<PAGE>

================================================================================

                                  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, 1999

                         Commission file number 0-17785

                          AIRCRAFT INCOME PARTNERS L.P.
             (Exact name of registrant as specified in its charter)

        DELAWARE                                               13-3430508
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                            Identification No.)

             411 West Putnam Avenue, Suite 270, Greenwich, CT 06830
                    (Address of principal executive offices)

                                 (203) 862-7444
              (Registrant's telephone number, including area code)

                                      None
              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check 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
                   -----


================================================================================

<PAGE>


                         AIRCRAFT INCOME PARTNERS L. P.
                            FORM 10-Q - JUNE 30, 1999


                                      INDEX

PART I - FINANCIAL INFORMATION

  ITEM 1 - FINANCIAL STATEMENTS

       BALANCE SHEETS - June 30, 1999 and December 31, 1998..............    1


       STATEMENTS OF OPERATIONS - For the three months ended
             June 30, 1999 and 1998 and for the six months ended
             June 30, 1999 and 1998......................................    2


       STATEMENT OF PARTNERS' EQUITY - For the six months ended
             June 30, 1999...............................................    3


       STATEMENTS OF CASH FLOWS - For the six months ended
             June 30, 1999 and 1998......................................    4


       NOTES TO FINANCIAL STATEMENTS.....................................  5-8

  ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS.......................... 9-11

PART II - OTHER INFORMATION

  ITEM 1 - LEGAL PROCEEDINGS.............................................   12

  ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K .............................   12


SIGNATURES...............................................................   13


<PAGE>

PART 1 - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                          AIRCRAFT INCOME PARTNERS L.P.

                                 BALANCE SHEETS

                                                    June 30,        December 31,
                                                      1999             1998
                                                   ----------       ------------
 ASSETS

      Cash and cash equivalents                   $ 5,306,548       $ 4,199,804
      Equipment held for sale, net                  1,162,810         5,058,237
      Accounts receivable                             471,250           471,250
      Deferred costs                                   14,568            19,700
      Prepaid expenses                                 14,703                 -
      Other receivables                                 8,991            38,886
                                                  -----------       -----------

                                                  $ 6,978,870       $ 9,787,877
                                                  ===========       ===========

 LIABILITIES AND PARTNERS' EQUITY

 Liabilities
    Accounts payable and accrued expenses         $   182,658       $   540,437
                                                  -----------       -----------

 Commitments and contingencies

 Partners' equity
       Limited partners' equity (385,805
          units issued and outstanding)             6,107,636         8,313,741
       General partner's equity                       688,576           933,699
                                                   ----------       -----------

       Total partners' equity                       6,796,212         9,247,440
                                                   ----------       -----------

                                                  $ 6,978,870       $ 9,787,877
                                                  ===========       ===========


See notes to financial statements.

                                                                               1
<PAGE>


                          AIRCRAFT INCOME PARTNERS L.P.

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                             For the three months ended          For the six months ended
                                                      June 30,                            June 30,
                                            -----------------------------      ------------------------------
                                               1999              1998              1999              1998
                                            ----------        -----------      ------------       -----------

<S>                                         <C>               <C>              <C>                <C>
 Revenues
      Interest                              $   42,201        $   269,406      $     84,824       $   365,200
      Other income                              32,661                  -            98,672                 -
      Rental                                         -          1,426,556                 -         2,896,644
      Interest - installment note                    -             59,281                 -           122,035
                                            ----------        -----------      ------------       -----------

                                                74,862          1,755,243           183,496         3,383,879
                                            ----------        -----------      ------------       -----------

 Costs and expenses
      Provision for equipment impairment       180,000                  -         2,071,000                 -
      General and administrative               187,439             57,566           334,637           132,302
      Operating                                 67,367            332,254           191,087           497,469
      Other expenses                                 -             22,274            38,000            42,575
      Depreciation                                   -            791,735                 -         1,684,059
      Management fee                                 -            180,200                 -           180,200
                                            ----------        -----------      ------------       -----------

                                               434,806          1,384,029         2,634,724         2,536,605
                                            ----------        -----------      ------------       -----------

                                              (359,944)           371,214        (2,451,228)          847,274

 Gain on sale of aircraft - net                      -          1,360,469                 -         3,612,796
                                            ----------        -----------      ------------       -----------

