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 September 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 24 pages.
<PAGE>

                             Aircraft Finance Trust

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




                                      INDEX



Part I.  Financial Information                                              Page

         Item 1.      Financial Statements

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

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

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

              d)  Consolidated Statements of Changes in Beneficial
                  Interest Holders' Equity - Period Ended December 31,
                  1999 and Nine Months Ended September 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............................................15


Part II. Other Information

         Item 5.      Other Information......................................17

         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)

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

Cash and cash equivalents                             $   80,077    $   72,682
Restricted cash                                           17,403        19,468
Rents and other receivables                                3,225         4,122
Aircraft, net                                          1,139,067     1,170,564
Other assets                                                 198           138
                                                      ----------    ----------

     Total assets                                     $1,239,970    $1,266,974
                                                      ==========    ==========

              Liabilities and Beneficial Interest Holders' Equity

Accounts payable and accrued liabilities              $    4,065    $    5,819
Deferred rental income                                     5,390         7,031
Security and other deposits                               34,390        30,385
Notes payable:
     Class A-1                                           512,500       512,500
     Class A-2                                           337,929       368,897
     Class B                                             122,803       124,798
     Class C                                             106,000       106,000
     Class D                                              64,000        64,000
                                                      ----------    ----------
     Total notes payable                               1,143,232     1,176,195
                                                      ----------    ----------

     Total liabilities                                 1,187,077     1,219,430
                                                      ----------    ----------

Beneficial interest holders' equity                       52,893        47,544
                                                      ----------    ----------

     Total liabilities and beneficial interest
       holders' equity                                $1,239,970    $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)

<TABLE>
<CAPTION>

                                      Three Months   Three Months    Nine Months      Period from
                                          Ended          Ended          Ended          Inception
                                      September 30,  September 30,  September 30,  (April 13, 1999) to
                                          2000           1999           2000        September 30, 1999
                                      -------------  -------------  -------------   ------------------
<S>                                    <C>             <C>            <C>                <C>
Revenues:
   Rental and other income
      from operating leases            $ 35,920        $ 42,839       $109,860           $ 66,148
   Interest income                        1,493           1,009          4,170              1,594
                                       --------        --------       --------           --------

      Total revenues                     37,413          43,848        114,030             67,742
                                       --------        --------       --------           --------

Expenses:
   Interest                              19,649          19,599         58,664             31,847
   Depreciation                          10,671          10,564         32,043             17,823
   Operating                              4,528           8,221         13,449              8,256
   Administration and other               1,475           1,552          4,525              2,523
                                       --------        --------       --------           --------

      Total expenses                     36,323          39,936        108,681             60,449
                                       --------        --------       --------           --------

Net Income                             $  1,090        $  3,912       $  5,349           $  7,293
                                       ========        ========       ========           ========
</TABLE>

              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
                                             Nine Months          Inception
                                                Ended        (April 13, 1999) to
                                         September 30, 2000   September 30, 1999
                                         ------------------  -------------------

Cash Flows from Operating Activities:
Net income                                 $     5,349           $     7,293
Adjustments to reconcile net income to
     net cash provided by operating
     activities:
     Depreciation expense                       32,043                17,823
Changes in assets and liabilities:
     Rents and other receivables                   897                (7,622)
     Restricted cash                             2,065               (19,966)
     Other assets                                  (60)                 (243)
     Accounts payable and accrued
       liabilities                              (1,754)               12,108
     Deferred rental income                     (1,641)                6,903
     Security and other deposits                 4,005                19,966
                                           -----------           -----------

     Net cash provided by operating
       activities                               40,904                36,262
                                           -----------           -----------

Cash Flows from Investing Activities:
Aircraft improvements                             (546)               (1,698)
Purchase of aircraft                              --              (1,196,087)
                                           -----------           -----------

     Net cash used in investing
       activities                                 (546)           (1,197,785)
                                           -----------           -----------

Cash Flows from Financing Activities:
Issuance of beneficial interest                   --                  39,087
Proceeds from notes payable                       --               1,209,000
Repayment of notes payable                     (32,963)              (21,976)
                                           -----------           -----------

     Net cash (used in) provided by
       financing activities                    (32,963)            1,226,111
                                           -----------           -----------

Net Increase in Cash and Cash
  Equivalents                                    7,395                64,588

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

Cash and Cash Equivalents at
  End of Period                            $    80,077           $    64,588
                                           ===========           ===========


Supplemental Cash Flow Information:
     Cash paid for interest expense        $    58,810           $    28,380
                                           ===========           ===========

              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                                                             5,349
                                                                        -------

Balance at September 30, 2000                                           $52,893
                                                                        =======

              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)

                               September 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 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,
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 for interim
financial  information  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 by
generally accepted accounting principals for complete 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  inter-company  accounts and transactions  have
been  eliminated.  The  results  for the  interim  periods  are not  necessarily
indicative of the results to be expected for the year ended December 31, 2000.

