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

                      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


      Commission File Number:  0-24795

                    AVIATION GENERAL, INCORPORATED
      (Exact name of registrant as specified in its charter)


      Delaware                                           73-1547645
      (State of Incorporation)                         (IRS Employer
                                                     Identification No.)

      7200 NW 63rd Street
      Hangar 8, Wiley Post Airport
      Bethany, Oklahoma                                       73008
      (Address of principal executive offices)              (Zip Code)

                                     (405) 440-2255
              (Registrant's telephone number, including area code)

         Indicate by check mark whether the registrant (1) has filed all reports
      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 requirement for the past 90 days.

      Yes__X__                           No_____
           -

      There were 6,529,330 Shares of Common Stock Outstanding as of October 31,
2001.


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



<PAGE>




PART I. FINANCIAL INFORMATION
ITEM  I. FINANCIAL STATEMENTS

                  AVIATION GENERAL, INCORPORATED AND SUBSIDIARIES
                       CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                               (Unaudited)
                                                                              September 30,             December 31,
                                                                                  2001                      2000
                                                                           --------------------      --------------------
<S>                                                                        <C>                       <C>
                                    ASSETS
Current Assets
    Cash and cash equivalents                                                          $11,595                  $135,016
    Accounts receivable                                                                 21,785                   551,425
    Current portion of note receivable                                                  28,202                    25,628
    Inventories                                                                      8,272,684                 7,992,171
    Prepaid expenses and other assets                                                  218,966                   153,490
                                                                           --------------------      --------------------
       Total current assets                                                          8,553,232                 8,857,730
                                                                           --------------------      --------------------

Property and equipment
    Office equipment and furniture                                                     372,162                   363,388
    Vehicles and aircraft                                                               95,115                    95,115
    Manufacturing equipment                                                            385,179                   382,124
    Tooling                                                                            676,747                   654,619
    Leasehold improvements                                                             315,051                   311,764
                                                                           --------------------      --------------------
                                                                                     1,844,254                 1,807,010
    Less accumulated depreciation                                                   (1,170,907)               (1,085,037)
                                                                           --------------------      --------------------
                                                                                       673,347                   721,973
                                                                           --------------------      --------------------

Other assets
    Notes receivable, less current maturities                                           73,694                    95,921
    Available-for-sale equity securities - related party                               174,200                   603,000
    Note receivable from related party                                               1,529,889                 1,529,889
                                                                           --------------------      --------------------
                                                                                     1,777,783                 2,228,810
                                                                           --------------------      --------------------
                                                                                   $11,004,362               $11,808,513
                                                                           ====================      ====================
</TABLE>



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



<PAGE>









              AVIATION GENERAL, INCORPORATED AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                               (Unaudited)
                                                                              September 30,             December 31,
                                                                                  2001                      2000
                                                                           --------------------      --------------------

                     LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                                       <C>                       <C>
Current liabilities
    Accounts payable                                                               $1,872,371                 $1,226,414
    Accrued expenses                                                                  305,105                    561,398
    Refundable deposits                                                               141,873                    115,814
    Notes payable                                                                   3,520,810                  3,035,000
                                                                           --------------------      --------------------
       Total current liabilities                                                    5,840,159                  4,938,626
                                                                           --------------------      --------------------
    DEFERRED TAX LIABILITY                                                                  -                     58,568
                                                                           --------------------      --------------------

Stockholders' Equity
    Preferred stock, $.01 par value, 5,000,000 shares
        Authorized; no shares outstanding                                                   -                          -
    Common stock, $.50 par value, 20,000,000 shares
        Authorized; 7,631,519 shares issued at September
        30, 2001 and 7,051,519 issued at December 31, 2000                          3,815,759                  3,525,759
    Additional paid-in capital                                                     36,924,892                 36,889,799
    Less: Treasury stock at cost 772,189 shares at
        September 30, 2001 and December 31, 2000                                   (1,294,193)                (1,294,193)
    Accumulated other comprehensive income (loss)                                    (244,757)                   113,691
    Accumulated deficit                                                           (34,037,498)               (32,423,737)
                                                                           --------------------      --------------------
    Total stockholders' equity                                                      5,164,203                  6,811,319
                                                                           --------------------      --------------------
                                                                                  $11,004,362                $11,808,513
                                                                           ====================      ====================
</TABLE>