 Net (loss) income                          $ (359,944)       $ 1,731,683      $ (2,451,228)      $ 4,460,070
                                            ==========        ===========      ============       ===========

 Net (loss) income attributable
      Limited partners                      $ (323,950)       $ 1,558,515      $ (2,206,105)      $ 4,014,063
      General partner                          (35,994)           173,168          (245,123)          446,007
                                            ----------        -----------      ------------       -----------

                                            $ (359,944)       $ 1,731,683      $ (2,451,228)      $ 4,460,070
                                            ===========       ===========      ============       ===========


 Net (loss) income per unit of limited
      partnership interest (385,805 units
      outstanding)                          $     (.84)       $     4.04       $      (5.72)      $    10.40
                                            ===========       ===========      ============       ===========
</TABLE>

See notes to financial statements.

                                                                               2
<PAGE>


                          AIRCRAFT INCOME PARTNERS L.P.

                          STATEMENT OF PARTNERS' EQUITY



                                        Limited        General        Total
                                       Partners'      Partner's      Partners'
                                        Equity         Equity         Equity
                                      -----------    ----------    -----------

 Balance, January 1, 1999             $ 8,313,741    $  933,699    $ 9,247,440

 Net loss for the six months
      ended June 30, 1999              (2,206,105)     (245,123)    (2,451,228)
                                      -----------    ----------    -----------

 Balance, June 30, 1999               $ 6,107,636    $  688,576    $ 6,796,212
                                      ===========    ==========    ===========



See notes to financial statements.

                                                                               3
<PAGE>


                          AIRCRAFT INCOME PARTNERS L.P.

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                   For the six months ended
                                                                                            June 30,
                                                                                ------------------------------
                                                                                    1999              1998
                                                                                ------------       -----------
<S>                                                                            <C>                <C>
 INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS

 Cash flows from operating activities
      Net (loss) income                                                         $ (2,451,228)      $ 4,460,070
      Adjustments to reconcile net (loss) income to net
          cash (used in) provided by operating activities
             Provision for equipment impairment                                    2,071,000                 -
             Depreciation                                                                  -         1,684,059
             Gain on disposition of aircraft, net                                          -        (3,612,796)
      Changes in assets and liabilities
          Accounts receivable                                                              -            48,471
          Deferred costs                                                               5,132            22,968
          Prepaid expenses                                                           (14,703)            1,822
          Other receivables                                                           29,895            16,801
          Accounts payable and accrued expenses                                     (357,779)           46,742
          Deferred income                                                                  -             2,437
          Maintenance reserves                                                             -          (900,431)
          Management fee payable                                                           -           180,200
                                                                                ------------       -----------

                 Net cash (used in) provided by operating activities                (717,683)        1,950,343
                                                                                ------------       -----------

 Cash flows from investing activities
      Proceeds from sale of aircraft, net                                          1,824,427         7,370,121
      Proceeds from installment sale note receivable                                       -           309,965
                                                                                ------------       -----------

                 Net cash provided by investing activities                         1,824,427         7,680,086
                                                                                ------------       -----------

 Net increase in cash and cash equivalents                                         1,106,744         9,630,429

 Cash and cash equivalents, beginning of period                                    4,199,804         6,432,713
                                                                                ------------       -----------

 Cash and cash equivalents, end of period                                       $  5,306,548       $16,063,142
                                                                                ============       ===========
</TABLE>


See notes to financial statements.

                                                                               4
<PAGE>


                          AIRCRAFT INCOME PARTNERS L.P.

                          NOTES TO FINANCIAL STATEMENTS


1        INTERIM FINANCIAL INFORMATION

         The summary financial information contained herein is unaudited;
         however, in the opinion of management, all adjustments (consisting only
         of normal recurring accruals) necessary for a fair presentation of such
         financial information have been included. The accompanying financial
         statements, footnotes and discussions should be read in conjunction
         with the financial statements, related footnotes and discussions
         contained in the Aircraft Income Partners L.P. (the "Partnership")
         annual report on Form 10-K for the year ended December 31, 1998. The
         results of operations for the six months ended June 30, 1999 are not
         necessarily indicative of the results to be expected for the full year.

