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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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(Mark One)

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



For the quarterly period ended June 30, 2005



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 number 1-12380



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AVIALL, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 65-0433083                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|2750 Regent Boulevard                                          |  |                                     
|DFW Airport, Texas                                             |  | 75261-9048                          
|(Address of principal executive offices)                       |  | (Zip Code)                          



(972) 586-1000

(Registrants telephone number, including area code)



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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 ̈



Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No ̈



The number of shares of common stock, par value $0.01 per share, outstanding at July 25, 2005 was 33,951,310.



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PART 1  FINANCIAL INFORMATION

Item 1: Financial Statements



AVIALL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except share and per share data)

(Unaudited)



|                                                               |  |                             |            |                           |            |      |            |      |           
|-------------------------------------------------------------- |  | --------------------------- | ---------- | ------------------------- | ---------- | ---- | ---------- | ---- | ----------
|                                                               |  | Three Months Ended June 30, |            | Six Months Ended June 30,
|                                                               |  | 2005                        |            | 2004                      |            | 2005 |            | 2004
|Net sales                                                      |  | $                           | 322,072    |                           | 314,048    |      | 613,520    |      | 597,580   
|Cost of sales                                                  |  |                             | 261,643    |                           | 263,904    |      | 499,924    |      | 500,338   
|                                                               |  |                             |            |                           |            |      |            |      |           
|Gross profit                                                   |  |                             | 60,429     |                           | 50,144     |      | 113,596    |      | 97,242    
|Selling and administrative expense                             |  |                             | 31,449     |                           | 29,653     |      | 59,535     |      | 57,252    
|                                                               |  |                             |            |                           |            |      |            |      |           
|Operating income                                               |  |                             | 28,980     |                           | 20,491     |      | 54,061     |      | 39,990    
|Interest expense, net                                          |  |                             | 5,262      |                           | 4,207      |      | 10,365     |      | 8,552     
|                                                               |  |                             |            |                           |            |      |            |      |           
|Earnings before income taxes                                   |  |                             | 23,718     |                           | 16,284     |      | 43,696     |      | 31,438    
|Provision for income taxes                                     |  |                             | 8,347      |                           | 2,819      |      | 15,325     |      | 7,996     
|                                                               |  |                             |            |                           |            |      |            |      |           
|Net earnings                                                   |  | $                           | 15,371     |                           | 13,465     |      | 28,371     |      | 23,442    
|                                                               |  |                             |            |                           |            |      |            |      |           
|Basic net earnings per share                                   |  | $                           | 0.46       |                           | 0.42       |      | 0.86       |      | 0.74      
|Weighted average common shares                                 |  |                             | 33,426,831 |                           | 31,954,552 |      | 33,138,712 |      | 31,849,586
|                                                               |  |                             |            |                           |            |      |            |      |           
|Diluted net earnings per share                                 |  | $                           | 0.44       |                           | 0.40       |      | 0.82       |      | 0.70      
|Weighted average common and potentially dilutive common shares |  |                             | 34,945,090 |                           | 33,550,653 |      | 34,777,139 |      | 33,396,705
|                                                               |  |                             |            |                           |            |      |            |      |           



See accompanying notes to
consolidated financial statements.



2



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AVIALL, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share data)

(Unaudited)



