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 June 30, 2000

                                       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 18 pages.
<PAGE>

                             Aircraft Finance Trust

            FORM 10-Q - For the Quarterly Period Ended June 30, 2000




                                      INDEX



Part I.  Financial Information                                              Page

         Item 1.      Financial Statements

              a)  Consolidated Balance Sheets - June 30, 2000 and
                  December 31, 1999...........................................3

              b)  Consolidated Statements of Income - Three and
                  Six Months Ended June 30, 2000 and the period
                  from Inception (April 13, 1999) to June 30, 1999............4

              c)  Consolidated  Statements of Cash Flows - Six Months
                  Ended June 30, 2000 and the period from Inception
                  (April 13, 1999) to June 30, 1999...........................5

              d)  Consolidated Statements of Changes in Beneficial
                  Interest Holders' Equity - Year Ended December 31, 1999
                  and Six Months Ended June 30, 2000..........................6

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

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

         Item 3.      Quantitative and Qualitative Disclosures about
                      Market Risk............................................14


Part II. Other Information

         Item 5.      Other Information......................................16

         Item 6.      Exhibits and Reports on Form 8-K.......................16

         Signatures   .......................................................17


                                       2
<PAGE>

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

Item 1.       Financial Statements


                     Aircraft Finance Trust and Subsidiaries

                           Consolidated Balance Sheets
                                   (unaudited)

                             (dollars in thousands)

                                                       June 30,    December 31,
                                                         2000          1999
                                                      ----------  -------------
                                     Assets

Cash and cash equivalents                             $   79,007    $   72,682
Restricted cash                                           17,030        19,468
Rents and other receivables                                3,937         4,122
Aircraft, net                                          1,150,092     1,170,564
Other assets                                                 283           138
                                                      ----------    ----------

     Total assets                                     $1,250,349    $1,266,974
                                                      ==========    ==========

              Liabilities and Beneficial Interest Holders' Equity

Accounts payable and accrued liabilities              $    3,992    $    5,819
Deferred rental income                                     4,767         7,031
Security and other deposits                               33,802        30,385
Notes payable:
     Class A-1                                           512,500       512,500
     Class A-2                                           348,691       368,897
     Class B                                             124,794       124,798
     Class C                                             106,000       106,000
     Class D                                              64,000        64,000
                                                      ----------    ----------
     Total notes payable                               1,155,985     1,176,195
                                                      ----------    ----------

     Total liabilities                                 1,198,546     1,219,430
                                                      ----------    ----------

Beneficial interest holders' equity                       51,803        47,544
                                                      ----------    ----------

     Total liabilities and beneficial interest
       holders' equity                                $1,250,349    $1,266,974
                                                      ==========    ==========

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

                                       3
<PAGE>


                     Aircraft Finance Trust and Subsidiaries

                        Consolidated Statements of Income
                                   (unaudited)

                             (dollars in thousands)

                                                                   Period from
                                  Three Months    Six Months        Inception
                                     Ended          Ended       (April 13, 1999)
                                  June 30, 2000  June 30, 2000  to June 30, 1999
                                  -------------  -------------  ----------------
Revenues:
   Rental and other income
      from operating leases          $38,237        $73,940          $23,309
   Interest income                     1,465          2,677              585
                                     -------        -------          -------

      Total revenues                  39,702         76,617           23,894
                                     -------        -------          -------

Expenses:
   Interest expense                   19,548         39,015           12,248
   Depreciation expense               10,695         21,372            7,260
   Operating expense                   4,562          8,921               35
   Administration and other            1,519          3,050              970
                                     -------        -------          -------

      Total expenses                  36,324         72,358           20,513
                                     -------        -------          -------

Net Income                           $ 3,378        $ 4,259          $ 3,381
                                     =======        =======          =======

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

                                       4
<PAGE>

                     Aircraft Finance Trust and Subsidiaries

                      Consolidated Statements of Cash Flows
                                   (unaudited)

                             (dollars in thousands)

                                                                  Period from
                                                  Six Months       Inception
                                                     Ended      (April 13, 1999)
                                                 June 30, 2000  to June 30, 1999
                                                 -------------  ----------------