         When used in this quarterly report on Form 10-Q, the words "believes,"
         "anticipates," "expects" and similar expressions are intended to
         identify forward-looking statements. Statements looking forward in time
         are included in this quarterly report on Form 10-Q pursuant to the
         "safe harbor" provision on the Private Securities Litigation Reform Act
         of 1995. Such statements are subject to certain risks and uncertainties
         which could cause actual results to differ materially, including, but
         not limited to, those set forth in "management's discussion and
         analysis of financial condition and results of operations." Readers are
         cautioned not to place undue reliance on these forward-looking
         statements, which speak only as of the date hereof. The Partnership
         undertakes no obligation to publicly revise these forward-looking
         statements to reflect events or circumstances occurring after the date
         hereof or to reflect the occurrence of unanticipated events.


2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Leased aircraft and aircraft held for sale

         The cost of leased aircraft and aircraft held for sale represents the
         initial cost of the aircraft to the Partnership plus miscellaneous
         acquisition and closing costs and is carried at the lower of
         depreciated cost or fair value.

         Depreciation is computed using the straight-line method, over the
         estimated useful lives of such aircraft (15 years for McDonnell Douglas
         DC9-32 aircraft). The Partnership capitalizes major additions to its
         aircraft and depreciates such capital improvements over the remaining
         estimated useful life of the aircraft. No depreciation is taken on
         equipment held for sale.

         When aircraft are sold or otherwise disposed of, the cost and
         accumulated depreciation (and any related allowance for equipment
         impairment) are removed from the accounts and any gain or loss on such
         sale or disposal is reflected in operations. Normal maintenance and
         repairs are charged to operations as incurred. The Partnership provides
         allowances for equipment impairment based upon a periodic review of all
         aircraft in its portfolio, when management believes that, based upon
         market analysis, appraisal reports and leases currently in place with
         respect to specific aircraft, the investment in such aircraft may not
         be recoverable. The Partnership may provide for additional losses in
         subsequent periods and such provisions could be material.

3        CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES

         The general partner of the Partnership, Integrated Aircraft Fund
         Management Corp. ("IAFM"), is a wholly owned subsidiary of Presidio
         Capital Corp. ("Presidio"). Other limited partnerships and similar
         investment programs have been formed by affiliates of IAFM to acquire
         equipment and, accordingly, conflicts of interest may arise between the
         Partnership and such other limited partnerships. Affiliates of IAFM
         have also engaged in businesses related to the management of equipment
         and the sale of various types of equipment and may transact business
         with the Partnership.

         Subject to the rights of the Limited Partners under the Limited
         Partnership Agreement, Presidio controls the Partnership through its
         indirect ownership of all of the shares of IAFM. On August 28, 1997, an
         affiliate of NorthStar Capital Partners acquired all of the Class B
         shares of Presidio, the corporate parent of IAFM. This acquisition,
         when aggregated with previous acquisitions, caused NorthStar Capital
         Partners to acquire indirect control of IAFM. Effective July 31, 1998,
         Presidio is indirectly owned by NorthStar Capital Investment Corp.
         ("NorthStar"), a Maryland corporation.


                                                                               5
<PAGE>


                          AIRCRAFT INCOME PARTNERS L.P.

                          NOTES TO FINANCIAL STATEMENTS


3        CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)

         Presidio entered into a management agreement with NorthStar Presidio
         Management Company, LLC ("NorthStar Presidio"), an affiliate of
         NorthStar. Under the terms of the management agreement, NorthStar
         Presidio provides the day-to-day management of Presidio and its direct
         and indirect subsidiaries and affiliates. For the six months ended June
         30, 1999 and 1998, reimbursable expense paid to NorthStar Presidio
         amounted to $23,522 and $11,250.

         IAFM is entitled to a 10 percent interest in the net income, loss and
         distributions from operations and cash from sales. No distributions
         were paid with respect to the six months ended June 30, 1999. For the
         six months ended June 30, 1998, IAFM received distributions totaling
         $1,187,422.