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


<PAGE>




                      AVIATION GENERAL, INCORPORATED
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                (Unaudited)
<TABLE>
<CAPTION>

                                                                Three Months Ended September 30,
                                                               2001                          2000
                                                      -----------------------       -----------------------
<S>                                                   <C>                           <C>
Net sales - aircraft                                             $1,277,118                    $4,307,203
Net sales - service                                                 275,278                       497,595
                                                      -----------------------       -----------------------
   Total net sales                                                1,552,396                     4,804,798
                                                      -----------------------       -----------------------

Cost of sales - aircraft                                          1,024,284                     3,361,773
Cost of sales - service                                             237,559                       359,996
                                                      -----------------------       -----------------------
   Total cost of sales                                            1,261,843                     3,721,769
                                                      -----------------------       -----------------------

Gross margin                                                        290,553                     1,083,029
                                                      -----------------------       -----------------------

Other operating expenses
   Product development and engineering costs                         61,995                       102,261
   Selling, general and administrative expenses                     690,641                       725,181
                                                      -----------------------       -----------------------
     Total other operating expenses                                 752,636                       827,442
                                                      -----------------------       -----------------------

Operating income (loss)                                            (462,083)                      255,587
                                                      -----------------------       -----------------------

Other income (expenses)
   Other income                                                      36,056                        55,872
   Interest expense                                                (124,900)                      (59,073)
   Other expense                                                     (8,837)                          (33)
                                                      -----------------------       -----------------------
   Total other income                                               (97,681)                       (3,234)
                                                      -----------------------       -----------------------

Net income (loss)                                                 ($559,764)                     $252,353
                                                      =======================       =======================

Net income per share

   Weighted average common shares
      outstanding, basic                                           6,730,091                     6,376,334
                                                      -----------------------       -----------------------
   Net income (loss) per share, basic                                ($0.08)                         $0.04
                                                      =======================       =======================

   Weighted average common shares
      Outstanding, diluted                                         6,730,091                     6,619,192
                                                      -----------------------       -----------------------
   Net income (loss) per share, diluted                              ($0.08)                         $0.04
                                                      =======================       =======================
</TABLE>



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


<PAGE>




                                      AVIATION GENERAL, INCORPORATED
                             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                               (Unaudited)
<TABLE>
<CAPTION>


                                                                Nine Months Ended September 30,
                                                               2001                          2000
                                                      -----------------------       -----------------------
<S>                                                   <C>                           <C>
Net sales - aircraft                                             $6,141,113                   $11,529,604
Net sales - service                                               1,270,051                     1,473,856
                                                      -----------------------       -----------------------
   Total net sales                                                7,411,164                    13,003,460
                                                      -----------------------       -----------------------

Cost of sales - aircraft                                          5,162,363                     9,028,129
Cost of sales - service                                           1,042,790                     1,098,131
                                                      -----------------------       -----------------------
   Total cost of sales                                            6,205,153                    10,126,260
                                                      -----------------------       -----------------------

Gross margin                                                      1,206,011                     2,877,200
                                                      -----------------------       -----------------------

Other operating expenses
   Product development and engineering costs                        244,172                       295,747
   Selling, general and administrative expenses                   2,326,161                     2,201,271
                                                      -----------------------       -----------------------
     Total other operating expenses                               2,570,333                     2,497,018
                                                      -----------------------       -----------------------

Operating income (loss)                                          (1,364,322)                      380,182
                                                      -----------------------       -----------------------

Other income (expenses)
   Other income                                                     136,359                       168,475
   Interest expense                                                (370,860)                     (144,644)
   Other expense                                                    (14,936)                         (428)
                                                      -----------------------       -----------------------
   Total other income                                              (249,437)                       23,403
                                                      -----------------------       -----------------------

