<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 September 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.)


           Cambridge Center, 9th Floor, Cambridge, Massachusetts 02142
           -----------------------------------------------------------
                    (Address of principal executive offices)

                                 (617) 234-3000
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

             411 West Putnam Avenue, Suite 270, Greenwich, CT 06830
             ------------------------------------------------------
              (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 - SEPTEMBER 30, 1999



                                      INDEX


<TABLE>
<S>                                                                                                           <C>
PART I - FINANCIAL INFORMATION


      ITEM 1 - FINANCIAL STATEMENTS

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


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


           STATEMENT OF PARTNERS' EQUITY - For the nine months
                 ended September 30, 1999 ................................................................     3


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


           NOTES TO FINANCIAL STATEMENTS .................................................................   5-9


      ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS ..................................................... 10-12



PART II - OTHER INFORMATION

      ITEM 1 - LEGAL PROCEEDINGS .........................................................................    13

      ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K ..........................................................    13


SIGNATURES       .........................................................................................    14
</TABLE>

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                         AIRCRAFT INCOME PARTNERS L.P.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                    September 30,   December 31,
                                                                                        1999           1998
                                                                                    ------------    ------------
<S>                                                                                   <C>           <C>
ASSETS

     Cash and cash equivalents                                                        $6,172,187    $4,199,804
     Equipment held for sale, net                                                      1,162,810     5,058,237
     Marketable securities                                                             1,213,052          -
     Accounts receivable                                                                  26,250       471,250
     Deferred costs                                                                       14,568        19,700
     Prepaid expenses                                                                      9,978          -
     Other receivables                                                                     9,169        38,886
                                                                                      ----------    ----------

                                                                                      $8,608,014    $9,787,877
                                                                                      ==========    ==========

LIABILITIES AND PARTNERS' EQUITY

Liabilities
     Accounts payable and accrued expenses                                            $  139,702    $  540,437
                                                                                      ----------    ----------

Commitments and contingencies

Partners' equity
         Limited partners' equity (385,805 units
            issued and outstanding)                                                    7,612,526     8,313,741
         General partner's equity                                                        855,786       933,699
                                                                                      ----------    ----------

         Total partners' equity                                                        8,468,312     9,247,440
                                                                                      ----------    ----------

                                                                                      $8,608,014    $9,787,877
                                                                                      ==========    ==========
</TABLE>

See notes to financial statements.
                                                                               1

<PAGE>

                         AIRCRAFT INCOME PARTNERS L.P.

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>


                                                       For the three months ended         For the nine months ended
                                                             September 30,                      September 30,
                                                     ---------------------------        ----------------------------

                                                         1999           1998                1999             1998
                                                     ------------   ------------        ------------    ------------
<S>                                                  <C>            <C>                 <C>             <C>
Revenues
     Settlement income                               $  1,638,913   $        -          $  1,638,913    $        -
     Interest                                              68,142        180,906             152,966         546,106
     Other income                                             -              -                98,672             -
     Rental                                                   -          710,335                 -         3,606,979
     Interest - installment note                              -           18,974                 -           141,009
                                                     ------------   ------------        ------------    ------------

                                                        1,707,055        910,215           1,890,551       4,294,094
                                                     ------------   ------------        ------------    ------------

Costs and expenses
     General and administrative                           136,195         32,936             470,832         165,238
     Operating                                             10,310            100             201,397         497,569
     Provision for equipment impairment                       -              -             2,071,000             -
     Other expenses                                           -            6,361              38,000          48,936
     Depreciation                                             -          364,180                 -         2,048,239
     Management fee                                           -              -                   -           180,200
                                                     ------------   ------------        ------------    ------------

                                                          146,505        403,577           2,781,229       2,940,182
                                                     ------------   ------------        ------------    ------------

                                                        1,560,550        506,638            (890,678)      1,353,912

Gain on sale of aircraft - net                            111,550      7,515,523             111,550      11,128,319
                                                     ------------   ------------        ------------    ------------

Net income (loss)                                    $  1,672,100   $  8,022,161        $   (779,128)   $ 12,482,231
                                                     ============   ============        ============    ============