Cash Flows from Operating Activities:
Net income                                        $     4,259     $     3,381
Adjustments to reconcile net income to net cash
     provided by operating activities:
     Depreciation expense                              21,372           7,260
Changes in assets and liabilities:
     Rents and other receivables                          185          (2,238)
     Restricted cash                                    2,438         (19,402)
     Other assets                                        (145)           (349)
     Accounts payable and accrued liabilities          (1,827)          3,774
     Deferred rental income                            (2,264)          6,192
     Security and other deposits                        3,417          19,954
                                                  -----------     -----------

     Net cash provided by operating activities         27,435          18,572
                                                  -----------     -----------

Cash Flows from Investing Activities:
Aircraft improvements                                    (900)            (20)
Purchase of aircraft                                     --        (1,196,087)
                                                  -----------     -----------

     Net cash used in investing activities               (900)     (1,196,107)
                                                  -----------     -----------

Cash Flows from Financing Activities:
Issuance of beneficial interest                          --            39,087
Proceeds from notes payable                              --         1,209,000
Repayment of notes payable                            (20,210)         (7,414)
                                                  -----------     -----------

     Net cash (used in) provided by financing
       activities                                     (20,210)      1,240,673
                                                  -----------     -----------

Net Increase in Cash and Cash Equivalents               6,325          63,138

Cash and Cash Equivalents at Beginning of Period       72,682            --
                                                  -----------     -----------

Cash and Cash Equivalents at End of Period        $    79,007     $    63,138
                                                  ===========     ===========


Supplemental Cash Flow Information:
     Cash paid for interest expense               $    39,137     $     8,750
                                                  ===========     ===========

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

                                       5
<PAGE>

                     Aircraft Finance Trust and Subsidiaries

    Consolidated Statements of Changes in Beneficial Interest Holders' Equity
                                   (unaudited)

                             (dollars in thousands)


                                                                    Beneficial
                                                                     Interest
                                                                     --------

Issuance of Beneficial Interest (May 5, 1999)                         $39,087

   Net income                                                           8,457
                                                                      -------

Balance at December 31, 1999                                           47,544

   Net income                                                           4,259
                                                                      -------

Balance at June 30, 2000                                              $51,803
                                                                      =======

                  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)

                                  June 30, 2000


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 two subsidiaries  (collectively "Aircraft Finance") were formed to
conduct certain limited activities,  including buying, owning, leasing,  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,
received  proceeds 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 generally  accepted  accounting  principles 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  statement 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 to be expected for the entire year.

         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, 1999 filed with the Securities and Exchange Commission.

Use of Estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
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>


Reclassification

         Certain  reclassifications have been made to prior year data to conform
with the current year.


Note 3 - Derivative Financial Instruments

Interest Rate Swap Agreements

         One of  Aircraft  Finance's  original  interest  rate  swap  agreements
expired on April 15,  2000;  however,  Aircraft  Finance  entered into three new
interest rate swap agreements in June 2000. As a result,  Aircraft Finance was a
party to seven  interest rate swap  agreements  at June 30, 2000.  Four of these
agreements  were  entered  into on May 5, 1999 and the other three were  entered
into on June 29, 2000 but have an  effective  date of July 15,  2000.  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 30-day LIBOR. On June
30, 2000, the aggregate  fair value of these  interest rate swap  agreements was
approximately $34.4 million.

         The  following  table  presents,  as of June 30, 2000, a summary of the
terms of the  Aircraft  Finance's  interest  rate swap  agreements  (dollars  in
thousands):

                                 Rate to be
  Fixed          Rate to be       received
 Notional      paid by Aircraft  by Aircraft     Maturity            Estimated
  Amount            Finance        Finance         Date             fair value
  ------            -------        -------         ----             ----------
$  60,000            5.50%          LIBOR      January 15, 2002   $    1,377,189
  175,000            5.56%          LIBOR      October 15, 2002        5,615,559
  345,000            5.65%          LIBOR      January 15, 2004       15,491,381
  230,000            5.71%          LIBOR     November 15, 2004       11,893,112
   20,000 (i)        7.13%          LIBOR      January 15, 2002                -
   20,000 (i)        7.14%          LIBOR      October 15, 2002                -
   15,000 (i)        7.17%          LIBOR          May 15, 2005                -

         (i) Entered into in June 2000 with an effective date of July 15, 2000.