Net income (loss)                                               ($1,613,759)                     $403,585
                                                      =======================       =======================
Net Income (loss) per share

   Weighted average common shares
      Outstanding, basic                                           6,431,235                     6,401,065
                                                      -----------------------       -----------------------
   Net Income (loss) per share, basic                                ($0.25)                         $0.06
                                                      =======================       =======================

   Weighted average common shares
      outstanding, diluted                                         6,431,235                     6,721,703
                                                      -----------------------       -----------------------
   Net Income (loss) per share, diluted                              ($0.25)                         $0.06
                                                      =======================       =======================
</TABLE>


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


<PAGE>



                     AVIATION GENERAL, INCORPORATED
             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (Unaudited)
<TABLE>
<CAPTION>

                                                                           Nine Months Ended September 30,
                                                                            2001                     2000
                                                                     --------------------     --------------------
<S>                                                                  <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net Income (Loss)                                                      $(1,613,759)                $403,585
     Adjustments to reconcile net income (loss) to
         net cash used by operating activities
         Depreciation and amortization                                           85,927                  107,302
         Non-cash interest earnings                                             (92,230)                (105,319)
         Receipts on notes receivable - related party                                 -                   41,045
         Changes in assets and liabilities
               (Increase) decrease  in
                   Accounts receivable                                          529,640                 (820,322)
                   Notes receivable                                              19,653                   17,173
                   Notes receivable - related party                                   -                     (142)
                   Inventories                                                 (280,513)              (1,630,876)
                   Prepaid expense and other assets                             (65,476)                  56,079
               Increase (decrease) in
                   Accounts payable                                             645,957                  685,079
                   Accrued expenses                                            (256,293)                  74,419
                   Refundable deposits                                           26,059                  (63,408)
                                                                     --------------------     --------------------
     Net cash used by operating activities                                   (1,001,035)              (1,235,385)
                                                                     --------------------     --------------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase of securities of related party                                          -                 (113,590)
     Capital expenditures                                                       (37,244)                 (79,836)
                                                                     --------------------     --------------------
     Net cash (used) provided by investing activities                           (37,244)                (193,426)
                                                                     --------------------     --------------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from borrowings                                                 4,116,943                5,212,430
     Payments on borrowings                                                  (3,202,085)              (3,676,888)
     Exercise of stock options                                                        -                   12,501
     Purchase of treasury stock                                                       -                 (325,000)
                                                                     --------------------     --------------------
     Net cash provided by financing activities                                  914,858                1,223,043
                                                                     --------------------     --------------------

Net decrease in cash                                                           (123,421)                (205,768)
Cash and cash equivalents at beginning of period                                135,016                  281,138
                                                                     --------------------     --------------------
Cash and cash equivalents at end of period                                      $11,595                  $75,370
                                                                     ====================     ====================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION
      Cash paid during the period for:
         Interest                                                              $347,486                 $130,834
         Income taxes                                                                 -                        -
</TABLE>


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


<PAGE>




                         AVIATION GENERAL, INCORPORATED
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1. The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations; however, the Company believes that the disclosures are adequate to
make the information presented not misleading. In the opinion of the Company,
all adjustments necessary to present fairly the financial position of Aviation
General, Incorporated as of September 30, 2001 and December 31, 2000, and the
results of operations and cash flows for the three and nine month periods ended
September 30, 2001 and 2000 have been included and are of a normal, recurring
nature. The results of operations for such interim periods are not necessarily
indicative of the results for the full year. It is suggested that these
condensed financial statements be read in conjunction with the Company's 2000
Annual Report on Form 10-K.

2. Basic income (loss) per share of common stock has been computed by using the
weighted average number of shares of common stock outstanding during the period.
Diluted income (loss) per share has been computed based on the assumption that
all dilutive options are exercised.

