintenance costs on airframes and
engines,  and  require  the  lessee  to make  certain  payments  to the  lessor,
calculated  on  measures  of usage  to cover  the  expected  costs of  scheduled
maintenance charges, including major airframe and engine overhauls. Such amounts
are  included  in rental  and other  income  from  operating  leases.  Under the
provisions  for many  leases,  for certain  airframe and engine  overhauls,  the
lessee is  reimbursed  for costs  incurred  up to,  but not  exceeding,  related
payments  made by the lessee,  to the lessor  based on those  measures of usage.
Reserves are maintained at amounts  considered  adequate to cover those expected
payments for maintenance costs.

         Administrative  and other expenses during the 2002 Quarter and the 2001
Quarter were $1.5 million for both periods.  These expenses consist primarily of
fees paid to the service providers and other general and  administrative  costs.
The most  significant of these fees was the servicer fee, which amounted to $1.0
million in the 2002 Quarter and $1.1 million in the 2001  Quarter.  A portion of
the fees paid to the Servicer  corresponds to rental  payments due and received.
These fees are based upon a fixed  percentage  of rental  receipts and will vary
with rental income of Aircraft Finance.

         On March  31,  2002,  the fair  value of the  interest  rate  swaps was
approximately  ($23.4) million compared to ($32.7) million on December 31, 2001.
The change in fair value of derivatives of $9.3 million, as a component of other
comprehensive  income,  and  accumulated  other  comprehensive  loss of  ($23.4)
million were  recorded in the  Consolidated  Statement of Changes in  Beneficial
Interest Holders' Deficit.

         Moody's Investors Service, Inc. ("Moody's"), one of the rating agencies
for the Notes,  announced  the  downgrade  of the Class C and Class D Notes in a
press release  issued on March 18, 2002.  The press release  states that factors
affecting  Moody's  downgrade  included  concerns over (i) possible loss of cash
flow due to lease restructurings following the September 11 crisis and continued
re-leasing at reduced rates in the near future, (ii) the significant  percentage
of aircraft  that will be coming off lease within  twelve months of December 31,
2001,  (iii) the level of the  delinquent  lessees  and the  number of  grounded
aircraft,  (iv)  the  potential  volatility  of  future  cash  flows  due to the

                                       13
<PAGE>

proportion of widebody  aircraft in the aircraft  portfolio and (v) the decrease
in the aggregate appraised value of the aircraft as of December 31, 2001.

Liquidity

         Aircraft Finance held cash and cash  equivalents of $78.2 million,  and
restricted cash of $11.0 million at March 31, 2002 compared to $76.7 million and
$10.9 million, respectively, at December 31, 2001. The liquidity reserve amount,
which is  included  in cash and cash  equivalents,  was $52 million at March 31,
2002 and December 31, 2001.  The liquidity  reserve amount is required under the
terms of the  indenture  and is intended to serve as a source of  liquidity  for
Aircraft Finance's maintenance obligations and other contingent costs.

Cash Flows from Operating Activities

         Aircraft Finance's cash flows from operating  activities depend on many
factors  including,  but not limited to, the performance of lessees and Aircraft
Finance's  ability to  re-lease  aircraft,  the average  cost of the Notes,  the
efficiency of its interest rate hedging  policies,  the ability of interest rate
swap providers to perform under the terms of the swap agreements and the ability
of Aircraft Finance to refinance certain  subclasses of Notes that have not been
repaid with lease cash flows.

         Net cash provided by operating activities for the 2002 Quarter amounted
to $8.2  million,  primarily  reflecting a net loss of $1.4 million  adjusted by
non-cash  depreciation  expense of $10.4  million,  and an  increase in accounts
payable and accrued  liabilities  related to operations  of $1.0 million.  These
were offset by an increase in  receivables  and other assets of $0.7 million and
decreases  in deferred  rental  income of $0.5  million and  security  and other
deposits of $0.5 million.

         Net cash provided by operating activities for the 2001 Quarter amounted
to $13.3 million,  primarily  reflecting net income of $1.9 million  adjusted by
non-cash  depreciation  expense of $11 million,  and an increase in security and
other  deposits  of $2.3  million.  These were  offset by a decrease in accounts
payable and accrued liabilities of $1.1 million and increases in restricted cash
of $0.5 million and receivables and other assets of $0.6 million.


