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, 2001

                                       OR

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

               For the transition period from _______ to ________


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

                          Commission File No. 333-82153

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


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

                                   51-6512392
                        (IRS Employer Identification No.)

                                    DELAWARE
         (State or other jurisdiction of incorporation or organization)

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




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

                          Yes  X                  No
                              ---                    ---

                      This document consists of 23 pages.
<PAGE>

                             Aircraft Finance Trust

          FORM 10-Q - For the Quarterly Period Ended September 30, 2001




                                      INDEX



Part I.       Financial Information Page

         Item 1.      Financial Statements

              a)  Consolidated Balance Sheets - September 30, 2001 and
                  December 31, 2000...........................................3

              b)  Consolidated Statements of Income (Loss) - Three and
                  Nine Months Ended September 30, 2001 and
                  September 30, 2000..........................................4

              c)  Consolidated Statements of Comprehensive Income
                  (Loss) - Three and Nine Months Ended September 30, 2001
                  and September 30, 2000......................................5

              d)  Consolidated Statement of Changes in Beneficial
                  Interest Holders' Equity - Nine Months Ended
                  September 30, 2001 and Year Ended December 31, 2000.........6

              e)  Consolidated Statements of Cash Flows - Nine Months Ended
                  September 30, 2001 and September 30, 2000...................7

              f)  Notes to Consolidated Financial Statements..................8

         Item 2.      Management's Discussion and Analysis of
                      Financial Condition and Results of Operations..........11

         Item 3.      Quantitative and Qualitative Disclosures about
                      Market Risk............................................17

Part II.      Other Information

         Item 6.      Exhibits and Reports on Form 8-K.......................19

         Signatures   .......................................................20


                                       2
<PAGE>

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

Item 1.       Financial Statements


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

                                                     September 30,  December 31,
                                                          2001          2000
                                                     -------------  ------------
                                                      (unaudited)
                                     Assets

Cash and cash equivalents                            $    73,220    $    76,658
Restricted cash                                           11,247         17,761
Rents and other receivables                                3,843          3,352
Aircraft, net                                          1,080,263      1,129,322
Other assets                                                 339            131
                                                     -----------    -----------

     Total assets                                    $ 1,168,912    $ 1,227,224
                                                     ===========    ===========

              Liabilities and Beneficial Interest Holders' Equity

Accounts payable and accrued liabilities             $     4,076    $     5,007
Deferred rental income                                     4,098          4,927
Derivative contracts                                      37,735           --
Security and other deposits                               41,125         37,489
Notes payable:
     Class A-1                                           512,500        512,500
     Class A-2                                           278,567        322,801
     Class B                                             119,814        121,542
     Class C                                             106,000        106,000
     Class D                                              64,000         64,000
                                                     -----------    -----------
     Total notes payable                               1,080,881      1,126,843
                                                     -----------    -----------

     Total liabilities                                 1,167,915      1,174,266
                                                     -----------    -----------

Beneficial interest holders' equity:
     Beneficial interest                                  38,732         52,958
     Accumulated other comprehensive loss                (37,735)          --
                                                     -----------    -----------

     Total beneficial interest holders' equity               997         52,958
                                                     -----------    -----------

     Total liabilities and beneficial interest
        holders' equity                              $ 1,168,912    $ 1,227,224
                                                     ===========    ===========

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

                                       3
<PAGE>


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




                                     Three Months Ended      Nine Months Ended
                                         September 30,          September 30,
                                      2001         2000      2001         2000
                                      ----         ----      ----         ----
Revenues:
   Rental and other income
      from operating leases         $  37,089   $  35,920  $ 109,606   $ 109,860
   Interest income                        767       1,493      3,013       4,170
                                    ---------   ---------  ---------   ---------

      Total revenues                   37,856      37,413    112,619     114,030
                                    ---------   ---------  ---------   ---------

Expenses:
   Interest expense                    18,121      19,649     55,360      58,664
   Depreciation expense                11,089      10,671     33,155      32,043
   Impairment expense                  18,158        --       18,158        --
   Operating expense                    6,614       4,528     15,661      13,449
   Administration and other             1,525       1,475      4,511       4,525
                                    ---------   ---------  ---------   ---------

      Total expenses                   55,507      36,323    126,845     108,681
                                    ---------   ---------  ---------   ---------

Net (Loss) Income                   $ (17,651)  $   1,090  $ (14,226)  $   5,349
                                    =========   =========  =========   =========