         As compensation for its services, IAFM receives the management fee
         provided for in the Limited Partnership Agreement which is equal to 4%
         of Distributions of Cash from Operations from Operating Leases and 2%
         of Distributions of Cash from Operations from Full Payout Leases, as
         such terms are defined in the Limited Partnership Agreement. In
         conjunction with such services, IAFM did not earn any management fees
         for the six months ended June 30, 1999 and for the six months ended
         June 30, 1998, management fees amounted to $180,200.

         Upon the ultimate liquidation of the Partnership, IAFM may be required
         to remit to the Partnership certain payments representing capital
         account deficit restoration based upon a formula provided within the
         Limited Partnership Agreement. Such restoration amount may be less than
         the recorded IAFM deficit, which could result in distributions to the
         limited partners of less than their recorded equity.

4        EQUIPMENT HELD FOR SALE

         Equipment held for sale consists of one McDonnell Douglas DC9-32
         aircraft with an aggregate net carrying value of $1,162,810 (net of
         accumulated depreciation of $4,683,731 and an allowance for equipment
         impairment of $1,695,334) at June 30, 1999. Based upon current
         information with respect to a potential sale of the one remaining
         DC-9-32 aircraft, management believes that the equipment had been
         impaired and has recorded an impairment of $960,000 for the six months
         ended June 30, 1999. See note 6a, Commitments and Contingencies,
         Continental Airlines, Inc.

5        AIRCRAFT SALES

         (i)      On March 31, 1998, a Boeing 737-2H4 aircraft owned by the
                  Partnership was sold to an unaffiliated third party for
                  proceeds of $3,500,000 exclusive of selling expenses of
                  approximately $106,000. The aircraft, which was formerly
                  leased to Southwest Airlines Co., had been off-lease since
                  January 1998. At the time of sale, the aircraft had a net
                  carrying value of approximately $1,141,000.

         (ii)     On May 19, 1998, a Boeing 737-297 Advanced aircraft owned by
                  the Partnership was sold to an unaffiliated third party for
                  proceeds of $4,100,000, exclusive of selling expenses of
                  approximately $124,000. The aircraft, which was formerly
                  leased to Aloha had a net carrying value of approximately
                  $2,617,000 at the time of sale.


                                                                               6
<PAGE>


                          AIRCRAFT INCOME PARTNERS L.P.

                          NOTES TO FINANCIAL STATEMENTS


5        AIRCRAFT SALES (continued)

         (iii)    Between August 17, 1998 and September 23, 1998, the
                  Partnership sold its interest in two Boeing 737-200 aircraft,
                  four Boeing 727-200 aircraft (inclusive of an undivided
                  47.92231% joint venture interest in one aircraft) and one
                  McDonnell Douglas DC9-51 aircraft. Aside from the DC9-51
                  aircraft, the six aircraft had an original cost of
                  approximately $71,235,500, represented 45.03% of the net
                  carrying value of Partnership's aircraft as of the end of June
                  30, 1998 and, at the time of sale, had a net carrying value of
                  approximately $7,744,000. The Partnership's interest in the
                  DC9-51 aircraft consisted of the right to receive deferred
                  payments of $2,529,900 related to a September 1, 1996
                  installment sale. The sales, inclusive of the DC9-51 aircraft,
                  were made to an unaffiliated third party for gross sales
                  proceeds, exclusive of closing costs, of $18,000,000.

         (iv)     On June 1, 1999, the Partnership sold two McDonnell Douglas
                  DC9-32 aircraft to an unaffiliated third party for gross sale
                  proceeds of $1,910,000, exclusive of selling expenses of
                  approximately $86,000. At the time of sale, the aircraft had a
                  net carrying value of approximately $1,824,000.

6        COMMITMENTS AND CONTINGENCIES

         a.       Continental Airlines, Inc.

         In November 1991, in connection with its reorganization under the
         United States Bankruptcy Code, Continental Airlines, Inc.
         ("Continental") rejected the leases of the three Boeing 727-100
         aircraft owned by the Partnership, which had been out of service since
         1991. Due to the condition and the related market for such aircraft,
         the Partnership provided aggregate allowances for equipment impairment
         of approximately $6,483,000. During 1993, the Partnership sold all
         three Boeing 727-100 aircraft. The Partnership had retained its rights
         pursuant to a proof of claim and an administrative claim filed in the
         Continental Bankruptcy case with respect to such aircraft.