Net income (loss) attributable to
     Limited partners                                $  1,504,890   $  7,219,945        $   (701,215)   $ 11,234,008
     General partner                                      167,210        802,216             (77,913)      1,248,223
                                                     ------------   ------------        ------------    ------------

                                                     $  1,672,100   $  8,022,161        $   (779,128)   $ 12,482,231
                                                     ============   ============        ============    ============


 Net income (loss) per unit of limited
      partnership interest (385,805 units
      outstanding)                                   $       3.90   $      18.71        $      (1.82)   $      29.11
                                                     ============   ============        ============    ============
</TABLE>

See notes to financial statements.
                                                                               2

<PAGE>
                         AIRCRAFT INCOME PARTNERS L.P.

                         STATEMENT OF PARTNERS' EQUITY



<TABLE>
<CAPTION>
                                                                     Limited          General           Total
                                                                    Partners'        Partner's        Partners'
                                                                     Equity           Equity           Equity
                                                                  -----------        ---------      -----------
<S>                                                               <C>                <C>            <C>
 Balance, January 1, 1999                                         $ 8,313,741        $ 933,699      $ 9,247,440

 Net loss for the nine months
      ended September 30, 1999                                       (701,215)         (77,913)        (779,128)
                                                                  -----------        ---------      -----------

 Balance, September 30, 1999                                      $ 7,612,526        $ 855,786      $ 8,468,312
                                                                  ===========        =========      ===========
</TABLE>

See notes to financial statements.
                                                                               3
<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>


                                                                                           For the nine months ended
                                                                                                September 30,
                                                                                         ----------------------------

                                                                                             1999            1998
                                                                                         ------------    ------------
<S>                                                                                      <C>             <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS

Cash flows from operating activities
     Net (loss) income                                                                   $   (779,128)   $ 12,482,231
     Adjustments to reconcile net (loss) income to net
         cash provided by operating activities
            Provision for equipment impairment                                              2,071,000             -
            Depreciation                                                                          -         2,048,239
            Gain on disposition of aircraft, net                                             (111,550)    (11,128,319)
            Value of marketable securities received
                in settlement of bankruptcy claims                                         (1,213,052)            -
     Changes in assets and liabilities
         Accounts receivable                                                                  445,000         (18,020)
         Other receivables                                                                     29,717          (7,777)
         Restricted cash - security deposits                                                      -           506,120
         Deferred costs                                                                         5,132          95,505
         Prepaid expenses                                                                      (9,978)         13,170
         Accounts payable and accrued expenses                                               (400,735)         56,456
         Maintenance reserves                                                                     -        (1,524,249)
         Security deposits payable                                                                -          (506,120)
         Deferred income                                                                          -          (133,217)
         Deferred costs payable                                                                   -           (50,000)
                                                                                         ------------    ------------

                Net cash provided by operating activities                                      36,406       1,834,019
                                                                                         ------------    ------------

Cash flows from investing activities
     Proceeds from sale of aircraft, net                                                    1,935,977      22,629,614
     Proceeds from installment sale note receivable                                               -         2,911,906
                                                                                         ------------    ------------

                Net cash provided by investing activities                                   1,935,977      25,541,520
                                                                                         ------------    ------------

Cash flows from financing activities
     Distributions to partners                                                                    -       (11,874,221)
                                                                                         ------------    ------------

Net increase in cash and cash equivalents                                                   1,972,383      15,501,318

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

Cash and cash equivalents, end of period                                                 $  6,172,187    $ 21,934,031
                                                                                         ============    ============
</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 nine months ended September 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 lease or 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.

         Marketable securities

         Marketable securities represents certain shares of Class A and Class B
         common stock of Continental Airlines, Inc. ("Continental") received by
         the Partnership in settlement of a claim filed in Continental's
         reorganization proceedings under the United States Bankruptcy Code. See
         Note 6a, Commitments and Contingencies - Continental Airlines, Inc.
         These securities are measured at fair value in accordance with the
         Financial Accounting Standards Board Statement #115, "Accounting for
         Certain Investments in Debt and Equity Securities" ("SFAS #115"). This
         statement requires that investments in debt and equity securities
         classified as available for sale be carried at fair value. Unrealized
         appreciation and depreciation are reflected as a separate component of
         partners' equity.
                                                                               5

<PAGE>

                          AIRCRAFT INCOME PARTNERS L.P.