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


                                       4
<PAGE>

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


                                   Three Months Ended       Nine Months Ended
                                      September 30,            September 30,
                                    2001         2000        2001         2000
                                    ----         ----        ----         ----

Net income (loss)                 $(17,651)    $  1,090    $(14,226)    $  5,349

Other comprehensive
 loss (Notes 3 and 4)              (24,871)        --       (37,735)        --
                                  --------     --------    --------     --------

Comprehensive
income (loss)                     $(42,522)    $  1,090    $(51,961)    $  5,349
                                  ========     ========    ========     ========

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


                                       5
<PAGE>


                     Aircraft Finance Trust and Subsidiaries
    Consolidated Statement of Changes in Beneficial Interest Holders' Equity
                  For the Nine Months ended September 30, 2001
                                   (unaudited)
                             (dollars in thousands)


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

Balance at December 31, 2000                   --             52,958     52,958

   Net loss                                    --            (14,226)   (14,226)

   Other comprehensive loss:
   Changes in derivative instruments
     Cumulative effect of adopting
       FAS 133                                1,711             --        1,711
     Changes in fair value of
       derivatives                          (39,446)            --      (39,446)
                                           --------         --------   --------

   Total other comprehensive loss           (37,735)            --      (37,735)
                                           --------         --------   --------

Balance at September 30, 2001              $(37,735)        $ 38,732   $    997
                                           ========         ========   ========


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


                                       6
<PAGE>

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

                                                             Nine Months Ended
                                                               September 30,
                                                             2001         2000
                                                             ----         ----

Cash Flows from Operating Activities:
Net income (loss)                                          $(14,226)   $  5,349
Adjustments to reconcile net income to net cash
     provided by operating activities:
     Depreciation expense                                    33,155      32,043
     Impairment expense                                      18,158        --
Changes in assets and liabilities:
     Rents and other receivables                               (491)        897
     Restricted cash                                          6,514       2,065
     Other assets                                              (208)        (60)
     Accounts payable and accrued liabilities                  (931)     (1,754)
     Deferred rental income                                    (829)     (1,641)
     Security and other deposits                              3,636       4,005
                                                           --------    --------

     Net cash provided by operating activities               44,778      40,904
                                                           --------    --------

Cash Flows from Investing Activities:
Aircraft improvements                                        (2,254)       (546)
                                                           --------    --------

     Net cash used in investing activities                   (2,254)       (546)
                                                           --------    --------

Cash Flows from Financing Activities:
Repayment of notes payable                                  (45,962)    (32,963)
                                                           --------    --------

     Net cash used in financing activities                  (45,962)    (32,963)
                                                           --------    --------

Net (Decrease) Increase in Cash and Cash Equivalents         (3,438)      7,395

Cash and Cash Equivalents at Beginning of Period             76,658      72,682
                                                           --------    --------

Cash and Cash Equivalents at End of Period                 $ 73,220    $ 80,077
                                                           ========    ========

Supplemental Cash Flow Information:
     Cash paid for interest expense                        $ 55,967    $ 58,810
                                                           ========    ========


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


                                       7
<PAGE>

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

                               September 30, 2001


Note 1 - Organization

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

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


Note 2 - Basis of Presentation

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

         These interim  unaudited  consolidated  financial  statements should be
read in conjunction with Aircraft Finance's  consolidated  financial  statements
and accompanying notes included in Aircraft Finance's Annual Report on Form 10-K
for the year ended  December  31, 2000 filed with the  Securities  and  Exchange
Commission.

Use of Estimates

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

                                       8
<PAGE>


Note 3 - Risks and Uncertainties

         On  September  11,  2001,  terrorists  hijacked and crashed four United
States commercial  aircraft,  with attendant  significant loss of life, property
damage and economic disruption. Two of the four aircraft crashed into and caused
the World Trade Center  towers to collapse,  and a third crashed into and caused
significant  damage to the Pentagon in Washington,  D.C. As a result, air travel
in the United  States was suspended  for several  days,  restrictions  have been
placed on United States air travel, airline costs such as aircraft insurance and
aircraft  security  have  increased  and  passenger  demand  for air  travel has
significantly declined.  Consequently,  Aircraft Finance's lessees are likely to
incur  higher  costs and lower  revenues,  which would  adversely  impact  their
financial position. Any additional terrorist attacks, the current anti-terrorist
activity in  Afghanistan  and  throughout the world and any military or economic
responses  by the United  States may further  increase  airline  costs and cause
further declines in air travel demand.