|                                                                                                                                                                            |  |              |         |   |                  |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------------- | ------- | -
|                                                                                                                                                                            |  | June 30,2005 |         |   | December 31,2004 |        
|Assets                                                                                                                                                                      |  |              |         |   |                  |         |  
|Current assets:                                                                                                                                                             |  |              |         |   |                  |         |  
|Cash and cash equivalents                                                                                                                                                   |  | $            | 35,885  |   |                  | 91,632  |  
|Receivables, net                                                                                                                                                            |  |              | 172,445 |   |                  | 144,087 |  
|Inventories                                                                                                                                                                 |  |              | 343,667 |   |                  | 328,129 |  
|Prepaid expenses and other current assets                                                                                                                                   |  |              | 3,824   |   |                  | 2,953   |  
|Deferred income taxes                                                                                                                                                       |  |              | 29,795  |   |                  | 40,432  |  
|                                                                                                                                                                            |  |              |         |   |                  |         |  
|Total current assets                                                                                                                                                        |  |              | 585,616 |   |                  | 607,233 |  
|                                                                                                                                                                            |  |              |         |   |                  |         |  
|Property and equipment                                                                                                                                                      |  |              | 35,104  |   |                  | 33,929  |  
|Goodwill                                                                                                                                                                    |  |              | 46,843  |   |                  | 46,843  |  
|Intangible assets                                                                                                                                                           |  |              | 200,991 |   |                  | 46,525  |  
|Deferred income taxes                                                                                                                                                       |  |              | 3,226   |   |                  | 3,229   |  
|Other assets                                                                                                                                                                |  |              | 12,460  |   |                  | 11,717  |  
|                                                                                                                                                                            |  |              |         |   |                  |         |  
|Total assets                                                                                                                                                                |  | $            | 884,240 |   |                  | 749,476 |  
|                                                                                                                                                                            |  |              |         |   |                  |         |  
|Liabilities and Shareholders Equity                                                                                                                                        |  |              |         |   |                  |         |  
|Current liabilities:                                                                                                                                                        |  |              |         |   |                  |         |  
|Current portion of long-term debt                                                                                                                                           |  | $            | 1,157   |   |                  | 1,440   |  
|Revolving line of credit                                                                                                                                                    |  |              | 60,661  |   |                  |        |  
|Cash overdrafts due to outstanding checks                                                                                                                                   |  |              | 11,301  |   |                  | 43,023  |  
|Accounts payable                                                                                                                                                            |  |              | 162,715 |   |                  | 98,629  |  
|Accrued expenses                                                                                                                                                            |  |              | 51,692  |   |                  | 46,741  |  
|                                                                                                                                                                            |  |              |         |   |                  |         |  
|Total current liabilities                                                                                                                                                   |  |              | 287,526 |   |                  | 189,833 |  
|                                                                                                                                                                            |  |              |         |   |                  |         |  
|Long-term debt                                                                                                                                                              |  |              | 201,697 |   |                  | 201,990 |  
|Other liabilities                                                                                                                                                           |  |              | 5,820   |   |                  | 8,652   |  
|Commitments and contingencies                                                                                                                                               |  |              |        |   |                  |        |  
|Shareholders equity:                                                                                                                                                       |  |              |         |   |                  |         |  
|Common stock ($0.01 par value per share, 80,000,000 shares authorized; 36,001,721 shares and 34,582,746 shares issued at June 30, 2005 and
December 31, 2004, respectively) |  |              | 360     |   |                  | 346     |  
|Additional paid-in capital                                                                                                                                                  |  |              | 458,810 |   |                  | 447,060 |  
|Accumulated deficit                                                                                                                                                         |  |              | (33,759 | ) |                  | (62,130 | )
|Treasury stock, at cost (2,050,411 shares and 2,035,124 shares at June 30, 2005 and December 31, 2004, respectively)                                                        |  |              | (28,589 | ) |                  | (28,218 | )
|Unearned compensation - restricted stock                                                                                                                                    |  |              | (1,247  | ) |                  | (1,679  | )
|Accumulated other comprehensive loss                                                                                                                                        |  |              | (6,378  | ) |                  | (6,378  | )
|                                                                                                                                                                            |  |              |         |   |                  |         |  
|Total shareholders equity                                                                                                                                                  |  |              | 389,197 |   |                  | 349,001 |  
|                                                                                                                                                                            |  |              |         |   |                  |         |  
|Total liabilities and shareholders equity                                                                                                                                  |  | $            | 884,240 |   |                  | 749,476 |  
|                                                                                                                                                                            |  |              |         |   |                  |         |  



See accompanying notes to
consolidated financial statements.