                          NOTES TO FINANCIAL STATEMENTS


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.

         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 nine months ended
         September 30, 1999 and 1998, reimbursable expense paid to NorthStar
         Presidio amounted to $32,421 and $18,750.

         On October 21, 1999, Presidio entered into a new Services Agreement
         with AP-PCC III, L.P. (the "Agent") pursuant to which the Agent was
         retained to provide asset management and investor relation services to
         the Partnership and other entities affiliated with the Partnership.

         As a result of this agreement, the Agent has the duty to direct the day
         to day affairs of the Partnership, including, without limitation,
         reviewing and analyzing potential sale, financing or restructuring
         proposals regarding the Partnership's assets, preparation of all
         Partnership reports, maintaining Partnership records and maintaining
         bank accounts of the Partnership. The Agent is not permitted, however,
         without the consent of Presidio, or as otherwise required under the
         terms of the Partnership's Agreement of Limited Partnership (the
         "Partnership Agreement") to, among other things, cause the Partnership
         to sell or acquire an asset or file for bankruptcy.

         In order to facilitate the provision by the Agent of the asset
         management services and the investor relation services, effective
         October 25,1999, the officers and directors of the General Partner
         resigned and nominees of the Agent were elected as the officers and
         directors of the General Partner. The Agent is an affiliate of Winthrop
         Financial Associates, a Boston based company that provides asset
         management services, investor relation services and property management
         services to over 150 limited partnerships which own commercial property
         and other assets. The General Partner does not believe that this
         transaction will have a material effect on the operations of the
         Partnership.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 nine months ended September
         30, 1999. For the nine months ended September 30, 1998, IAFM received
         distributions totaling $2,966,412.

         As compensation for the foregoing 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 nine months ended September 30, 1999. For the nine months
         ended September 30, 1998, management fees amounted to $180,200.

                                                                               6

<PAGE>
                          AIRCRAFT INCOME PARTNERS L.P.

                          NOTES TO FINANCIAL STATEMENTS


3        CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES

         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 September 30, 1999. Based upon current
         information with respect to a potential sale of the aircraft,
         management believed that the equipment had been impaired and 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.

         (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. In the quarter ended September
              30, 1999, the Partnership received an additional $111,550 relating
              to the sale of the aircraft as a result of the Partnership
              providing the records for the engines.

                                                                               7
<PAGE>
                          AIRCRAFT INCOME PARTNERS L.P.

                          NOTES TO FINANCIAL STATEMENTS


6        COMMITMENTS AND CONTINGENCIES

         a.       Continental Airlines, Inc.

         In November 1991, in connection with its reorganization under the
         United States Bankruptcy Code, 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 received
         $780,000 on August 24, 1999 as well as 8,684 shares of Continental's
         Class A stock and 24,179 shares of Continental's Class B stock and an
         additional $90,861 on September 24, 1999. On October 6, 1999, the
         Partnership sold all shares of stock for net proceeds aggregating
         approximately $1,213,000, which equaled the Partnership's cost basis in
         the 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.

         During 1997, the lease to Continental of three McDonnell Douglas Model
         DC9-32 aircraft owned by the Partnership was 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 allegations in the
         complaint.

         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

                                                                               8
<PAGE>
                          AIRCRAFT INCOME PARTNERS L.P.

                          NOTES TO FINANCIAL STATEMENTS


6        COMMITMENTS AND CONTINGENCIES (continued)

         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.