<TABLE>
<CAPTION>

                                                                     Nine months ending
                                                       September 30, 2001            September 30, 2000
                                                       ------------------            ------------------
<S>                                                    <C>                          <C>
  Numerator
       Net income (loss)                                    ($1,613,759)                  $403,585

  Denominator
       Weighted average shares outstanding,
         Basic                                                6,431,235                  6,401,065

       Effect of dilutive securities
         Stock options                                                -                    320,638
                                                         --------------               ------------
  Denominator for income (loss) per share
    assuming dilution                                         6,431,235                  6,721,703
                                                         ==============               ============
  Income (loss) per share, basic                                ($0.25)                     $ 0.06
                                                         ==============               ============

  Income (loss) per share, assuming dilution                    ($0.25)                     $ 0.06
                                                         ==============               ============
</TABLE>


<TABLE>
<CAPTION>

                                                                    Three months ending
                                                       September 30, 2001          September 30, 2000
                                                       ------------------          ------------------
<S>                                                   <C>                          <C>
  Numerator
       Net income (loss)                                      ($559,764)                  $252,353

  Denominator
       Weighted average shares outstanding,
         Basic                                                6,730,091                  6,376,334

       Effect of dilutive securities
         Stock options                                                -                    242,858
                                                                  -----                -----------

  Denominator for income per share,
    assuming dilution                                         6,730,091                  6,619,192
                                                             ==========                 ==========

  Income (loss) per share, basic                                ($0.08)                     $ 0.04
                                                         ==============               ============

  Income (loss) per share, assuming dilution                    ($0.08)                     $ 0.04
                                                         ==============               ============
</TABLE>

<PAGE>




3.  Total comprehensive income (loss) for the periods presented is as follows:
<TABLE>
<CAPTION>

                                                        For the nine months ending September 30,
                                                                2001                       2000
                                                                ----                       ----
<S>                                                   <C>                           <C>
  Net income (loss)                                         ($1,613,759)                  $403,585
  Other comprehensive income (loss)                            (358,448)                   222,509
                                                             -----------             -------------

  Comprehensive income (loss)                               ($1,972,207)                  $626,094
                                                           =============                 ==========

                                                        For the three months ending September 30,
                                                                2001                       2000
                                                                ----                       ----

  Net income (loss)                                           ($559,764)                  $252,353
  Other comprehensive income (loss)                            (108,816)                  (117,250)
                                                            ------------            --------------

  Comprehensive income (loss)                                 ($668,580)                  $135,103
                                                            ============                 =========
</TABLE>


4. Inventories consist primarily of finished goods and parts for manufacturing
and servicing aircraft. Inventory costs include all direct manufacturing costs
and applied overhead. These inventories, other than used aircraft, are stated at
the lower of cost or market, and cost is determined by the average-cost method.
Used aircraft are valued on a specific-identification basis at the lower of cost
or current estimated realizable wholesale price. Inventory components at the
balance sheet dates were as follows:


                                      September 30, 2001     December 31, 2000


  Raw materials                               $1,816,629             $2,522,930
  Work in process                              2,388,421              1,710,363
  New and pre-owned aircraft                   4,010,163              3,663,866
  Other                                           57,471                 95,012
                                                  ------                 ------

  Total inventories                           $8,272,684             $7,992,171
                                             ===========            ===========


5. No income tax provision has been necessary due to the generation or
utilization of net operating loss carryforwards and the related change in the
valuation allowance for deferred income tax assets.

6. The Company is subject to regulation by the FAA. The Company is subject to
inspections by the FAA and may be subjected to fines and other penalties
(including orders to cease production) for noncompliance with FAA regulations.
The Company has a Production Certificate from the FAA, which delegates to the
Company the inspection of each aircraft. The sale of the Company's product
internationally is subject to regulation by comparable agencies in foreign
countries.