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


Note 4 - New Accounting Pronouncements

FAS 144

         In October  2001,  the  Financial  Accounting  Standards  Board  issued
Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the
Impairment or Disposal of Long-Lived  Assets".  SFAS 144, which is effective for
fiscal  years  beginning  after  December  15,  2001  with  earlier  application
encouraged,  addresses financial  accounting and reporting for the impairment or
disposal of long-lived assets. This Statement  supersedes SFAS 121,  "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
of", and the accounting and reporting provisions of Accounting  Principles Board
("APB")  Opinion No. 30,  "Reporting  the Results of Operations -- Reporting the
Effects of Disposal of a Segment of a Business,  and Extraordinary,  Unusual and
Infrequently  Occurring Events and Transactions",  for the disposal of a segment
of a business (as  previously  defined in that  Opinion).  This  Statement  also
amends APB Opinion No. 51, "Consolidated Financial Statements", to eliminate the
exception to  consolidation  for a subsidiary  for which control is likely to be
temporary.

         As of  September  30, 2001,  Aircraft  Finance has written down its two
DC-10-30  aircraft to their  estimated fair values to reflect  changes in market
demand for such aircraft.  As a result,  impairment expense of $18.2 million has
been  recorded in Aircraft  Finance's  statements  of income for the quarter and
period ended September 30, 2001.


Note 5 - Derivative Financial Instruments

         In June  2000,  the  FASB  issued  Statement  of  Financial  Accounting
Standards No. 138 ("FAS 138") "Accounting for Certain Derivative Instruments and
Certain  Hedging  Activities  - an Amendment  of FASB  Statement  No. 133" ("FAS
133").  FAS 138 amends the  accounting  and  reporting  standards of FAS 133 for

                                       9
<PAGE>

certain  derivative  instruments  and certain  hedging  activities.  FAS 133, as
amended,  is effective  for all fiscal  quarters of all fiscal  years  beginning
after June 15, 2000  (January 1, 2001 for  Aircraft  Finance).  FAS 133 requires
that all  derivative  instruments be recorded on the balance sheet at their fair
value.  Changes in the fair value of  derivatives  are  recorded  each period in
current  earnings  or  other  comprehensive  income,   depending  on  whether  a
derivative is designated as part of a hedge  transaction and, if it is, the type
of hedge  transaction.  For Aircraft  Finance's swap  agreements  which meet the
definition of cash-flow hedge transactions, in which Aircraft Finance is hedging
the variability of cash flows related to a variable-rate asset,  liability, or a
forecasted  transaction,  changes in the fair value of the derivative instrument
are reported in other  comprehensive  income. As a result of the adoption of FAS
133,  as  amended,  on January 1, 2001,  Aircraft  Finance  recorded  derivative
contracts  on the  balance  sheet  reflecting  the  estimated  fair value of its
outstanding swaps and a corresponding  increase to other comprehensive income, a
component of beneficial interest holders' equity, of $1.7 million.

         On September 30, 2001,  the fair value of these interest rate swaps was
approximately  ($37.7)  million  compared to $1.7 million on January 01, 2001, a
net reduction in fair value of the derivatives of $39.4 million.

Interest Rate Swap Agreements

         As of  September  30,  2001,  Aircraft  Finance  was a party  to  seven
interest rate swap  agreements.  Four were entered into on May 5, 1999 and three
on July 15, 2000. The total aggregate gross notional  principal  amount of these
interest rate swaps is $865 million at September 30, 2001. Under the agreements,
Aircraft Finance will pay a fixed rate of interest on the notional amount to the
counterparty  and, in turn, the counterparty will pay Aircraft Finance a rate of
interest on the notional  amount based on LIBOR.  The one-month  LIBOR rate with
respect to the Swaps (and the  Notes)  was 3.49% and 6.71% as of  September  30,
2001 and December 31, 2001, respectively.  On September 30, 2001, the fair value
of these interest rate swaps was approximately  ($37.7) million compared to $1.7
million on December 31, 2000. Due to the potential volatility of LIBOR, the fair
value of Aircraft  Finance's  interest rate swap  agreements are also subject to
volatility. The change in fair value of the seven interest rate swaps was due to
changes  in  market   interest   rates.   This  change  was  recorded  in  other
comprehensive income in the equity section of the balance sheet.