         These interim  unaudited  consolidated  financial  statements should be
read in conjunction with Aircraft Finance's  consolidated  financial  statements
and  accompanying  notes included in its 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 September  30, 2000.  Four of
these  agreements  were  entered  into on May 5, 1999 and the other  three  were
effective on July 15, 2000.  Under the agreements,  Aircraft  Finance will pay a
fixed rate of interest on the notional amount to the counter-party and, in turn,
the  counter-party  will pay Aircraft Finance a rate of interest on the notional
amount based on 30-day LIBOR. On September 30, 2000, the aggregate fair value of
these interest rate swap agreements was approximately $22.1 million.

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

  Fixed    Rate to be paid       Rate to be
Notional     by Aircraft    received by Aircraft    Maturity          Estimated
 Amount        Finance             Finance            Date           Fair Value
 ------        -------             -------            ----           ----------
$  60,000        5.50%              LIBOR         January 15, 2002   $      861
  175,000        5.56%              LIBOR         October 15, 2002        3,571
  345,000        5.65%              LIBOR         January 15, 2004       10,249
  230,000        5.71%              LIBOR        November 15, 2004        8,045
   20,000        7.13%              LIBOR         January 15, 2002         (117)
   20,000        7.14%              LIBOR         October 15, 2002         (195)
   15,000        7.17%              LIBOR             May 15, 2005         (289)

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
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 will adopt SFAS 133

                                       8
<PAGE>

and SFAS 138 in the year 2001. Aircraft Finance estimates that, at September 30,
2000,  the effect on its  financial  statements  of  adopting  SFAS No.  133, as
amended,  would have been to increase  Beneficial  Interest  Holders'  Equity by
approximately $22.1 million. The transition effect as of January 1, 2001, cannot
be  estimated  at this time  because  it is  subject  to the  following  unknown
variables as of that date: (1) actual hedged positions, and (2) market values of
hedged positions.



                                       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

The Aircraft and Lessees

         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 of all  aircraft  owned at December 31,
1999.

                                       10
<PAGE>


         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 September  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 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 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.

         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 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.

         In July 2000, a second  B737-400  aircraft was returned  from a Turkish
lessee.  Aircraft  Finance  has  entered  into a letter of intent to lease  this
aircraft to an  Indonesian  lessee for a term of 60 months  with an  anticipated
delivery date in November 2000. This aircraft  represents  approximately 2.6% of
the aggregate appraised value at December 31, 1999.

         In September  2000, an A320-200  aircraft  formerly  leased by a lessee
based in the United States was returned  early.  In October 2000,  this aircraft
was  delivered to a lessee  based in Mexico for a lease term of 60 months.  This
aircraft  represents  approximately  2.4% of the  aggregate  appraised  value at
December 31, 1999.

Other 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.

         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

                                       11
<PAGE>

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.

         As previously  discussed,  Aircraft Finance has entered into agreements
with two lessees for the two aircraft  formerly  leased to Turkish and Brazilian
lessees. 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 June 2000.

         On June 21, 2000,  Wayne  Lippman  tendered his  resignation  as Equity
Trustee of Aircraft Finance effective upon the appointment of a replacement.  At
September 30, 2000 a replacement had not been appointed.

         During the nine month period ended September 30, 2000, there were three
lessees on non-accrual  status.  All aircraft with respect to these lessees have
been  returned  early,  as  discussed  above.  The  total  amount  of  rent  and
maintenance reserve payments  outstanding under the leases for the four aircraft
from these three lessees amounted to approximately  $5.8 million as of September
30, 2000. One of these lessees, based in Brazil, owed approximately $1.0 million
at September 30, 2000 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  $1.2 million at  September  30, 2000 for
outstanding  maintenance  reserve payments after the application of $0.8 million
of cash security  deposits and a letter of credit.  The third  lessee,  based in
Turkey,  owed  approximately  $3.6 million at September 30, 2000 for outstanding
rent and maintenance  reserve  payments after the application of $1.1 million of
cash security deposits and letters of credit.

         As of September 30, 2000,  Aircraft Finance has repaid principal on the
Notes of $65.8 million, as compared to $58.7 million anticipated 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 Exhibit 99.1.  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.

                                       12
<PAGE>


Results of Operations

         Results of operations for the period from April 13, 1999  ("Inception")
to September 30, 1999 reflect  results for the period from the  commencement  of
operations to September 30, 1999. As a result,  historical results of operations
for the period from  Inception to September  30, 1999 are not  comparable to the
nine months ended September 30, 2000.

         Aircraft  Finance reported net income of $1.1 million on total revenues
of $37.4 million during the three months ended  September 30, 2000,  compared to
net income of $3.9  million,  on total  revenues of $43.8  million for the three
months ended September 30, 1999.  Aircraft  Finance  reported net income of $5.3
million  on total  revenues  of $114.0  million  during  the nine  months  ended
September 30, 2000, compared to net income of $7.3 million, on total revenues of
$67.7  million for the period from  Inception  to September  30, 1999.  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 aircraft  subject to operating  leases was
$35.9  million  and  $109.9  million  during  the  three and nine  months  ended
September 30, 2000,  respectively,  compared to rental and other income of $42.8
million and $66.1 million  during the three months ended  September 30, 1999 and
the period from Inception to September 30, 1999, respectively.  Rental and other
income from  operating  leases was  negatively  impacted  for the three and nine
months ended  September  30, 2000,  primarily  due to three lessees being put on
non-accrual  status,  off-lease  time for six  aircraft  and  lower  rentals  on
re-marketed aircraft. See "Recent Developments" for further details.