         The Company faces the inherent business risk of exposure to product
liability claims. In 1994, Congress enacted the General Aviation Revitalization
Act, which established an eighteen-year statute of repose for general aviation
manufacturers. This legislation prohibits product liability suits against
manufacturers when the aircraft involved in an accident is more than eighteen
years old. The Company's product liability insurance policy with coverage of $10
million per occurrence and $10 million annually in the aggregate with a
deductible of $200,000 per occurrence and annually in the aggregate expired
March 1, 1995. Subsequent to March 1, 1995, the Company is not insured for
product liability claims. Management believes that the interest of shareholders
is better served by vigorously defending claims through the services of highly
qualified specialists and attorneys rather than retaining product liability
insurance to settle exorbitant claims.

         The Company is routinely involved in various legal matters arising in
the normal course of business, including product liability claims. Management
intends to vigorously defend against these claims and currently believes that
legal matters will not result in any material adverse effect on the Company's
financial position or results of operations. Accordingly, no provisions for any
liabilities that may result have been recorded in the financial statements. Due
to the uncertainty of these matters, it is at least reasonably possible that
management's view of the outcome will change in the near term.

7. The Company's business strategy is to capture a significant share of the
existing domestic and international market for the single engine, high
performance aircraft by offering a premium updated version of an established
aircraft design. Commander aircraft have an airframe design decades newer than
the competition and are certified to more stringent standards. In addition,
Commander aircraft have a significantly better safety record and higher resale
value than all other aircraft in their class. The Company believes the domestic
and international market for its aircraft includes individuals and corporations
that will purchase the Company's aircraft for business and personal travel, and
governments, commercial and military organizations that will use the aircraft
for training and other purposes.

         The Company believes the market for its products will improve as a
result of attrition of the existing fleet of aging single engine high
performance aircraft, development of new international markets for general
aviation aircraft, increased use of single engine aircraft as a corporate tool
for small and medium-sized businesses, and demand for advanced single engine
trainers.

         Recognizing that the size of the pre-owned aircraft market is
significantly larger than new aircraft sales, the Company has structured a
separate aviation services division within the Company to purchase, refurbish
and sell pre-owned piston aircraft at reasonable profit margins. The Aviation
Services Division also acts as broker for pre-owned piston aircraft and serves
as advisor to potential aircraft buyers and sellers. The Company is also
involved in the sale, brokerage and refurbishment of jet aircraft through its
Strategic Jet Services subsidiary.

         The Company markets its aircraft through a factory direct sales and
marketing organization comprised of regional sales personnel who are managed and
supported from the Company's headquarters in Oklahoma. The marketing
organization is augmented by a worldwide network of Commander Authorized Service
Centers (ASCs). The Company's marketing program utilizes a highly focused
domestic and international advertising and public relations program that
includes product advertising in leading business and aviation publications,
ongoing direct mail programs to owners and pilots, and internet marketing
communications.

         The Company has one of the most comprehensive worldwide service and
support networks in its class. The Company grants domestic Commander ASCs the
non-exclusive right to refer prospects for new Commander aircraft. Commander
ASCs receive a referral fee for identifying purchasers, and provide a full
complement of service and support services, including financing, insurance,
service and support, hangar/storage, flight instruction, and professional pilot
service. The Company selects ASCs from among experienced independent aviation
sales and service organizations that it believes to have excellent facilities,
service capabilities, reputation and financial strength. Through its ASCs,
Commander Aircraft Company offers a turn-key aircraft ownership program designed
to stimulate ownership of Commander aircraft by companies that have not
previously owned or operated aircraft. This flexible program can be tailored to
meet each customer's specific requirements.

PART I.      FINANCIAL INFORMATION
ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
             OPERATIONS AND FINANCIAL CONDITION

RESULTS FROM OPERATIONS

         Revenues from the sale of aircraft for the third quarter of 2001
totaled $1,277,118 compared to $4,307,203 for the comparable period of 2000. For
the third quarter of 2001, seven new and pre-owned aircraft were sold, and one
turbo-prop aircraft was brokered, compared with thirteen new and pre-owned
aircraft sold in the same period for 2000.

         For the nine months ended September 30, 2001, revenues were $6,141,113
compared to $11,529,604 for the nine months ended September 30, 2000. The
company sold 23 new and pre-owned aircraft in the first nine months of 2001
compared to 41 in the comparable period in 2000. The uncertainty of the economy,
causing customer cancellation or postponement of new and pre-owned aircraft
purchases has adversely impacted the revenues for 2001. The Company has made and
will continue to make adjustments in its cost and overhead structure.