3



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AVIALL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

|                                                     |  |                           |          |   |      |         |  
|---------------------------------------------------- |  | ------------------------- | -------- | - | ---- | ------- | -
|                                                     |  | Six Months Ended June 30, |         
|                                                     |  | 2005                      |          |   | 2004 |        
|Operating activities:                                |  |                           |          |   |      |         |  
|Net earnings                                         |  | $                         | 28,371   |   |      | 23,442  |  
|Depreciation and amortization                        |  |                           | 11,983   |   |      | 8,674   |  
|Deferred income taxes                                |  |                           | 10,635   |   |      | 6,436   |  
|Compensation expense on restricted stock awards      |  |                           | 432      |   |      | 331     |  
|Changes in:                                          |  |                           |          |   |      |         |  
|Receivables, net                                     |  |                           | (28,358  | ) |      | (27,164 | )
|Inventories                                          |  |                           | (15,538  | ) |      | 32,474  |  
|Accounts payable                                     |  |                           | 64,086   |   |      | 5,902   |  
|Accrued expenses                                     |  |                           | 4,951    |   |      | 11,824  |  
|Other, net                                           |  |                           | (3,604   | ) |      | (1,862  | )
|                                                     |  |                           |          |   |      |         |  
|Net cash provided by operating activities            |  |                           | 72,958   |   |      | 60,057  |  
|                                                     |  |                           |          |   |      |         |  
|Investing activities:                                |  |                           |          |   |      |         |  
|Purchase of distribution rights                      |  |                           | (160,846 | ) |      | (800    | )
|Capital expenditures                                 |  |                           | (5,638   | ) |      | (4,390  | )
|Sales of property, plant and equipment               |  |                           | 377      |   |      | 5       |  
|                                                     |  |                           |          |   |      |         |  
|Net cash used for investing activities               |  |                           | (166,107 | ) |      | (5,185  | )
|                                                     |  |                           |          |   |      |         |  
|Financing activities:                                |  |                           |          |   |      |         |  
|Net change in revolving credit facility              |  |                           | 60,661   |   |      | (142    | )
|Cash overdrafts due to outstanding checks            |  |                           | (31,722  | ) |      | (36,551 | )
|Issuance of common stock                             |  |                           | 11,764   |   |      | 2,627   |  
|Debt issuance cost paid                              |  |                           | (1,898   | ) |      | (736    | )
|Debt repaid                                          |  |                           | (1,094   | ) |      | (1,762  | )
|Purchase of treasury stock                           |  |                           | (371     | ) |      | (351    | )
|Debt proceeds                                        |  |                           | 62       |   |      |        |  
|                                                     |  |                           |          |   |      |         |  
|Net cash provided by (used for) financing activities |  |                           | 37,402   |   |      | (36,915 | )
|                                                     |  |                           |          |   |      |         |  
|Change in cash and cash equivalents                  |  |                           | (55,747  | ) |      | 17,957  |  
|Cash and cash equivalents, beginning of period       |  |                           | 91,632   |   |      | 23,424  |  
|                                                     |  |                           |          |   |      |         |  
|Cash and cash equivalents, end of period             |  | $                         | 35,885   |   |      | 41,381  |  
|                                                     |  |                           |          |   |      |         |  
|Cash paid for interest and income taxes:             |  |                           |          |   |      |         |  
|Interest                                             |  | $                         | 8,937    |   |      | 775     |  
|Income taxes                                         |  | $                         | 1,847    |   |      | 665     |  
|                                                     |  |                          
|Noncash investing and financing activities:          |  |                           |          |   |      |         |  
|Property and equipment acquired with debt            |  | $                         | 413      |   |      | 121     |  



See accompanying notes to
consolidated financial statements.



4



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AVIALL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 - BASIS OF PRESENTATION



The
accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating results for the three- and six-month periods ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. For
further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2004.



NOTE 2 - STOCK-BASED COMPENSATION



We account for our stock-based compensation plans in accordance with the recognition and measurement principles of Accounting Principles Board Opinion No.
25, or APB 25, Accounting for Stock Issued to Employees, and related interpretations. All options granted under our plans have an exercise price equal to the market value of the underlying common stock on the date of grant. Therefore, no
compensation cost related to these option grants is included in net earnings. We also make the appropriate disclosures as required by Statement of Financial Accounting Standards No. 123, or SFAS 123, Accounting for Stock-Based
Compensation, and Statement of Financial Accounting Standards No. 148, or SFAS 148, Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment of FAS 123. Awards of restricted stock are valued at the market
price of our common stock on the date of grant and recorded as unearned compensation within shareholders equity. The unearned compensation is amortized to compensation expense over the vesting period of the restricted stock.