         Interest  income  during the three and nine months ended  September 30,
2000 was $1.5 million and $4.2 million,  respectively,  compared to $1.0 million
and $1.6 million during the three months ended September 30, 1999 and the period
from Inception to September 30, 1999,  respectively.  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 $2.3 million
and $4.9 million,  was $19.6 million and $58.7 million during the three and nine
months ended September 30, 2000,  respectively.  Interest  expense for the three
months ended  September 30, 1999 was $19.6 million,  which included $0.6 million
of interest  rate swap expense,  and for the period from  Inception to September
30, 1999 was $31.8  million,  which  included $1.4 million of interest rate swap
expense.  The weighted  average  interest rate on the Notes during the three and
nine months ended September 30, 2000 was 6.7%.  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 nine months ended  September
30, 2000 was $10.7 million and $32.0  million,  respectively,  compared to $10.6
million for the three months ended  September 30, 1999 and $17.8 million  during
period from Inception to September 30, 1999.

         Operating  expense during the three and nine months ended September 30,
2000 was $4.5 million and $13.4 million, respectively,  compared to $8.2 million
for the three  months ended  September  30,  1999,  and $8.3 million  during the
period  from  Inception  to  September  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.

                                       13
<PAGE>


         Administration  and other  expenses  during  the three and nine  months
ended  September  30,  2000 were $1.5  million and $4.5  million,  respectively,
compared to $1.6 million for the three months ended  September 30, 1999 and $2.5
million for the period from  Inception to September  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 $3.3 million during the three and nine months
ended September 30, 2000,  respectively,  compared to $1.1 million for the three
months  ended  September  30,  1999 and $2.0  million  during  the  period  from
Inception to September 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 $80.1 million,  and
restricted  cash of $17.4 million at September 30, 2000.  The liquidity  reserve
amount,  which is included in cash and cash  equivalents,  was $52.0  million at
September 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.

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 nine months ended
September  30, 2000 amounted to $40.9  million,  primarily  reflecting  non-cash
depreciation expense of $32.0 million, net income of $5.3 million, a decrease in
restricted  cash of $2.1 million an increase in security  and other  deposits of
$4.0  million and a decrease  in rents and other  receivables  of $0.9  million.
These were offset by decreases in accounts  payable and accrued  liabilities  of
$1.8 million and a decrease in deferred rental income of $1.6 million.

Cash Flows from Investing and Financing Activities

         Net  cash  used in  investing  activities  for the  nine  months  ended
September   30,  2000  amounted  to  $0.5  million  for   capitalized   aircraft
improvements and aircraft delivery costs.

         Net  cash  used in  financing  activities  for the  nine  months  ended
September 30, 2000  amounted to $33.0 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 September  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 had 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

                                       14
<PAGE>

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.

         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  September  30,  2000 was  approximately  $1,134
million.  The  terms  of each  class of the  Notes,  including  the  outstanding
principal amount at September 30, 2000, are as follows (in thousands):

                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       337,929   LIBOR + 0.50%    June 15, 2008    May 15, 2024
   Class B         122,803   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
               -----------
               $ 1,143,232

         Aircraft  Finance was a party to seven interest rate swap agreements at
September 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.

                                       15
<PAGE>


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

   Fixed      Rate to be         Rate to be
 Notional  paid by Aircraft received by Aircraft    Maturity          Estimated
  Amount        Finance            Finance            Date           Fair Value
  ------        -------            -------            ----           ----------
$  60,000        5.50%              LIBOR         January 15, 2002  $      861
  175,000        5.56%              LIBOR         October 15, 2002       3,571
  345,000        5.65%              LIBOR         January 15, 2004      10,249
  230,000        5.71%              LIBOR        November 15, 2004       8,045
   20,000        7.13%              LIBOR         January 15, 2002        (117)
   20,000        7.14%              LIBOR         October 15, 2002        (195)
   15,000        7.17%              LIBOR             May 15, 2005        (289)

         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 5.  Other Information

         On June 21, 2000,  Wayne  Lippman  tendered his  resignation  as Equity
Trustee of Aircraft Finance effective upon the appointment of a successor Equity
Trustee. At September 30, 2000 a replacement had not been appointed.

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

b.      Reports on Form 8-K

        During the quarterly  period ended September 30, 2000,  Aircraft Finance
filed reports on Form 8-K dated July 17, 2000, August 15, 2000 and September 15,
2000. 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


       November 10, 2000            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  November 10, 2000
----------------------------                                   ---------------
David H. Treitel


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


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

                                       18