         In June 1999, the Partnership and Continental agreed to settle the
         foregoing claims. Pursuant to the settlement, the Partnership would
         receive $780,000 as well as approximately 8,240 shares of Continental's
         Class A stock and 22,975 shares of Continental's Class B stock. Subject
         to the resolution of third party claims against additional stock
         reserved under Continental's Plan of Reorganization, the Partnership
         may receive additional shares of Class A and Class B stock. The
         agreement is the subject of a stipulation filed in the Bankruptcy Court
         on July 9, 1999.

         During 1997, the lease of three McDonnell Douglas Model DC9-32 aircraft
         owned by the Partnership were extended to September 1998 (2 aircraft)
         and December 1998 (one aircraft) at a rental of $52,500 per month, per
         aircraft. Two of the aircraft were returned in September 1998 and the
         third aircraft was returned in December 1998.

         Upon return, the Partnership conducted inspections of the aircraft to
         ascertain whether the return conditions of the lease were satisfied. On
         May 5, 1999, First Security Bank, N.A., acting not in its individual
         capacity, but solely as trustee under a trust agreement in which the
         Partnership is beneficiary, filed a complaint in the United States
         District Court, Southern District of New York. The complaint seeks
         damages in an amount to be determined at trial, but believed to be in
         excess of $3,000,000, arising out of Continental's i) failure to return
         the three DC9-32 aircraft in the return condition required by the lease
         and ii) failure to make a rent payment provided for in the lease.
         Continental has filed an answer denying the complaint.


                                                                               7
<PAGE>


                          AIRCRAFT INCOME PARTNERS L.P.

                          NOTES TO FINANCIAL STATEMENTS


6        COMMITMENTS AND CONTINGENCIES (continued)

         b.       Tax assessment

         In September 1996, the Partnership received proposed notices of
         assessment from the State of Hawaii with respect to general excise tax
         ("GET") aggregating approximately $1,338,000 (including interest and
         penalties) for the years 1991, 1992, 1993 and 1994. In July 1998, the
         Partnership received additional proposed notices of assessment for GET
         aggregating approximately $585,000 for the years 1995, 1996 and 1997.
         The state is alleging that GET is owed by the Partnership with respect
         to rents received from Aloha and Hawaiian under the leases between the
         Partnership and each of the airlines.

         The leases with both Aloha and Hawaiian provided for full
         indemnification of the Partnership for such taxes, but the bankruptcy
         of Hawaiian may relieve Hawaiian of its indemnification obligation for
         any periods prior to September 21, 1993, when Hawaiian and its
         affiliates sought bankruptcy protection. In any event, it is the
         Partnership, as taxpayer, which is ultimately liable for the GET, if it
         is applicable.

         The State of Hawaii has never previously applied the GET to rentals
         received by a lessor of aircraft where the lessor's only contact with
         the State of Hawaii is that it has leased its aircraft to airlines
         which are based in the state. Aloha and Hawaiian, as well as the
         Partnership, have separately engaged tax counsel and both airlines are
         cooperating with the Partnership in vigorously contesting the proposed
         assessments.

         Final notices of assessment have not yet been issued. Although there
         can be no assurance that the contest of the assessments will be
         successful, the Partnership believes that the state's position on the
         applicability of GET in this instance is without merit. The Partnership
         has not recorded any provision or liability as a result of the proposed
         notices of assessment.


                                                                               8
<PAGE>


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS



         Liquidity and Capital Resources

         As of June 30, 1999, the Partnership had cash available of
         approximately $5,159,000, inclusive of the original general working
         capital reserves of approximately $1,929,000.

         The Partnership's remaining aircraft consists of one McDonnell Douglas
         DC9-30 aircraft, which had been leased to Continental Airlines, Inc.
         and returned in September 1998.

         The Partnership is attempting to sell the one remaining aircraft as
         promptly as possible with a view towards liquidating the Partnership's
         entire portfolio and winding up the business of the Partnership prior
         to the end of 1999.

         The Partnership may use a portion of its operating reserves, which
         would otherwise be available for distribution, to upgrade or enhance
         its remaining aircraft if the Partnership determines that such
         expenditures are in its best interests in order to maximize
         re-marketing value of such aircraft.