Note 4 - New Accounting Pronouncements

         In June 1998, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards No. 133 ("SFAS 133"),  "Accounting
for  Derivative  Instruments  and  Hedging  Activities".  SFAS  133  establishes
accounting and reporting  standards for derivative  instruments  and for hedging
activities  and it requires that an entity  recognize all  derivatives as either
assets or liabilities  in the statement of financial  position and measure those
instruments at fair value. Changes in the fair value of derivatives are recorded
each period in current  earnings or other  comprehensive  income,  depending  on
whether a derivative is designated as part of a hedge transaction and, if it is,
the type of hedge  transaction.  The accounting for changes in the fair value of
such derivatives will vary based on the intended use of the derivative.  In June
1999, the FASB issued Statement of Financial  Accounting Standard No. 137 ("SFAS
137"),  "Accounting for Derivative Instruments and Hedging Activities - Deferral

                                       8
<PAGE>

of the  Effective  Date of FASB  Statement  No.  133".  SFAS  137  deferred  the
effective  date of SFAS 133 to fiscal years  beginning  after June 15, 2000.  In
June 2000, the FASB issued  Statement of Financial  Accounting  Standard No. 138
("SFAS 138"), "Accounting for Certain Derivative Instruments and Certain Hedging
Activities  - an  Amendment  of FASB  Statement  No.  133".  SFAS 138 amends the
accounting  and  reporting   standards  of  SFAS  133  for  certain   derivative
instruments and certain hedging activities. Aircraft Finance plans to adopt SFAS
133 and SFAS 138  beginning in the year 2001.  Adoption of SFAS 133 and SFAS 138
are not expected to have a significant  impact on Aircraft  Finance's results of
operations, cash flows or financial position.

                                       9
<PAGE>

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 four
classes of the Initial Notes were  exchanged for four  corresponding  classes of
new notes (the "Exchange  Notes"),  as more fully discussed below. The remaining
outstanding  Initial  Notes and the  outstanding  Exchange  Notes  are  together
referred to as the Notes.

         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 cash flows from
such  activities  will be used to service  the  interest  and  principal  on the
outstanding  Notes and to make  distribution 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  contingent  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

         On January 20,  2000,  Aircraft  Finance  completed  an exchange  offer
whereby  Aircraft  Finance issued four classes of new notes, the Exchange Notes,
designated  Class A-1,  A-2,  B and C, 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 were
not  exchanged and remain  unchanged.  $3 million of the Class A-2 Initial Notes
were not tendered in the exchange offer and remain outstanding.

                                       10
<PAGE>


         Under the terms of the  indenture,  Aircraft  Finance  is  required  to
obtain annual  appraisals of its aircraft.  In February 2000,  Aircraft  Finance
received  appraisals  of the adjusted base values of the aircraft as of December
31, 1999 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, 1999 was $1,256.1  million.  The  appraisals  at
December  31,  1999  did  not  indicate  a  decline  in  value  of the  aircraft
sufficiently  in  excess  of the value  decline  assumed  under the terms of the
indenture to require  excess cash flows,  as defined,  to be  redirected  to the
Class A Notes.

         In February 2000, a B737-300 aircraft formerly leased to a Dutch lessee
was delivered for lease to a lessee based in the Philippines for a lease term of
57 months.  The aircraft  with respect to this lessee  represents  approximately
2.6% of the aggregate appraised value at December 31, 1999.

         In March 2000, Aircraft Finance entered into a restructuring  agreement
with Canadian  Airlines,  a lessee of two Airbus  A320-200  aircraft.  Under the
restructuring  agreement,  Canadian  Airlines,  a subsidiary of Air Canada,  was
replaced  by Air Canada  Capital LTD as the new  lessee.  Air Canada  guarantees
these leases. Pursuant to this restructuring, the cash security deposits of $1.5
million held by Aircraft Finance in connection with these aircraft were returned
to Canadian  Airlines.  As of June 30, 2000,  all current rent amounts due under
these  leases had been  paid.  The two  aircraft  with  respect  to this  lessee
represent approximately 4.5% of the aggregate appraised value of the aircraft at
December 31, 1999.