The following table illustrates the effect on net earnings and earnings per
share, or EPS, if we had applied the fair-value recognition provisions of SFAS 123 to stock-based employee compensation:



|                                                                                                                                   |  |                             |        |   |                           |        |   |      |        |   |      |        |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ------------------------- | ------ | - | ---- | ------ | - | ---- | ------ | -
|                                                                                                                                   |  | Three Months Ended June 30, |        |   | Six Months Ended June 30, |       
|(In Thousands, Except Per Share Data)                                                                                              |  | 2005                        |        |   | 2004                      |        |   | 2005 |        |   | 2004 |       
|Net earnings, as reported                                                                                                          |  | $                           | 15,371 |   |                           | 13,465 |   |      | 28,371 |   |      | 23,442 |  
|Deduct: Total stock-based compensation expense determined under fair-value-based method for all awards, net of related tax
effects |  |                             | (509   | ) |                           | (450   | ) |      | (1,172 | ) |      | (901   | )
|                                                                                                                                   |  |                             |        |   |                           |        |   |      |        |   |      |        |  
|Pro forma net earnings for purposes of computing basic net EPS                                                                     |  | $                           | 14,862 |   |                           | 13,015 |   |      | 27,199 |   |      | 22,541 |  
|                                                                                                                                   |  |                             |        |   |                           |        |   |      |        |   |      |        |  
|Earnings per share:                                                                                                                |  |                             |        |   |                           |        |   |      |        |   |      |        |  
|Basic - as reported                                                                                                                |  | $                           | 0.46   |   |                           | 0.42   |   |      | 0.86   |   |      | 0.74   |  
|Basic - pro forma                                                                                                                  |  | $                           | 0.44   |   |                           | 0.41   |   |      | 0.82   |   |      | 0.71   |  
|Diluted - as reported                                                                                                              |  | $                           | 0.44   |   |                           | 0.40   |   |      | 0.82   |   |      | 0.70   |  
|Diluted - pro forma                                                                                                                |  | $                           | 0.42   |   |                           | 0.39   |   |      | 0.78   |   |      | 0.67   |  
|                                                                                                                                   |  |                             |        |   |                           |        |   |      |        |   |      |        |  



5



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NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS



In June 2005, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No. 154,
or SFAS 154, Accounting Changes and Error Corrections - a replacement of APB No. 20 and FAS No. 3. SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements
presented on the basis of the new accounting principle. SFAS 154 also requires that a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for prospectively as a change in estimate, and correction of errors in
previously issued financial statements should be termed a restatement. SFAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. We will adopt SFAS 154 effective January 1, 2006 and
expect no material impact on our consolidated financial statements as a result of the adoption.



In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), or SFAS 123R, Share-Based Payment, which
replaces Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and Statement of
Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FAS 123. SFAS 123R addresses the accounting for share-based payment transactions in which a company receives
employee services in exchange for either equity instruments of the company or liabilities that are based on the fair value of the companys equity instruments or that may be settled by the issuance of such equity instruments. SFAS 123R
addresses all forms of share-based payment awards, including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. SFAS 123R eliminates the ability to account for share-based compensation
transactions using the intrinsic method and generally would require that such transactions be accounted for using a fair-value-based method and recognized as expense over the period during which an employee is required to provide services in
exchange for the award. SFAS 123R is effective for annual periods beginning after June 15, 2005. As such, we will implement the provisions of SFAS 123R effective January 1, 2006. In 2006, we will incur compensation expense under SFAS 123R, as
currently written, related to unvested options granted prior to January 1, 2006. Although we have not completed evaluating the impact the adoption of SFAS 123R will have on our future results of operations, we currently estimate the impact on an
annual basis will be similar to that in our pro forma disclosures for SFAS 123 detailed in Note 2.