         The following  table  presents,  as of September 30, 2001, a summary of
the terms of  Aircraft  Finance's  interest  rate swap  agreements:  (dollars in
thousands)

  Fixed      Rate to be          Rate to be
Notional  paid by Aircraft  received by Aircraft     Maturity          Estimated
 Amount        Finance             Finance             Date           fair value
 ------        -------             -------             ----           ----------
$ 60,000        5.50%              LIBOR          January 15, 2002     $   (532)
 175,000        5.56%              LIBOR          October 15, 2002       (5,279)
 345,000        5.65%              LIBOR          January 15, 2004      (16,619)
 230,000        5.71%              LIBOR         November 15, 2004      (12,472)
  20,000        7.13%              LIBOR          January 15, 2002         (291)
  20,000        7.14%              LIBOR          October 15, 2002         (947)
  15,000        7.17%              LIBOR              May 15, 2005       (1,595)
                                                                       --------
                                                                       $(37,735)
                                                                       ========

                                       10
<PAGE>



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

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

         Aircraft  Finance is a special  purpose  entity,  which  owns  aircraft
subject to operating leases.  Aircraft  Finance's  business consists of aircraft
leasing  activities.  Aircraft  Finance  may  also  engage  in  acquisitions  of
additional  aircraft  and sales of  aircraft.  Any  acquisitions  of  additional
aircraft and the related issuance of additional notes will require  confirmation
by the rating  agencies  that they will not lower,  qualify  or  withdraw  their
ratings on the outstanding Notes as a result.  Aircraft Finance's aggregate cash
flows from such activities will be used to service the interest and principal on
the  outstanding  Notes and to make  distributions  of remaining  amounts to the
holders of the beneficial interest  certificates,  after the payment of expenses
incurred by Aircraft Finance.

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

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

Recent Developments

The Aircraft and Lessees

         On  September  11,  2001,  terrorists  hijacked and crashed four United
States commercial  aircraft,  with attendant  significant loss of life, property
damage and economic disruption. Two of the four aircraft crashed into and caused

                                       11
<PAGE>

the World Trade Center  towers to collapse,  and a third crashed into and caused
significant  damage to the Pentagon in Washington,  D.C. As a result, air travel
in the United  States was suspended  for several  days,  restrictions  have been
placed on United States air travel, airline costs such as aircraft insurance and
aircraft  security  have  increased  and  passenger  demand  for air  travel has
significantly declined.  Consequently,  Aircraft Finance's lessees are likely to
incur  higher  costs and lower  revenues,  which would  adversely  impact  their
financial position. Any additional terrorist attacks, the current anti-terrorist
activity in  Afghanistan  and  throughout the world and any military or economic
responses  by the United  States may further  increase  airline  costs and cause
further declines in air travel demand.

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

         In January 2001, a B737-300  aircraft formerly leased by a lessee based
in Ireland was returned early. In March 2001,  Aircraft  Finance  delivered this
aircraft to a lessee based in Switzerland for a short-term  lease ending October
31, 2001. In September  2001,  Aircraft  Finance signed a contract with a lessee
based in the United  States for a three-year  lease of this  aircraft  beginning
December 15, 2001. This aircraft represents  approximately 2.4% of the aggregate
appraised value at December 31, 2000.

         On January  10,  2001,  Trans  World  Airlines,  Inc.  ("TWA"),  one of
Aircraft  Finance's lessees,  filed for Chapter 11 bankruptcy  protection in the
United States  Bankruptcy  Court for the District of Delaware  (the  "Bankruptcy
Court"). TWA leases one aircraft from Aircraft Finance, which represents 4.9% of
the aircraft by aggregate  appraised  value as of December 31, 2000. By order of
Judge Peter J. Walsh dated  March 12,  2001,  the  Bankruptcy  Court  authorized
American Airlines,  Inc.'s  ("American") bid, submitted on February 28, 2001, to
sell  substantially  all of TWA's  assets to  American.  As of March  12,  2001,
Aircraft  Finance has entered into a new agreement with American with respect to
the TWA lease.  The new lease term has an expiration date of September 22, 2002.
At  September  30,  2001,  TWA was  current  in its  payments,  which are due in
arrears.

         In June 2001, Aircraft Finance signed a contract with a lessee based in
the  Ukraine  for a  five-year  lease of one  B737-300  aircraft,  which will be
returned  from  British  Midland  in  March  2002.   This  aircraft   represents
approximately 2.5% of the aggregate appraised value at December 31, 2000.

         City Bird  Belgium has filed for  bankruptcy  in a Brussels  Commercial
Court and has been in bankruptcy  protection since July 2001. Aircraft Finance's
B737-400  aircraft  formerly  leased to City Bird France,  a  subsidiary  of and
guaranteed  by City Bird  Belgium,  was  repossessed  on October 17, 2001.  This
aircraft, which represents 2.7% of the aggregate appraised value at December 31,
2000, has been off-lease as of October 17, 2001.