         Service revenues totaled $275,278 for the quarter ended September 30,
2001 compared to $497,595 for the comparable quarter in 2000. The decrease was
due to decreased spare parts shipments and decreased aircraft repair and
refurbishment activity.

         Service revenues were $1,270,051 for the nine months ended September
30, 2001 compared to $1,473,856 for the nine months ended September 30, 2000.
The decrease was due to decreased service work and parts sales in the current
year.

         Cost of aircraft sales for the three months ended September 30, 2001
decreased to $1,024,284 compared to $3,361,773 for the three months ended
September 30, 2000. The decrease in cost was due to a decrease in new and
pre-owned aircraft sales during the period.

         Cost of aircraft sales for the nine months ended September 30, 2001
decreased to $5,162,363 compared to $9,028,129 for the nine months ended
September 30, 2000. The decrease in cost was due to a decrease in new and
pre-owned aircraft sales during the period.

         Cost of sales for service and parts for the quarter ended September 30,
2001 decreased to $237,559 compared to $359,996 for the quarter ended September
30, 2000. The decrease was due to a decrease in service activity and parts
shipments.

         Cost of sales for service and parts for the nine months ended September
30, 2001 were $1,042,790 compared to $1,098,131 for the nine months ended
September 30, 2000. The decrease was due to a decrease in service activity and
parts shipments.

         Aircraft sales margins were lower for the three and nine months ended
September 30, 2001 compared to the prior periods due to lower production volume,
which reduced production efficiencies and caused, in some cases, higher cost of
purchased items. Service margins were down for the three months ended September
30, 2001 compared to the prior period due to a lower volume of work. For the
nine months ended September 30, 2001 service margins were lower than the prior
period because of a lower volume of work.

         Product development and engineering costs decreased to $61,995 for the
third quarter of 2001, from $102,261 for the comparable period in 2000. The
reduction in these expenses is due to the downsizing in this area. For the nine
months ended September 30, 2001 product development and engineering costs were
$244,172 compared to $295,747 for the nine months ended September 30, 2000.

         Sales, general and administrative expense decreased for the three-month
period ended September 30, 2001, to $690,641 from $725,181 for the comparable
period ended September 30, 2000. Sales, general and administrative expense for
the nine months ended September 30, 2001 were $2,326,161 compared to $2,201,271
for the nine months ended September 30, 2000. The increase is due to increased
legal costs relating to litigation resulting from the crash of one of the
Company's manufactured aircraft.

         Interest expense increased to $124,900 for the third quarter of 2001
from $59,073 for the comparable period in 2000 due to higher borrowings to
finance aircraft held for resale. For the nine months ended September 30, 2001,
interest expense was $370,860 compared to $144,644 due to higher borrowings to
finance aircraft held for sale.

LIQUIDITY AND CAPITAL RESOURCES

         Cash balances decreased to $11,595 at September 30, 2001 from $135,016
at December 31, 2000. Accounts receivable decreased by $529,640 at September 30,
2001 due to a payment received in the first quarter for an aircraft in accounts
receivable at December 31,2000.

         Notes receivable decreased to $101,896 at September 30, 2001 from
$121,549 at December 31, 2000 due to regular quarterly payments from the debtor.
Notes receivable from related parties remained unchanged from December 31, 2000
to September 30, 2001. Accrued interest due on the note receivable from the
related party at September 30, 2001 was $92,230. The note is secured by Aviation
General, Incorporated stock pledged, as well as a personal guarantee from the
principal shareholder of the debtor. The note is classified as non-current due
to the probability that payment in full will not occur within the next year.

         The Company's investment in equity securities is classified as
available for sale with unrealized gains or losses excluded from income and
reported as other comprehensive income or loss. Declines in the fair value of
securities that are other than temporary result in write-downs are included in
earnings. This investment is in the common stock of a related party.