NOTE 4 - SEGMENT INFORMATION



The following tables present information by operating segment (in thousands):



|                             |  |                             |         |   |                           |         |   |      |         |   |      |         |  
|---------------------------- |  | --------------------------- | ------- | - | ------------------------- | ------- | - | ---- | ------- | - | ---- | ------- | -
|                             |  | Three Months Ended June 30, |         |   | Six Months Ended June 30, |        
|Net Sales                    |  | 2005                        |         |   | 2004                      |         |   | 2005 |         |   | 2004 |        
|Aviall Services              |  | $                           | 314,630 |   |                           | 306,873 |   |      | 598,653 |   |      | 583,294 |  
|ILS                          |  |                             | 7,442   |   |                           | 7,175   |   |      | 14,867  |   |      | 14,286  |  
|                             |  |                             |         |   |                           |         |   |      |         |   |      |         |  
|Total net sales              |  | $                           | 322,072 |   |                           | 314,048 |   |      | 613,520 |   |      | 597,580 |  
|                             |  |                             |         |   |                           |         |   |      |         |   |      |         |  
|                             |  |                             |         |  
|Profit                       |  |                             |         |   |                           |         |   |      |         |   |      |        
|Aviall Services              |  | $                           | 31,217  |   |                           | 22,339  |   |      | 57,634  |   |      | 42,605  |  
|ILS                          |  |                             | 2,665   |   |                           | 2,703   |   |      | 5,476   |   |      | 5,251   |  
|                             |  |                             |         |   |                           |         |   |      |         |   |      |         |  
|Reportable segment profit    |  |                             | 33,882  |   |                           | 25,042  |   |      | 63,110  |   |      | 47,856  |  
|Corporate                    |  |                             | (4,902  | ) |                           | (4,551  | ) |      | (9,049  | ) |      | (7,866  | )
|Interest expense, net        |  |                             | (5,262  | ) |                           | (4,207  | ) |      | (10,365 | ) |      | (8,552  | )
|                             |  |                             |         |   |                           |         |   |      |         |   |      |         |  
|Earnings before income taxes |  | $                           | 23,718  |   |                           | 16,284  |   |      | 43,696  |   |      | 31,438  |  
|                             |  |                             |         |   |                           |         |   |      |         |   |      |         |  



6



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NOTE 5 - EARNINGS PER SHARE



A reconciliation of the denominator of the basic and diluted EPS calculations for net earnings follows:



|                                                             |  |                             |  |                           |  |            |  |           
|------------------------------------------------------------ |  | --------------------------- |  | ------------------------- |  | ---------- |  | ----------
|                                                             |  | Three Months Ended June 30, |  | Six Months Ended June 30,
|Denominator                                                  |  | 2005                        |  | 2004                      |  | 2005       |  | 2004      
|Weighted average common shares                               |  | 33,426,831                  |  | 31,954,552                |  | 33,138,712 |  | 31,849,586
|Effect of dilutive securities:                               |  |                             |  |                           |  |            |  |           
|Stock options                                                |  | 1,005,129                   |  | 1,010,469                 |  | 1,131,222  |  | 970,904   
|Restricted stock rights                                      |  | 250,717                     |  | 323,285                   |  | 244,798    |  | 313,876   
|Warrants                                                     |  | 262,413                     |  | 262,347                   |  | 262,407    |  | 262,339   
|                                                             |  |                             |  |                           |  |            |  |           
|Weighted average common and dilutive potential common shares |  | 34,945,090                  |  | 33,550,653                |  | 34,777,139 |  | 33,396,705
|                                                             |  |                             |  |                           |  |            |  |           



Basic EPS is computed
by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net earnings by the weighted average number of common and dilutive potential common shares outstanding during
the period.



NOTE 6 - INCOME TAXES



Our income tax expense for the first six months of 2005 was $15.3 million,
and our effective tax rate was 35.1%. Our income tax expense for the first six months of 2004 was $8.0 million, and our effective tax rate was 25.4%. The increase in our effective tax rate from 25.4% in 2004 to 35.1% in 2005 is primarily due to the
release in the first six months of 2004 of a $2.8 million valuation allowance for state tax net operating loss, or NOL, carryforwards.



NOTE 7 - INTANGIBLE ASSETS



In January 2005, we entered into a distribution agreement with GE Engine Services Distribution LLC and General Electric, or GE, whereby GE has appointed
us as the exclusive worldwide distributor of unique parts for the GE CF6-50 and CF6-80A, or CF6 engines, for as long as these engines remain in service. As a result of the GE CF6 agreement, we paid $157.0 million for distribution rights which will
be amortized over the estimated life of the engines.