         In October 2001, Aircraft Finance issued notices of default to a lessee
based in Brazil after this lessee  failed to make  payments to Aircraft  Finance
including payments due under a restructuring of lease payment terms. This lessee
leases one B737-300  aircraft and two  B767-200ER  aircraft,  which  represent a
total of 8.0% of the aggregate appraised value at December 31, 2000.

                                       12
<PAGE>


         In November  2001,  Canada 3000 (Royal  Aviation)  filed for bankruptcy
protection  in Canada.  Royal  Aviation  leases  one  A310-300  aircraft,  which
represents 2.6% of the aggregate appraised value at December 31, 2000.


Other Developments

         Under the terms of the  indenture,  Aircraft  Finance  is  required  to
obtain annual  appraisals of its aircraft.  In February 2001,  Aircraft  Finance
received  appraisals  of the adjusted base values of the aircraft as of December
31, 2000 from three independent appraisers that are members of the International
Society of  Transport  Aircraft  Trading,  as  required  by the  indenture.  The
aggregate of the average of the three  appraisals (the current  appraised value)
of the aircraft at December 31, 2000 was $1,177.4 million. Such average is below
the assumed  portfolio  values set forth in the indenture  relating to the notes
for  certain  months  in 2001.  This  reduction  in the  appraised  value of the
portfolio  resulted in  increased  scheduled  principal  payments to the Class A
Notes.

         As of September 30, 2001,  there were three former  lessees,  which had
defaulted.  With respect to these lessees,  all four related  aircraft have been
returned  early.  The total  amount  of rent and  maintenance  reserve  payments
outstanding  under the leases for the four  aircraft  from these  three  lessees
amounted to  approximately  $5.6  million at September  30,  2001.  One of these
lessees,  based in Brazil, owed approximately $1.0 million at September 30, 2001
for outstanding  maintenance  reserve payments,  after the application of a $1.0
million cash security  deposit.  The second lessee,  based in the United States,
owed   approximately   $1.0  million  at  September  30,  2001  for  outstanding
maintenance  reserve  payments  after the  application  of $1.1  million of cash
security  deposits and a letter of credit.  The third  lessee,  based in Turkey,
owed  approximately  $3.6 million at September 30, 2001 for outstanding rent and
maintenance  reserve  payments  after the  application  of $1.1  million of cash
security deposits and letters of credit.

         As of September 30, 2001,  Aircraft Finance has repaid principal on the
Notes of $128.1  million,  as  compared to $105.2  million  based on revenue and
expense assumptions found in the Offering Memorandum dated April 21, 1999. For a
more  detailed  analysis  of  Aircraft  Finance's  performance  compared  to the
assumptions in the Offering Memorandum, see the unaudited Exhibit 99.1.

         The beneficial  interests in Aircraft Finance were originally purchased
by UniCapital AFT-I, Inc. (51%) and UniCapital AFT-II, Inc. (49%), each of which
were  wholly-owned  indirect  subsidiaries  of  UniCapital  Air Group,  Inc.,  a
wholly-owned  subsidiary of UniCapital Coporation  ("UniCapital").  During 1999,
2000,  and the period  ended  September  30,  2001,  UniCapital  sold all of its
ownership of AFT-I, Inc., and AFT-I, Inc. and AFT-II, Inc. sold certain of their
beneficial  interests in Aircraft Finance to financial  services  companies.  In
addition, during the three months ended March 31, 2001, AFT-II, Inc. transferred
certain of its remaining  interests to AFT-III,  Inc., a  wholly-owned  indirect
subsidiary of UniCapital.  On August 9, 2001, AFT-III,  Inc. transferred certain
of its remaining  interests in Aircraft Finance to one of the financial services
companies. As of September 30, 2001, financial services companies owned 71.0% of
Aircraft Finance,  AFT-II, Inc. owned 1.6% of Aircraft Finance and AFT-III, Inc.
owned 27.4% of Aircraft Finance. On December 11, 2000, UniCapital and the entity
that  directly  owns  AFT-II,  Inc.  and  AFT-III,   Inc.  filed  petitions  for
reorganization  under Chapter 11 of the United States  Bankruptcy Code in the U.
S.  Bankruptcy  Court for the  Southern  District  of New York (the  "Bankruptcy
Court"). As of September 30, 2001, UniCapital and such owner of AFT-II, Inc. and
AFT  III,  Inc.  were  still  operating  as  debtors  in  possession  under  the
jurisdiction of the Bankruptcy Court.