         In April 2000, Aircraft Finance entered into an agreement for one MD-83
aircraft,  currently leased to an Italian lessee, to extend the lease from April
2000 to November  2001.  The  aircraft  with  respect to this lessee  represents
approximately 1.9% of the aggregate appraised value at December 31, 1999.

         In June 2000, a B767-300ER aircraft formerly leased to a Swedish lessee
was delivered for lease to a Canadian lessee for a lease term of 36 months.  The
aircraft  with  respect  to this  lessee  represents  approximately  4.7% of the
aggregate appraised value at December 31, 1999.

         During the six month period ended June 30, 2000, there were two lessees
on non-accrual status. The total amount of rent and maintenance reserve payments
outstanding  under the leases  for the three  aircraft  from  these two  lessees
amounted  to  approximately  $5.0  million  as  of  June  30,  2000,  after  the
application of certain security deposits. One of these lessees, based in Brazil,
owed  approximately  $1.0 million at June 30, 2000 for  outstanding  maintenance
reserve payments,  after the application of a $1.0 million security deposit. The
other lessee,  based in Turkey, owed approximately $4.0 million at June 30, 2000
for outstanding rent and maintenance reserve payments,  after the application of
$0.5 million of security deposits and a letter of credit. Aircraft Finance holds
additional  security  deposits  and a letter of credit in the  aggregate of $0.5
million against the remaining arrearages of this Turkish lessee.

         In May 2000, a B737-300  aircraft  formerly  leased to Transbrasil  was
returned  early.  In July 2000, this aircraft was delivered to VARIG for a lease
term  of 60  months.  The  aircraft  with  respect  to  this  lessee  represents
approximately 2.7% of the aggregate appraised value at December 31, 1999.

         In April 2000, a B737-400  aircraft formerly leased to a Turkish lessee
was returned early and  re-delivered to a new lessee (based in Belgium) in April
2000 for a lease term of 36 months. This aircraft represents  approximately 2.6%
of the aggregate appraised value at December 31, 1999.

                                       11
<PAGE>


         In July,  2000, a second B737-400  aircraft was returned from a Turkish
lessee and is currently being  re-marketed for lease.  This second aircraft also
represents  approximately 2.6% of the aggregate  appraised value at December 31,
1999.

         As a  result  of the  new  and  extended  leases  discussed  above,  in
aggregate,  monthly lease revenues are approximately  $0.3 million or 2.4% lower
than  anticipated  in the  Offering  Memorandum  dated April 21, 1999  ("Assumed
Case").  As of June 30,  2000,  Aircraft  Finance has repaid  principal of $53.0
million,  as  compared to $47.2  million  anticipated  under the  Assumed  Case.
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  contingent
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.

         As previously  discussed,  Aircraft Finance has entered into agreements
with  two  lessees  for  the  two  off-lease  aircraft.  As a  result  of  these
agreements,  the  concentration of the five largest lessees is 38.8% of the most
recent appraised value of the portfolio.  One of the concentration limits in the
indenture requires the five largest lessees not to exceed 35% of the most recent
appraised value of the portfolio.  Under the indenture,  Aircraft Finance is not
permitted  to  enter  into  a  lease   agreement   that  would  exceed   certain
concentration  limits  unless it receives  rating agency  confirmation  that the
rating  agencies will not downgrade,  qualify,  or withdraw their ratings on the
Notes.  Aircraft  Finance  received  such rating agency  confirmations  from the
rating agencies during the quarter ended June 30, 2000.

         On August  15,  2000,  Wayne  Lippman  resigned  as Equity  Trustee  of
Aircraft  Finance  effective  upon the  appointment  of Martin Kalb as successor
Equity Trustee.

Results of Operations

         Results of operations for the period from April 13, 1999  ("Inception")
to June 30, 1999 reflect  combined  results for the period from the commencement
of operations to June 30, 1999.  As a result,  historical  results of operations
for the period from  Inception to June 30, 1999 is not  comparable  to the three
and six month periods ended June 30, 2000.

         Aircraft  Finance reported net income of $3.4 million on total revenues
of $39.7 million  during the three months ended June 30, 2000, and net income of
$4.3 million on total revenues of $76.6 million during the six months ended June
30, 2000,  both  compared to net income of $3.4  million,  on total  revenues of
$23.9 million for the period from Inception to June 30, 1999. Aircraft Finance's
revenues consisted of rental and other income from operating leases and interest
income earned on cash balances.