         Of the 18 aircraft originally purchased by the Partnership, at June 30,
         1999, the Partnership had an interest in one aircraft, which had an
         original cost of approximately $7,542,000 (net book value of
         approximately $1,163,000).

         In November 1991, in connection with its reorganization under the
         United States Bankruptcy Code, Continental Airlines, Inc.
         ("Continental") rejected the leases of the three Boeing 727-100
         aircraft owned by the Partnership, which had been out of service since
         1991. Due to the condition and the related market for such aircraft,
         the Partnership provided aggregate allowances for equipment impairment
         of approximately $6,483,000. During 1993, the Partnership sold all
         three Boeing 727-100 aircraft. The Partnership had retained its rights
         pursuant to a proof of claim and an administrative claim filed in the
         Continental Bankruptcy case with respect to such aircraft.

         In June 1999, the Partnership and Continental agreed to settle the
         foregoing claims. Pursuant to the settlement, the Partnership would
         receive $780,000 as well as approximately 8,240 shares of Continental's
         Class A stock and 22,975 shares of Continental's Class B stock. Subject
         to the resolution of third party claims against additional stock
         reserved under Continental's Plan of Reorganization, the Partnership
         may receive additional shares of Class A and Class B stock. The
         agreement is the subject of a stipulation filed in the Bankruptcy Court
         on July 9, 1999.

         During 1997, the leases of three McDonnell Douglas Model DC9-32
         aircraft owned by the Partnership were extended to September 1998 (2
         aircraft) and December 1998 (one aircraft) at a rental of $52,500 per
         month, per aircraft. Two of the aircraft were returned in September
         1998 and the third aircraft was returned in December 1998.

         Upon return, the Partnership conducted inspections of the aircraft to
         ascertain whether the return conditions of the leases were satisfied.
         On May 5, 1999, First Security Bank, N.A., acting not in its individual
         capacity, but solely as trustee under a trust agreement in which the
         Partnership is beneficiary, filed a complaint in the United States
         District Court, Southern District of New York. The complaint seeks
         damages in an amount to be determined at trial, but believed to be in
         excess of $3,000,000 arising out of Continental's i) failure to return
         the three DC9-32 aircraft in the return condition required by the lease
         and ii) failure to make a rent payment provided for in the lease.
         Continental has filed an answer denying the complaint.


                                                                               9
<PAGE>


         Liquidity and Capital Resources (continued)

         In September 1996 and July 1998, the Partnership received proposed
         notices of assessment from the State of Hawaii with respect to general
         excise tax of approximately $1,923,000 (including interest and
         penalties) for the years 1991 through 1997. The state is alleging that
         the Partnership owes GET with respect to rents received from Aloha
         Airlines, Inc. ("Aloha") and Hawaiian Airlines, Inc. ("Hawaiian") under
         the leases between the Partnership and each of the airlines.

         The leases with both Aloha and Hawaiian provide for full
         indemnification of the Partnership for such taxes, but the bankruptcy
         of Hawaiian may relieve Hawaiian of its indemnification obligation for
         any periods prior to September 21, 1993, when Hawaiian and its
         affiliates sought bankruptcy protection. In any event, it is the
         Partnership, as taxpayer, which is ultimately liable for the GET, if it
         is applicable.

         The State of Hawaii has never previously applied the GET to rentals
         received by a lessor of aircraft where the lessor's only contact with
         the State of Hawaii is the fact that it has leased its aircraft to
         airlines which are based in the state. Aloha and Hawaiian, as well as
         the Partnership, have separately engaged tax counsel and both airlines
         are cooperating with the Partnership to vigorously contest the proposed
         assessments.

         Final notices of assessment have not yet been issued. Although there
         can be no assurance that the contest of the assessments will be
         successful, the Partnership believes that the state's position on the
         applicability of GET in this instance is without merit. The Partnership
         has not recorded any liability as a result of the proposed notices of
         assessment.

         Inflation has not had any material effect on the Partnership's revenues
         since its inception nor does the Partnership anticipate any material
         effect on its business from this factor. The softness in the aircraft
         industry and resulting decline in the value of the aircraft owned by
         the Partnership have resulted in the Partnership providing allowances
         for equipment impairment.