                                       13
<PAGE>


Results of Operations

         Aircraft  Finance reported a net loss of $17.7 million during the three
months ended  September  30, 2001 ("2001  Quarter")  on total  revenues of $37.9
million  compared  to net  income of $1.1  million  on total  revenues  of $37.4
million during the three months ended September 30, 2000 ("2000 Quarter"), and a
net loss of $14.2 million on total  revenues of $112.6  million  during the nine
months ended September 30, 2001 ("2001  Period")  compared to net income of $5.3
million on total revenue of $114.0  million  during nine months ended  September
30, 2000 ("2000 Period"). The net loss reported in the 2001 Quarter and the 2001
Period is  primarily  due to a  write-down  of two  DC-10-30  aircraft  to their
estimated  fair values as of September 30, 2001.  The decrease in total revenues
in the 2001 Period  compared to the 2000 Period is primarily due to lower rental
rates and  interest  income,  partially  offset by higher  maintenance  reserves
income and other income.  Aircraft  Finance's  revenues  consisted of rental and
other income from operating leases and interest income earned on cash balances.

         Rental and other income from operating leases was $37.1 million for the
2001 Quarter compared to $35.9 million for the 2000 Quarter,  and $109.6 million
for the 2001 Period compared to $109.9 million for the 2000 Period. The increase
of rental and other income in the 2001 Quarter is primarily  due to the negative
impact of placing certain  lessees on non-accrual  status and off-lease time for
certain  aircraft in the 2000 Quarter.  The slight  decrease of rental and other
income in the 2001 period is  primarily  due to lower  rental  rates in the 2001
period  partially  offset by increase of maintenance  reserve income in the 2001
period.

         Interest income was $0.8 million for the 2001 Quarter  compared to $1.5
million for the 2000 Quarter,  and $3.0 million for the 2001 Period  compared to
$4.2  million  for the 2000  Period.  These  decreases  are the  result of lower
average  cash  balances  and a  decline  in the  interest  rate  earned on those
balances.  Interest income is earned on Aircraft Finance's cash balances,  which
are  invested in  short-term  highly  liquid  investments  as  permitted  by the
indenture.  The amount of interest  income  earned varies based upon the current
interest rates paid on such  investments  and the level of cash balances held by
Aircraft Finance.


         Interest expense, including interest rate swap expense of $4.1 million,
was  $18.1  million  for the 2001  Quarter  compared  to $19.6  million,  net of
interest  rate swap proceeds of $2.3  million,  for the 2000 Quarter,  and $55.4
million,  including net interest rate swap expense of $6.4 million, for the 2001
Period  compared to $58.7  million,  net of interest  rate swap proceeds of $4.9
million,  for the 2000 Period.  Interest  expense is paid on Aircraft  Finance's
outstanding  Notes. The weighted average interest rate on the Notes for the 2001
Quarter and 2001 Period was 6.55% and 6.69%, respectively, compared to 6.75% and
6.67%  for the 2000  Quarter  and 2000  Period,  respectively.  The  outstanding
balance of the Notes at September  30, 2001 and  September 30, 2000 was $1,080.9
million and $1,143.2 million, respectively. Interest expense varies based on the
actual  interest rates on the floating rate Notes,  the interest rate swap costs
or proceeds and the outstanding principal balances of the Notes.

         Depreciation expense was $11.1 million for the 2001 Quarter compared to
$10.7  million  for the 2000  Quarter,  and $33.2  million  for the 2001  Period
compared to $32.0 million for the 2000 Period.  The increase in the 2001 Quarter
and 2001 Period as compared to the 2000 Quarter and 2000 Period is primarily due
to the depreciation of additional capitalized improvements.

                                       14
<PAGE>


         As of September  30,  2001,  Aircraft  Finance  wrote down the net book
value of its two  DC-10-30  aircraft to  estimated  fair values and  incurred an
impairment expense of $18.2 million.

         Operating  expense  was  $6.6  million  for the 2001  Quarter  and $4.5
million for the 2000 Quarter,  and $15.7 million for the 2001 Period compared to
$13.4 million for the 2000 Period.  In the 2001 Quarter there was a write-off of
a $1.2 million  receivable for reimbursed  maintenance costs and $0.7 million of
expenses accrued for Eurocontrol  charges.  Operating expense consists primarily
of  aircraft  maintenance  expense  and lease  related  costs.  Most of Aircraft
Finance's lease contracts require lessees to bear the obligation for maintenance
costs on airframes and engines,  and require lessees to make certain payments to
lessor, calculated on measures of usage to cover the expected costs of scheduled
maintenance  charges,  including  major  airframe  and  engine  overhauls.  Such
payments are included in rental and other income from  operating  leases.  Under
the  provisions of all  participating  leases,  for certain  airframe and engine
overhauls,  the  lessees  are  reimbursed  for  costs  incurred  up to,  but not
exceeding,  related payments made by lessees,  to lessor based on those measures
of usage.  Reserves are maintained at amounts considered adequate to cover those
expected payments for maintenance costs.