In April
2005, we entered into two distribution agreements with Hamilton Sundstrand which give us exclusive distribution rights for Hamilton Sundstrand-built spare parts that are unique to the 60kVA family of generators, the JT8D mechanical fuel controls and
the JT9D engine accessories. We paid approximately $3.8 million for these distribution rights which will be amortized over the ten-year terms of these agreements.



NOTE 8  DEBT



On January 28, 2005, we entered into an amendment to our senior secured credit facility, or the Credit Facility, to increase the facility size,
restructure the borrowing base, extend the termination date and change certain financial ratios and covenants. As of June 30, 2005, our amended Credit Facility consists of a $260.0 million revolving credit and letter of credit facility due as a
balloon payment in 2008. As of June 30, 2005, we had $60.0 million of borrowings outstanding under the Credit Facility. We also maintain a Canadian $6.0 million secured revolving credit facility which had borrowings of $0.7 million outstanding as of
June 30, 2005.



7



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NOTE 9 - PENSION PLANS AND POSTRETIREMENT BENEFITS



The following table sets forth the components of net pension expense for all our plans:



|                                   |  |                             |        |   |                           |      |   |      |        |   |      |        |  
|---------------------------------- |  | --------------------------- | ------ | - | ------------------------- | ---- | - | ---- | ------ | - | ---- | ------ | -
|                                   |  | Three Months Ended June 30, |        |   | Six Months Ended June 30, |     
|(In Thousands)                     |  | 2005                        |        |   | 2004                      |      |   | 2005 |        |   | 2004 |       
|Service cost                       |  | $                           | 736    |   |                           | 615  |   |      | 1,472  |   |      | 1,230  |  
|Interest cost                      |  |                             | 1,028  |   |                           | 969  |   |      | 2,056  |   |      | 1,938  |  
|Expected return on plan assets     |  |                             | (1,087 | ) |                           | (963 | ) |      | (2,173 | ) |      | (1,926 | )
|Transition obligation amortization |  |                             | 34     |   |                           | 35   |   |      | 68     |   |      | 70     |  
|Prior service cost amortization    |  |                             | 1      |   |                           | 1    |   |      | 2      |   |      | 2      |  
|Net loss recognition               |  |                             | 297    |   |                           | 117  |   |      | 594    |   |      | 234    |  
|                                   |  |                             |        |   |                           |      |   |      |        |   |      |        |  
|Net pension expense                |  | $                           | 1,009  |   |                           | 774  |   |      | 2,019  |   |      | 1,548  |  
|                                   |  |                             |        |   |                           |      |   |      |        |   |      |        |  



The following table
sets forth the components of net postretirement benefit income for all our plans:



|                                  |  |                             |     |   |                           |     |   |      |     |   |      |     |  
|--------------------------------- |  | --------------------------- | --- | - | ------------------------- | --- | - | ---- | --- | - | ---- | --- | -
|                                  |  | Three Months Ended June 30, |     |   | Six Months Ended June 30, |    
|(In thousands)                    |  | 2005                        |     |   | 2004                      |     |   | 2005 |     |   | 2004 |    
|Service cost                      |  | $                           |    |   |                           |    |   |      |    |   |      |    |  
|Interest cost                     |  |                             | 17  |   |                           | 23  |   |      | 35  |   |      | 45  |  
|Net amortization and deferral     |  |                             | (36 | ) |                           | (33 | ) |      | (71 | ) |      | (67 | )
|                                  |  |                             |     |   |                           |     |   |      |     |   |      |     |  
|Net postretirement benefit income |  | $                           | (19 | ) |                           | (10 | ) |      | (36 | ) |      | (22 | )
|                                  |  |                             |     |   |                           |     |   |      |     |   |      |     |  



NOTE 10 - GUARANTOR AND
NONGUARANTOR FINANCIAL STATEMENTS



Our senior unsecured
notes, or the Senior Notes, are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by each direct and indirect domestic subsidiary of Aviall, Inc., or Aviall, each a guarantor subsidiary. Each guarantor
subsidiary is directly or indirectly 100% owned by Aviall. The Senior Notes are not guaranteed by any direct or indirect foreign subsidiary of Aviall, each a nonguarantor subsidiary.