         Year 2000 compliance

         The Year 2000 compliance issue concerns the inability of computerized
         information systems and equipment to accurately calculate, store or use
         a date after December 31, 1999, as a result of the year being stored as
         a two digit number. This could result in a system failure or
         miscalculations causing disruptions of operations. The Partnership and
         NorthStar Presidio recognize the importance of ensuring that its
         business operations are not disrupted as a result of Year 2000 related
         computer system and software issues.

         NorthStar Presidio is in the process of assessing its internal computer
         information systems and is taking the steps necessary to remediate
         these systems so that they will be Year 2000 compliant. In connection
         therewith, NorthStar Presidio has installed a new fully compliant
         accounting and reporting system. NorthStar Presidio is also reviewing
         its other internal systems and programs, along with those of its
         unaffiliated third party service providers, in order to ensure
         compliance.


                                                                              10
<PAGE>


         Year 2000 compliance (continued)

         Because this assessment is ongoing, the total cost of bringing all
         systems and equipment into Year 2000 compliance has not been fully
         quantified. Based upon available information, NorthStar Presidio does
         not believe that these costs will have a material adverse effect on the
         Partnership's business, financial condition or results. While the
         Partnership's present intention is to wind up its business prior to the
         end of 1999, it is possible that there could be adverse consequences to
         the Partnership as a result of Year 2000 issues that are outside the
         Partnership's control.

         Results of Operations

         Net income decreased for the three and six month periods ended June 30,
         1999 compared to the three and six month periods ended June 30, 1998,
         principally due to a decrease in rental revenues and the recognition of
         a gain on the sale of aircraft in the prior year periods.

         Revenues decreased for the three and six month periods ended June 30,
         1999 compared to the corresponding periods of the prior year. Rental
         income decreased due to the fact that certain aircraft came off-lease
         in 1998, as well as due to the sale of certain aircraft in 1998.
         Interest decreased for the three and six month periods ended June 30,
         1999 compared to the corresponding periods in the prior year due to
         lower cash balances available for short-term investment.

         Expenses decreased for the three months ended June 30, 1999 and
         increased for the six months ended June 30, 1999 compared to the
         corresponding periods of the prior year as follows: (i) the elimination
         of depreciation expense; (ii) the decrease in operating expenses due
         primarily to lower costs related to the Partnership's off lease
         aircraft; (iii) the reduction in management fees offset by the (iv)
         recording of provisions for equipment impairment in 1999 and (v) the
         increase in general and administrative expenses, primarily due to legal
         costs related to the Continental Bankruptcy and the complaint filed
         against Continental.


                                                                              11
<PAGE>


PART II - OTHER INFORMATION



ITEM 1.        LEGAL PROCEEDINGS

               During 1997, the leases of three McDonnell Douglas Model DC9-32
               aircraft owned by the Partnership were extended to September 1998
               (2 aircraft) and December 1998 (one aircraft) at a rental of
               $52,500 per month, per aircraft. Two of the aircraft were
               returned in September 1998 and the third aircraft was returned in
               December 1998.

               Upon return, the Partnership conducted inspections of the
               aircraft to ascertain whether the return conditions of the leases
               were satisfied. On May 5, 1999, First Security Bank, N.A., acting
               not in its individual capacity, but solely as trustee under a
               trust agreement in which the Partnership is beneficiary, filed a
               complaint in the United States District Court, Southern District
               of New York. The complaint seeks damages in an amount to be
               determined at trial, but believed to be in excess of $3,000,000
               arising out of Continental's i) failure to return the three
               DC9-32 aircraft in the return condition required by the lease and
               ii) failure to make a rent payment provided for in the lease.
               Continental has filed an answer denying the complaint.

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

(a)            Exhibits:  None.
(b)            Reports on Form 8-K:  None.


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<PAGE>


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Partnership has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                               AIRCRAFT INCOME PARTNERS L.P.
                           BY: Integrated Aircraft Fund Management Corp.,
                               General Partner



                               /s/ Allan B. Rothschild
                               -------------------------------------------------
                               Allan B. Rothschild
                               President

                               /s/ Lawrence R. Schachter
                               -------------------------------------------------
                               Lawrence R. Schachter
                               Senior Vice President and Chief Financial Officer



Date: August 11, 1999


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