                                                                               9
<PAGE>

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

         Liquidity and Capital Resources

         As of September 30, 1999, the Partnership had operating reserves of
         approximately $7,272,000, 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 has encountered competition in attempting to market its
         aircraft due to a surplus in the market of aircraft similar to the
         types owned by the Partnership. In addition, the Partnership will have
         to compete with newer, more fuel-efficient aircraft, which will comply
         with FAA noise requirements. The Partnership believes that as a result
         of the factors listed above there has been a significant decline in the
         re-sale value of the aircraft owned by the Partnership.

         On June 1, 1999, the Partnership sold two aircraft to an unaffiliated
         third party for 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. In the quarter
         ended September 30, 1999, the Partnership received an additional
         $111,550 relating to the sale of the aircraft as a result of the
         Partnership providing the records for the engines.

         At September 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 received
         $780,000 on August 24, 1999 as well as 8,684 shares of Continental's
         Class A stock and 24,179 shares of Continental's Class B stock and an
         additional $90,861 on September 22, 1999. On October 6, 1999, the
         Partnership sold all shares of stock for net proceeds aggregating
         approximately $1,213,000, which equaled the Partnership's cost basis in
         the 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.

         During 1997, the lease of three McDonnell Douglas Model DC9-32 aircraft
         owned by the Partnership was 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.

                                                                              10


<PAGE>


         Liquidity and Capital Resources (continued)

         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
         allegations in the complaint.

         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
         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 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 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 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 types of 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 programs 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. The Partnership is dependent upon the General
         Partner and its affiliates for management and administrative services.
         This could result in system failure or miscalculations causing
         disruptions of operations, including, among other things, a temporary
         inability to process transactions, send invoices, or engage in similar
         normal business activities.

         During the third quarter of 1999, the General Partner and its
         affiliates completed their assessment of computer systems used in
         connection with the management of the Partnership. The General Partner
         and its affiliates have completed upgrading those systems where
         required. The Partnership has to date not borne, nor is it expected
         that the Partnership will bear, any significant costs in connection
         with the upgrade of those systems requiring remediation.

                                                                              11
<PAGE>

         Year 2000 compliance (compliance)

         To date, the General Partner is not aware of any external agent or
         service provider with a Year 2000 issue that would materially impact
         the Partnership's results of operations, liquidity or capital
         resources. However, the General Partner has no means of ensuring that
         external agents and service providers will be Year 2000 compliant. The
         General Partner does not believe that the inability of external agents
         or servive providers to complete their Year 2000 resolution process in
         a timely manner will have a material impact on the financial position
         or results of operations of the Partnership. However, the effect of
         non-compliance by external agents is not readily determinable.


         Results of Operations

         Net income decreased for the three and nine month periods ended
         September 30, 1999 compared to the three and nine month periods ended
         September 30, 1998, principally due to a decrease in gain on sale of
         aircraft partially offset by the settlement income recorded in 1999 and
         the decrease in costs and expenses.

         Revenues increased for the three months and decreased for the nine
         months ended September 30, 1999 compared to the corresponding periods
         in the prior year. Rental income decreased due to the fact that certain
         aircraft came off-lease in 1998 and remained off-lease in 1999, as well
         as due to the sale of certain aircraft in 1998. Interest decreased for
         the three and nine month periods ended September 30, 1999 compared to
         the corresponding periods in the prior year due to lower cash balances
         available for short-term investment. The Partnership recorded
         settlement income during the three and nine month periods ended
         September 30, 1999 due to the settlement of certain claims in the
         Continental Bankruptcy case compared to no settlement income recorded
         during the corresponding periods in the prior year.

         Expenses decreased for the three and nine months ended September 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 for the nine months ended September 30, 1999, 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 claims and the complaint
         filed against Continental.

                                                                              12
<PAGE>


PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         During 1997, the lease of three McDonnell Douglas Model DC9-32 aircraft
         owned by the Partnership was 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 allegations in the
         complaint.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:  None.

(b)      Reports on Form 8-K:  None

                                                                              13

<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 Rothschild
                           ----------------------------------------------------
                           Allan Rothschild
                           Duly Authorized Officer


                           /s/ Lawrence Schachter
                           ----------------------------------------------------
                           Lawrence Schachter
                           Principal Financial and Accounting Officer


                                                                              14
Date: November 11, 1999