         Inventories increased to $8,272,684 at September 30, 2001 from
$7,992,171 at December 31, 2000. Raw materials, parts and work in process
decreased approximately $28,243 while new and pre-owned aircraft inventory
increased by $346,297.

         During the first nine months of 2001, expenditures for fixed assets
totaled $37,244, which included replacement of fabrication tooling and an
upgrade to the Company's business software.

         Accounts payable increased to $1,872,371 at September 30, 2001 from
$1,226,414 at December 31, 2000, as the anticipated increase in production of
new aircraft in 2001 resulted in higher material and parts inventory purchased
on open account. Accrued expenses decreased to $435,105 at September 30, 2001
from $561,398 at December 31, 2000.

         Refundable deposits increased to $141,873 at September 30, 2001 from
$115,814 at December 31, 2000. Borrowings from bank lines increased to
$3,620,810 at September 30, 2001 from $3,035,000 at December 31, 2000.

COMPANY OVERVIEW

         Aviation General, Incorporated is a publicly traded holding company
with two wholly owned subsidiaries, Commander Aircraft Company and Strategic Jet
Services, Inc. Commander Aircraft Company (www.commanderair.com) manufactures,
markets and provides support services for its line of single engine, high
performance Commander aircraft, and consulting, brokerage and refurbishment
services for all types of piston aircraft. Strategic Jet Services, Inc.
(www.strategicjet.com) provides consulting, sales, brokerage, acquisition and
refurbishment services for jet aircraft.

         The Company formed Strategic Jet Services, Inc. (SJS), a wholly owned
subsidiary, to provide brokerage, sale, consulting and refurbishment work for
jet aircraft. This line of business generated first activity in 1999,
contributed revenues in 2000 and during the first nine months of 2001 and is
expected to contribute additional revenue in the fourth quarter of 2001.

         The Company continues to certify new state-of-the-art avionics systems
that offer the customer the latest technology in navigational and communication
equipment. The Company introduced a new de-icing option and received
certification from the Federal Aviation Administration, allowing equipped
aircraft to operate in known icing conditions similar to larger, more expensive
aircraft. Sales of this equipment not only provide additional revenues and
earnings, but also increase the value of the aircraft relative to its
competition.

         During 2000, the Company introduced the 115 series of high performance,
single engine aircraft. The Commander 115 represents the culmination of a
multitude of improvements to the Commander line, and features numerous airframe,
engine and systems refinements, as well as significantly increased range
capability and an upgraded standard avionics package which includes dual Garmin
430 global navigation, communication and moving map displays. The Commander 115
series is the latest of a thoroughbred line of aircraft that offer the ultimate
combination of performance, comfort, safety, and utility, and has become
recognized as the Mercedes of the single engine fleet.

         In addition to the above actions by the Company to increase revenue,
management has made efforts to reduce costs and cash requirements by optimizing
its production schedule using just-in-time scheduling. Management has reduced
the costs incurred to advertise new aircraft by focusing marketing efforts at a
specific customer profile.

         The Company continues to advertise in industry and trade publications
at a significantly reduced level, while directly contacting potential customers
whose demographic characteristics closely match the typical customer, especially
in the areas of income, pilot experience, and types of businesses with
demonstrated regional travel requirements. Further reducing selling expenses,
the Company has organized its service center, paint, interior and avionics shops
into a completion center to focus on the growing after-market refurbishment
business.

         The Company has expanded its operations to include SJS, enhanced the
Commander brand with the introduction of the Commander 115, and more effectively
targeted sales and marketing expenditures. With continued activity in the parts,
service and pre-owned aircraft sales, the Company has lowered its break even
sales to only 14 new aircraft per year. With the large investment complete,
management believes it has made significant progress towards the building of a
world class aviation company. Due to numerous factors beyond the control of the
Company, there can be no assurances that these results will be achieved.