Cash Flows from Investing and Financing Activities

         Net cash used in investing  activities for the 2002 Quarter amounted to
$1.2 million for capitalized aircraft  improvements  (consisting of $2.1 million
of capitalized aircraft  improvements net of accrued liabilities of $0.9 million
related to capitalized aircraft  improvements)  compared to $2.3 million for the
2001 Quarter.

         Net cash used in financing  activities for the 2002 Quarter amounted to
$5.5 million due to principal  repayment on the Notes. As a result,  the balance
of these Notes was $1,067.2  million at March 31, 2002.  During the 2002 Quarter
additional principal was redirected to certain Classes of Notes since the annual
average base value appraisals of aircraft were lower than the assumed  portfolio
values set forth in the indenture.  Generally,  principal and interest is repaid
on these Notes monthly based upon the cash collected,  the anticipated  expenses
and the cash balances  held by Aircraft  Finance on the  calculation  date. As a
result,  monthly principal payments on the Notes will vary depending on Aircraft
Finance's revenues and expenses for the month.

                                       14
<PAGE>


         Net cash used in financing  activities for the 2001 Quarter amounted to
$14.1 million due to principal repayment on the Notes. As a result, the balances
of these Notes were $1,112.7 million at March 31, 2001.  During the 2001 Quarter
additional principal was redirected to certain Classes of Notes since the annual
average base value appraisals of aircraft were lower than the assumed  portfolio
values set forth in the indenture.

         At March 31, 2002,  Aircraft  Finance was a party to five interest rate
swap agreements.  Three of these agreements were entered into on May 5, 1999 and
the other two were entered  into on June 29, 2000 but had an  effective  date of
July 15, 2000.  The net aggregate  amount due to be paid or received by Aircraft
Finance under these agreements is determined  monthly and is due on the same day
as the payments under the Notes.  The net economic effect of these interest rate
swaps was to hedge  Aircraft  Finance's  variable  interest  rate  exposure from
movements in interest rates over the duration of certain lease terms. Please see
"Item 3. Quantitative and Qualitative Disclosures about Market Risk" for further
information about these interest rate swap agreements.


Item 3.  Quantitative and Qualitative Disclosures about Market Risk

         Interest  incurred  by  Aircraft  Finance  on the Notes and the  rental
income  received  by  Aircraft  Finance  under  operating  leases  are  based on
combinations of variable and fixed measures of interest rates.  Aircraft Finance
is exposed to  interest  rate risk to the extent  that the mix of  variable  and
fixed  interest  obligations  under  the  Notes do not  correlate  to the mix of
variable and fixed rents under operating  leases.  Aircraft  Finance has engaged
advisors  to  monitor  interest  rates in  order to  mitigate  its  exposure  to
unfavorable variations. Aircraft Finance utilizes interest rate swaps that shift
the risk of fluctuations  in floating rates to the  counterparty in exchange for
fixed payments by Aircraft Finance.  Risks in the use of these instruments arise
from the  possible  inability of the  counterparties  to meet the terms of their
contracts and from market movements in securities values and interest rates.

         The controlling  trustees of Aircraft  Finance,  with the assistance of
Bankers Trust Company and Lehman  Brothers Inc., are  responsible  for reviewing
and approving  the overall  interest rate  management  policies and  transaction
authority  limits.  Counterparty  risk will be  monitored  on an ongoing  basis.
Counterparties  will  be  subject  to the  prior  approval  of  the  controlling
trustees.  Currently,  Aircraft Finance's counterparty is an affiliate of Lehman
Brothers Inc. Future  counterparties  may consist primarily of the affiliates of
major   United   States   and   European   financial   institutions,   including
special-purpose  derivative vehicles,  that have credit ratings, or that provide
collateralization  arrangements,  consistent with maintaining the ratings of the
Notes.