The unaudited consolidating financial information presents the consolidating balance sheets as of June 30, 2005 and December
31, 2004, the related statements of operations for the three- and six-month periods ended June 30, 2005 and 2004 and the statements of cash flows for the six month periods ended June 30, 2005 and 2004 with separate columns for:



| | a) | Aviall, the parent;
| | -- | -------------------



| | b) | the guarantor subsidiaries on a combined basis;
| | -- | -----------------------------------------------



| | c) | the nonguarantor subsidiaries on a combined basis; and
| | -- | ------------------------------------------------------



| | d) | total consolidated amounts.
| | -- | ---------------------------



The information includes elimination entries necessary to consolidate Aviall, the parent, with the guarantor and nonguarantor subsidiaries.



Investments in subsidiaries are accounted for by the parent using the equity
method of accounting. The guarantor and nonguarantor subsidiaries are presented on a combined basis. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. Separate financial statements
for the guarantor and nonguarantor subsidiaries are not presented because management believes such financial statements would not be meaningful to investors.



Pursuant to the terms of the Credit Facility, no subsidiary of Aviall other than Aviall Services, Inc., or Aviall Services, may pay cash dividends to
Aviall, other than to fund limited repurchases or redemptions of outstanding securities. In addition, Aviall Services may pay cash dividends to Aviall for the purpose of funding (i) ordinary operating expenses and scheduled debt service, (ii)
payments by Aviall of taxes in respect of Aviall and its subsidiaries, up to the amount that would be payable by Aviall Services, on a consolidated basis, if it were the taxpayer and (iii) any repurchase of the Senior Notes permitted under the terms
of the Credit Facility. Additionally, the Credit Facility restricts intercompany loans made to Aviall from its direct and indirect subsidiaries, with the exception of intercompany loans made to fund limited repurchases or redemptions of outstanding
securities and loans made by Aviall Services to fund required payments under the Senior Notes. The net assets of consolidating subsidiaries subject to these restrictions were $718.2 million and $714.8 million at June 30, 2005 and December 31, 2004,
respectively.



8



---

CONSOLIDATED STATEMENT OF OPERATIONS



|                                          |  |                                  |         |   |                       |         |   |                          |        |              |         |   |                   |        
|----------------------------------------- |  | -------------------------------- | ------- | - | --------------------- | ------- | - | ------------------------ | ------ | ------------ | ------- | - | ----------------- | -------
|                                          |  | Three Months Ended June 30, 2005
|(In Thousands)                            |  | Parent                           |         |   | GuarantorSubsidiaries |         |   | NonguarantorSubsidiaries |        | Eliminations |         |   | ConsolidatedTotal
|Net sales                                 |  | $                                |        |   |                       | 302,277 |   |                          | 37,280 |              | (17,485 | ) |                   | 322,072
|Cost of sales                             |  |                                  |        |   |                       | 248,393 |   |                          | 30,735 |              | (17,485 | ) |                   | 261,643
|                                          |  |                                  |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Gross profit                              |  |                                  |        |   |                       | 53,884  |   |                          | 6,545  |              |        |   |                   | 60,429 
|Selling and administrative expense        |  |                                  |        |   |                       | 26,974  |   |                          | 4,475  |              |        |   |                   | 31,449 
|                                          |  |                                  |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Operating income                          |  |                                  |        |   |                       | 26,910  |   |                          | 2,070  |              |        |   |                   | 28,980 
|Interest expense (income)                 |  |                                  | (4,645  | ) |                       | 9,810   |   |                          | 97     |              |        |   |                   | 5,262  
|Equity in (earnings) loss of subsidiaries |  |                                  | (12,409 | ) |                       | (1,102  | ) |                          |       |              | 13,511  |   |                   |       
|                                          |  |                                  |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Earnings (loss) before income taxes       |  |                                  | 17,054  |   |                       | 18,202  |   |                          | 1,973  |              | (13,511 | ) |                   | 23,718 
|Provision for income taxes                |  |                                  | 1,683   |   |                       | 5,793   |   |                          | 871    |              |        |   |                   | 8,347  
|                                          |  |                                  |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Net earnings (loss)                       |  | $                                | 15,371  |   |                       | 12,409  |   |                          | 1,102  |              | (13,511 | ) |                   | 15,371 
|                                          |  |                                  |         |   |                       |         |   |                          |        |              |         |   |                   |        