Forward Looking Statements

         This Form 10-Q includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of Section 27A of the Securities
Act. All statements, other than statements of historical fact, included in this
Form 10-Q that addresses activities, events or developments that the Company
expects, projects, believes, or anticipates will or may occur in the future,
including matters having to do with expected and future aircraft sales and
services revenues, the Company's ability to fund its operations and repay debt,
business strategies, expansion and growth of operations and other such matters,
are forward-looking statements. These statements are based on certain
assumptions and analyses made by our management in light of its experience and
its perception of historical trends, current conditions, expected future
developments, and other factors it believes are appropriate in the
circumstances. These statements are subject to a number of assumptions, risks
and uncertainties, including general economic and business conditions, the
business opportunities (or lack thereof) that may be presented to and pursued by
the Company, the Company's performance on its current contracts and its success
in obtaining new contracts, the Company's ability to attract and retain
qualified employees, and other factors, many of which are beyond the Company's
control. You are cautioned that these forward-looking statements are not
guarantees of future performance and that actual results or developments may
differ materially from those projected in such statements.

ITEM 2.  CHANGES IN SECURITEIS AND USE OF PROCEEDS

         During the third quarter, the Company issued an aggregate of 580,000
shares of its common stock in satisfaction of obligations in the amount of
approximately $260,000. The issuance of these securities was exempt from the
registration requirements of the Securities Act of 1933 because it did not
involve a public offering.


ITEM 3.  QUANITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         The registrant has no material market risk associated with interest
rates, foreign currency exchange rates or commodity prices.  The Company is
subject to market risk in connection with its ownership of 260,000 shares of
common stock of a related party.


PART II.  OTHER INFORMATION
ITEM 1.     LEGAL PROCEEDINGS

         Commander Aircraft Company is a defendant in a lawsuit resulting from a
crash of one of its manufactured aircraft. Management does not believe the
Company bears any responsibility and will vigorously defend against this claim
and currently believes this action will not have a material impact on the
Company's operations. The National Transportation and Safety Board accident
investigation has found the probable cause of this crash was pilot error.

ITEM 5. OTHER DISCLOSURES

         The Company has received a NASDAQ Staff Determination the Company fails
to comply with the minimum bid price requirements for continued listing on the
NASDAQ SmallCap Market, Rule 4310 (c)(4). The Company appealed the Staff
Determination and had a hearing before the NASDAQ officials. However, due to the
events of September 11, 2001, NASDAQ has delayed ruling on all such proceedings
until after January 1, 2002. The Company's common shares will continue to trade
on the NASDAQ Stock Market, pending the outcome of the appeal the Company has
filed in accordance with NASDAQ procedures, although there can be no assurance
NASDAQ will grant the Company's appeal for continued listing.

         This has been a difficult and challenging year for the Company.
Financial results have been adversely impacted by the overall decline in our
country's economic activity and financial markets. As reported previously in the
year, the Company has made adjustments in its cost and overhead structure to
take into account conditions. However, just as demand for the Company's aircraft
appeared to be improving, the September 11th attack on our country occurred, the
effect of which, on the economy and the general aviation industry in particular,
has been substantial. In particular aircraft purchase activities froze, were
postponed or cancelled, and many pending transactions could not be consummated
because the planes could not be delivered, due to general aviation flight
restrictions.

On the positive side, general aviation restrictions have begun to be loosened,
and aircraft purchase activities have begun to increase somewhat, as interest
rates, which have a profound effect on aircraft purchase finance cost, continue
to decline. There is also increasing interest in general aviation aircraft, due
to safety and convenience concerns with commercial air travel.

The Company plans to seek additional capital through a private placement and/or
merger with a strategic partner, as well as explore merger and acquisition
opportunities that could broaden the Company's business base and create
synergies.



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits  - None

(b)      Reports on Form 8-K - None.


                                    SIGNATURE


Pursuant to the requirements 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.



                          AVIATION GENERAL INCORPORATED
                                  (Registrant)




                             By: /s/ Wirt D. Walker
                                 Wirt D. Walker
                       Chairman of the Board of Directors
                          (Chief Executive Officer and
                              Authorized Signatory)




Date:  November 14, 2001