         Administrative  and other  expenses were $1.5 million for both the 2001
Quarter and the 2000 Quarter,  and $4.5 million for both the 2001 Period and the
2000  Period.  These  expenses  consist  primarily  of fees paid to the  service
providers and other general and  administrative  costs.  The most significant of
these fees was the  servicer  fee,  which  amounted to $1.1 million for both the
2001 Quarter and 2000 Quarter, and $3.3 million for both the 2001 Period and the
2000 Period. A significant  portion of the fees paid to the Servicer  correspond
to  rental  payments  due  and  received.  These  fees  are  based  upon a fixed
percentage  of rental  receipts  and will vary with  rental  income of  Aircraft
Finance.

         On September  30, 2001,  the fair value of the interest  rate swaps was
approximately  ($37.7) million  compared to $1.7 million on December 31, 2000, a
difference of ($39.4) million.  This accumulated other  comprehensive  income of
($39.4)  million was recorded in the  Consolidated  Statement  of  Comprehensive
Income.

Liquidity

         Aircraft Finance held cash and cash  equivalents of $73.2 million,  and
restricted  cash of $11.2  million at  September  30,  2001,  compared  to $80.1
million and $17.4  million,  respectively,  at September 30, 2000. The liquidity
reserve  amount,  which is  included  in cash and cash  equivalents,  was  $52.0
million at both September 30, 2001 and September 30, 2000. The liquidity reserve
amount is required  under the terms of the indenture and is intended to serve as
a source of liquidity for Aircraft Finance's  maintenance  obligations and other
contingent  costs.  A deposit of $6.75 million was refunded to the servicer,  GE
Capital Aviation Services,  Limited,  during the 2001 Quarter.  This deposit was
originally  used to secure  one of  Aircraft  Finance's  lessees  in the case of
delinquency  on any of its payments  during a two-year  period that commenced on
the date such leases were novated to Aircraft Finance.  The deposit was refunded
in September 2001 because there were no such delinquencies.

                                       15
<PAGE>


Cash Flows from Operating Activities

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

         Net cash provided by operating  activities for the 2001 Period amounted
to $44.8 million,  primarily  reflecting  net loss of $14.2 million  adjusted by
non-cash impairment expense of $18.2 million,  non-cash  depreciation expense of
$33.2 million,  and increases in security and other deposits of $3.6 million and
a decrease in restricted cash of $6.5 million. These were offset by increases in
rent and other receivables of $0.5 million and other assets of $0.2 million, and
decreases  in  accounts  payable  and accrued  liabilities  of $0.9  million and
deferred rental income of $0.8 million.

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

Cash Flows from Investing and Financing Activities

         Net cash used in investing  activities for the 2001 Period  amounted to
$2.3  compared to $0.5 million for the 2000 Period.  Aircraft  Finance  incurred
greater  expenditures  on capitalized  aircraft  improvements in the 2001 Period
compared to the 2000 Period.

         Net cash used in financing  activities for the 2001 Period  amounted to
$46.0 million due to principal repayment on the Notes. As a result, the balances
of these Notes were $1,080.9 million at September 30, 2001. Generally, principal
and interest is repaid on these Notes monthly based upon the cash collected, the
anticipated  expenses  and the cash  balances  held by  Aircraft  Finance on the
calculation date. As a result, monthly principal payments on the Notes will vary
depending on Aircraft Finance's revenues and expenses for the month. In addition
to the factors discussed above, during the 2001 Period additional  principal was
redirected  to certain  Classes  of Notes as a result of the  annual  base value
appraisals of aircraft.

         Net cash used in financing  activities for the 2000 Period  amounted to
$33.0 million due to principal  repayment on the Notes. As a result, the balance
of these Notes was $1,143.2 million at September 30, 2000.