         Rental  income  from  aircraft  subject to  operating  leases was $38.2
million and $73.9  million  during the three and six months ended June 30, 2000,
respectively,  compared  to  rental  income  of $23.3  during  the  period  from
Inception to June 30, 1999. Despite additional defaults of three leases based in
Brazil and Turkey,  with the  application  of $1.3 million of security  deposits
these leases  contributed  $0.5  million to rental and other  income  during the
three  months  ended June 30,  2000.  The  defaults of these  leases  negatively
impacted  rental and other income from operating  leases by  approximately  $1.8
million (net of security  deposits applied) during the six months ended June 30,
2000.

                                       12
<PAGE>


         Interest income during the three and six months ended June 30, 2000 was
$1.5 million and $2.7 million, respectively, compared to $0.6 million during the
period from Inception to June 30, 1999.  Interest income  consists  primarily of
interest  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.

         Interest  expense,  net of interest  rate swap proceeds of $1.7 million
and $2.7 million,  was $19.5 million and $39.0 million  during the three and six
months ended June 30, 2000, respectively,  compared to interest expense of $12.2
million which  included  $0.8 million of interest  rate swap expense  during the
period from  Inception to June 30, 1999. The weighted  average  interest rate on
the Notes during the three and six months ended June 30, 2000 was 6.7% and 6.6%,
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 three and six  months  ended June 30,
2000 was $10.7 million and $21.4 million, respectively, compared to $7.3 million
during period from Inception to June 30, 1999.

         Operating  expense  during the three and six months ended June 30, 2000
was $4.6  million  and $8.9  million,  respectively,  compared to less than $0.1
million  during the period from  Inception to June 30, 1999.  Operating  expense
consists primarily of aircraft maintenance expense and lease related costs. Most
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.  Reserves are  maintained at amounts  considered  adequate to
cover those expected payments for maintenance costs.

         Administrative and other expenses during the three and six months ended
June 30, 2000 were $1.5 million and $3.1 million, respectively, compared to $1.0
million for the period from Inception to June 30, 1999.  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 $1.1 million and $2.2 million during the three and six months
ended June 30, 2000,  respectively,  compared to $0.9 million  during the period
from  Inception to June 30, 1999. A significant  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.

Liquidity

         Aircraft Finance held cash and cash  equivalents of $79.0 million,  and
restricted cash of $17.0 million at June 30, 2000. The liquidity reserve amount,
which is included in cash and cash  equivalents,  was $52.0  million at June 30,
2000. 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.

                                       13
<PAGE>


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 interest rates 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  interest  rate swap
agreements  and  whether  Aircraft  Finance  will be able to  refinance  certain
subclasses of Notes that have not been repaid with lease cash flows.

         Net cash provided by operating activities for the six months ended June
30, 2000 amounted to $27.4 million,  primarily reflecting non-cash  depreciation
expense of $21.4 million,  net income of $4.3 million,  a decrease in restricted
cash of $2.4  million and an increase  in  security  and other  deposits of $3.4
million.  These  were  offset by  decreases  in  accounts  payable  and  accrued
liabilities of $1.8 million and deferred rental income of $2.3 million.

Cash Flows from Investing and Financing Activities

         Net cash used in investing activities for the six months ended June 30,
2000 amounted to $0.9 million for capitalized aircraft improvements and aircraft
delivery costs.

         Net cash used in financing activities for the six months ended June 30,
2000  amounted  to  $20.2  million  due to  principal  repayment  on the  Notes.
Generally,  principal and interest is repaid on certain 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.

         One of  Aircraft  Finance's  original  interest  rate  swap  agreements
expired on April 15,  2000;  however,  Aircraft  Finance  entered into three new
interest rate swap agreements in June, 2000. As a result, Aircraft Finance was a
party to seven  interest rate swap  agreements  at June 30, 2000.  Four of these
agreements  were  entered  into on May 5, 1999 and the other three were  entered
into on June 29,  2000  but have an  effective  date of July 15,  2000.  The net
aggregate  amounts 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 the  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.

