Tigerdude,
This happening because you're not getting the covering tight enough before you start to "attach" it to the wood underneath. The trick is to first pull the covering as tight as you can by hand before you start to shrink it and finally attach it. Once you have it as tight as you can pull it by hand, use a heat gun or covering iron (it's a lot easier with a heat gun) to shrink the covering. As you heat it will shrink and pull the wrinkles and bubbles out. After you have it shrunk then use a covering iron to iron it down and attach it to the wood of the plane. You shouldn't get any bubbles as you do this, but if you do use the point of your hobby knife to poke small hole in the bubble and use the covering iron to force the air out of the bubble towards the hole you made. I know that it's a little bit of a frustration, but covering is like just about everything else we do in this hobby in that you just have to practice to get better at it. One huge key to covering is to not get in a hurry. If you are in a hurry you WILL get wrinkles and bubbles, it just takes time to properly do this.

Ken