         Aircraft  Finance is a party to five  classes of Notes.  The  estimated
fair value of these Notes at March 31,  2002 was  approximately  $894.9  million
compared to $900.1  million at December 31, 2001. The terms of each class of the
Notes,  including the  outstanding  principal  amount at March 31, 2002,  are as
follows: (dollars in thousands)

                                       15
<PAGE>


              Outstanding
Class of       Principal                         Expected Final        Final
 Notes          Amount        Interest Rate       Payment Date     Maturity Date
 -----          ------        -------------       ------------     -------------
Class A-1     $  512,500      LIBOR + 0.48%       May 15, 2004      May 15, 2024
Class A-2        265,625      LIBOR + 0.50%      June 15, 2008      May 15, 2024
Class B          119,096      LIBOR + 1.15%       May 15, 2016      May 15, 2024
Class C          106,000              8.00%      July 15, 2016      May 15, 2024
Class D           64,000             11.00%    August 15, 2016      May 15, 2024
              ----------
              $1,067,221
              ==========

         Aircraft  Finance was a party to five interest rate swap  agreements at
March 31, 2002. Under the agreements,  Aircraft Finance will pay a fixed rate of
interest  on  the  notional  amount  to  the  counterparty  and,  in  turn,  the
counterparty will pay Aircraft Finance a rate of interest on the notional amount
based on one month LIBOR.  The one-month LIBOR rate with respect to the Notes as
of March  31,  2002  and  December  31,  2001 was  1.90%.  Due to the  potential
volatility  of LIBOR,  the fair value of Aircraft  Finance's  interest rate swap
agreements  is also  subject  to  volatility.  The  change in fair  value of the
interest rate swaps was due to changes in market  interest  rates as well as the
expiration of two swap agreements,  as discussed below. This change was recorded
in other comprehensive income in the equity section of the balance sheet.

         Two of Aircraft  Finance's swap agreements expired on January 15, 2002.
The notional amounts of these two swap agreements totaled $80 million.

         The  following  table  presents,  as of March  31,  2002,  the terms of
Aircraft Finance's interest rate swap agreements: (dollars in thousands)

  Fixed      Rate to be          Rate to be
 Notional  paid by Aircraft  received by Aircraft     Maturity         Estimated
  Amount       Finance             Finance              Date          fair value
  ------       -------             -------              ----          ----------
$175,000        5.56%               LIBOR          October 15, 2002    $ (3,245)
 345,000        5.65%               LIBOR          January 15, 2004     (11,097)
 230,000        5.71%               LIBOR         November 15, 2004      (7,392)
  20,000        7.14%               LIBOR          October 15, 2002        (554)
  15,000        7.17%               LIBOR              May 15, 2005      (1,107)
                                                                       --------
                                                                       $(23,395)
                                                                       ========

         Aircraft  Finance  expects to enter into  additional  swaps, or sell at
market values or unwind part or all of its initial swaps and any future swaps on
a periodic basis in its efforts to mitigate its exposure to unfavorable  changes
in interest rates. Any changes in Aircraft Finance's policy regarding its use of
interest rate hedging  products will be subject to periodic review by the rating
agencies.

                                       16
<PAGE>


                           Part II. Other Information
                           --------------------------

Item 6.  Exhibits and Reports of Form 8-K

a.       Exhibits (numbered in accordance with Item 601 of Regulation S-K)

         99.1   Other information - Analysis of actual cash flows versus assumed
                case

b.       Reports on Form 8-K

         During the  quarterly  period  ended March 31, 2002,  Aircraft  Finance
         filed reports on Form 8-K dated January 15, 2002, February 15, 2002 and
         March 15, 2002. Such reports on Form 8-K included copies of the monthly
         reports to holders of the Notes.


                                       17
<PAGE>




                                   SIGNATURES



Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                        AIRCRAFT FINANCE TRUST
                                        by Wilmington Trust Company,
                                        not in its individual capacity but
                                        solely as the Owner Trustee


        May 10, 2002                    By:     /S/CHARISSE L. RODGERS
        ------------                            ----------------------
           Date                         Name:   Charisse L. Rodgers
                                        Title:  Assistant Vice President


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



SIGNATURE                       TITLE                               DATE
---------                       -----                               ----


/S/DAVID H. TREITEL             Independent Controlling Trustee     May 10, 2002
-------------------                                                 ------------
David H. Treitel


/S/RICHARD E. CAVANAGH          Independent Controlling Trustee     May 10, 2002
----------------------                                              ------------
Richard E. Cavanagh


/S/DONALD G. BUTLER             Equity Trustee and Controlling      May 10, 2002
-------------------             Trustee                             ------------
Donald G. Butler


/S/CHARISSE L. RODGERS          Owner Trustee                       May 10, 2002
----------------------                                              ------------
Wilmington Trust Company, not
in its individual capacity but
solely as the Owner Trustee


                                       18