                                       14
<PAGE>


         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 will 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 June 30, 2000 was approximately $1,145 million. The
terms of each class of the Notes,  including the outstanding principal amount at
June 30, 2000, are as follows:

              Outstanding
Class of       Principal                      Expected Final          Final
 Notes          Amount       Interest Rate     Payment Date       Maturity Date
 -----          ------       -------------     ------------       -------------
Class A-1   $  512,500,000   LIBOR + 0.48%      May 15, 2004       May 15, 2024
Class A-2      348,691,457   LIBOR + 0.50%     June 15, 2008       May 15, 2024
Class B        124,793,872   LIBOR + 1.15%      May 15, 2016       May 15, 2024
Class C        106,000,000           8.00%     July 15, 2016       May 15, 2024
Class D         64,000,000          11.00%   August 15, 2016       May 15, 2024
             -------------
            $1,155,985,329

         Aircraft  Finance was a party to seven interest rate swap agreements at
June 30, 2000.  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 30-day LIBOR.

         The  following  table  presents,  as of June  30,  2000,  the  terms of
Aircraft Finance's interest rate swap agreements:

                                 Rate to be
  Fixed          Rate to be       received
 Notional      paid by Aircraft  by Aircraft     Maturity            Estimated
  Amount            Finance        Finance         Date             fair value
  ------            -------        -------         ----             ----------
$  60,000,000        5.50%          LIBOR      January 15, 2002    $  1,377,189
  175,000,000        5.56%          LIBOR      October 15, 2002       5,615,559
  345,000,000        5.65%          LIBOR      January 15, 2004      15,491,381
  230,000,000        5.71%          LIBOR     November 15, 2004      11,893,112
   20,000,000 (i)    7.13%          LIBOR      January 15, 2002               -
   20,000,000 (i)    7.14%          LIBOR      October 15, 2002               -
   15,000,000 (i)    7.17%          LIBOR          May 15, 2005               -

         (i) Entered into in June 2000 Aircraft  Finance with an effective  date
             of July 15, 2000.

         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.

                                       15
<PAGE>

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

Item 5.       Other Information

         On August  15,  2000,  Wayne  Lippman  resigned  as Equity  Trustee  of
Aircraft  Finance  effective  upon the  appointment  of Martin Kalb as successor
Equity Trustee.

         Martin  Kalb -- Mr.  Kalb  has  served  as  Executive  Vice  President,
Secretary  and  General  Counsel to  UniCapital  Corporation  since May 1998 and
Assistant  Secretary of UniCapital Air Group,  Inc.  since  December 1998.  From
October  1997 to May  1998,  Mr.  Kalb  served  as a  consultant  to  UniCapital
providing services consistent with the duties and  responsibilities of Executive
Vice  President,  Secretary and General  Counsel of UniCapital.  From 1987 until
November 1997, he was a senior partner in the Miami, Florida office of Greenberg
Traurig Hoffman Lipoff Rosen & Quentel,  P.A.,  where his practice  focused upon
mergers and acquisitions, income taxation and estate planning.


Item 6.       Exhibits and Reports of Form 8-K

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

        27.       Financial Data Schedule (in electronic format only)

b.      Reports on Form 8-K

        During the quarterly period ended June 30, 2000,  Aircraft Finance filed
reports on Form 8-K dated April 17, 2000,  May 15, 2000 and June 15, 2000.  Such
reports on Form 8-K  included  copies of the  monthly  reports to holders of the
Notes.


                                       16
<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


       August 10, 2000              By:        /S/CHARISSE L. RODGERS
       ---------------                  ----------------------------------------
           Date                     Name:      Charisse L. Rodgers
                                    Title:     Senior Financial Services Officer


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



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


/S/DAVID H. TREITEL             Independent Controlling Trustee  August 10, 2000
------------------------------                                   ---------------
David H. Treitel


/S/RICHARD E. CAVANAGH          Independent Controlling Trustee  August 10, 2000
------------------------------                                   ---------------
Richard E. Cavanagh


/S/WAYNE D. LIPPMAN             Equity Trustee and Controlling   August 10, 2000
------------------------------  Trustee                          ---------------
Wayne D. Lippman


/S/CHARISSE L. RODGERS          Owner Trustee                    August 10, 2000
------------------------------                                   ---------------
Wilmington Trust Company, not
in its individual capacity but
solely as the Owner Trustee


                                       17