         At September 30, 2001,  Aircraft  Finance was a party to seven interest
rate swap agreements.  Four of these agreements were entered into on May 5, 1999
and the other three were entered into on June 29, 2000 but had an effective date
of July 15,  2000.  The net  aggregate  amounts  due to be paid or  received  by
Aircraft Finance under these agreements is determined  monthly and is due on the
same day as the  payments  under the  Notes.  The net  economic  effect of these
interest  rate swaps was to hedge  Aircraft  Finance's  variable  interest  rate
exposure  from  movements in interest  rates over the duration of certain  lease
terms. Please see "Item 3. Quantitative and Qualitative Disclosures about Market
Risk" for further information about these interest rate swap agreements.

                                       16
<PAGE>



Item 3.  Quantitative and Qualitative Disclosures about Market Risk

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

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

         Aircraft  Finance is a party to five  classes of Notes.  The  estimated
fair value of these Notes at September 30, 2001 was  approximately  $932 million
compared to $1,121  million at December 31, 2000. The terms of each class of the
Notes,  including the outstanding principal amount at September 30, 2001, are as
follows: (dollars in thousands)

             Outstanding
 Class of     Principal                          Expected Final        Final
  Notes        Amount        Interest Rate        Payment Date     Maturity Date
  -----        ------        -------------        ------------     -------------
Class A-1   $  512,500         LIBOR + 0.48%       May 15, 2004     May 15, 2024
Class A-2      278,567         LIBOR + 0.50%      June 15, 2008     May 15, 2024
Class B        119,814         LIBOR + 1.15%       May 15, 2016     May 15, 2024
Class C        106,000                 8.00%      July 15, 2016     May 15, 2024
Class D         64,000                11.00%    August 15, 2016     May 15, 2024
            ----------
            $1,080,881
            ==========

         Aircraft  Finance was a party to seven interest rate swap agreements at
September 30, 2001. Under the agreements, Aircraft Finance will pay a fixed rate
of  interest  on the  notional  amount to the  counterparty  and,  in turn,  the
counterparty will pay Aircraft Finance a rate of interest on the notional amount
based on one month LIBOR.  The one month LIBOR rate with respect to the Notes as
of September  30, 2001 and December 31, 2000 was 3.49% and 6.71%,  respectively.
Due to the volatility of LIBOR,  the fair value of Aircraft  Finance's  interest
rate swap agreements are also subject to volatility.

                                       17
<PAGE>


         The following  table  presents,  as of September 30, 2001, the terms of
Aircraft Finance's interest rate swap agreements: (dollars in thousands)

  Fixed      Rate to be           Rate to be
Notional  paid by Aircraft   received by Aircraft    Maturity          Estimated
 Amount        Finance              Finance            Date           fair value
 ------        -------              -------            ----           ----------
$ 60,000        5.50%                LIBOR         January 15, 2002    $   (532)
 175,000        5.56%                LIBOR         October 15, 2002      (5,279)
 345,000        5.65%                LIBOR         January 15, 2004     (16,619)
 230,000        5.71%                LIBOR        November 15, 2004     (12,472)
  20,000        7.13%                LIBOR         January 15, 2002        (291)
  20,000        7.14%                LIBOR         October 15, 2002        (947)
  15,000        7.17%                LIBOR             May 15, 2005      (1,595)
                                                                       --------
                                                                       $(37,735)
                                                                       ========

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

                                       18
<PAGE>


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

Item 6.    Exhibits and Reports of Form 8-K

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

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

b.      Reports on Form 8-K

        During the quarterly  period ended September 30, 2001,  Aircraft Finance
        filed  reports on Form 8-K dated  July 16,  2001,  August  15,  2001 and
        September  17, 2001.  Such  reports on Form 8-K  included  copies of the
        monthly reports to holders of the Notes.

                                       19
<PAGE>




                                   SIGNATURES



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


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


      November 13, 2001                     By:    /S/CHARISSE L. RODGERS
      -----------------                            ----------------------
           Date                             Name:  Charisse L. Rodgers
                                            Title: Assistant Vice President


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



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


/S/DAVID H. TREITEL       Independent Controlling Trustee     November 13, 2001
-------------------                                           -----------------
David H. Treitel


/S/RICHARD E. CAVANAGH    Independent Controlling Trustee     November 13, 2001
----------------------                                        -----------------
Richard E. Cavanagh


/S/DONALD G. BUTLER       Equity Trustee and Controlling      November 13, 2001
-------------------       Trustee                             -----------------
Donald G. Butler


/S/CHARISSE L. RODGERS    Owner Trustee                       November 13, 2001
----------------------                                        -----------------
Wilmington Trust Company,
not in its individual
capacity but solely as
the Owner Trustee

                                       20