CONSOLIDATED STATEMENT OF
OPERATIONS



|                                          |  |                                |         |   |                       |         |   |                          |        |              |         |   |                   |        
|----------------------------------------- |  | ------------------------------ | ------- | - | --------------------- | ------- | - | ------------------------ | ------ | ------------ | ------- | - | ----------------- | -------
|                                          |  | Six Months Ended June 30, 2005
|(In Thousands)                            |  | Parent                         |         |   | GuarantorSubsidiaries |         |   | NonguarantorSubsidiaries |        | Eliminations |         |   | ConsolidatedTotal
|Net sales                                 |  | $                              |        |   |                       | 574,574 |   |                          | 72,573 |              | (33,627 | ) |                   | 613,520
|Cost of sales                             |  |                                |        |   |                       | 474,047 |   |                          | 59,504 |              | (33,627 | ) |                   | 499,924
|                                          |  |                                |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Gross profit                              |  |                                |        |   |                       | 100,527 |   |                          | 13,069 |              |        |   |                   | 113,596
|Selling and administrative expense        |  |                                |        |   |                       | 50,820  |   |                          | 8,715  |              |        |   |                   | 59,535 
|                                          |  |                                |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Operating income                          |  |                                |        |   |                       | 49,707  |   |                          | 4,354  |              |        |   |                   | 54,061 
|Interest expense (income)                 |  |                                | (9,290  | ) |                       | 19,492  |   |                          | 163    |              |        |   |                   | 10,365 
|Equity in (earnings) loss of subsidiaries |  |                                | (22,446 | ) |                       | (3,083  | ) |                          |       |              | 25,529  |   |                   |       
|                                          |  |                                |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Earnings (loss) before income taxes       |  |                                | 31,736  |   |                       | 33,298  |   |                          | 4,191  |              | (25,529 | ) |                   | 43,696 
|Provision for income taxes                |  |                                | 3,365   |   |                       | 10,852  |   |                          | 1,108  |              |        |   |                   | 15,325 
|                                          |  |                                |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Net earnings (loss)                       |  | $                              | 28,371  |   |                       | 22,446  |   |                          | 3,083  |              | (25,529 | ) |                   | 28,371 
|                                          |  |                                |         |   |                       |         |   |                          |        |              |         |   |                   |        



9



---

CONSOLIDATED STATEMENT OF OPERATIONS



|                                          |  |                                  |         |   |                       |         |   |                          |        |              |         |   |                   |        
|----------------------------------------- |  | -------------------------------- | ------- | - | --------------------- | ------- | - | ------------------------ | ------ | ------------ | ------- | - | ----------------- | -------
|                                          |  | Three Months Ended June 30, 2004
|(In Thousands)                            |  | Parent                           |         |   | GuarantorSubsidiaries |         |   | NonguarantorSubsidiaries |        | Eliminations |         |   | ConsolidatedTotal
|Net sales                                 |  | $                                |        |   |                       | 296,237 |   |                          | 32,875 |              | (15,064 | ) |                   | 314,048
|Cost of sales                             |  |                                  |        |   |                       | 252,273 |   |                          | 26,695 |              | (15,064 | ) |                   | 263,904
|                                          |  |                                  |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Gross profit                              |  |                                  |        |   |                       | 43,964  |   |                          | 6,180  |              |        |   |                   | 50,144 
|Selling and administrative expense        |  |                                  |        |   |                       | 25,635  |   |                          | 4,018  |              |        |   |                   | 29,653 
|                                          |  |                                  |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Operating income                          |  |                                  |        |   |                       | 18,329  |   |                          | 2,162  |              |        |   |                   | 20,491 
|Interest expense (income)                 |  |                                  | (4,246  | ) |                       | 8,386   |   |                          | 67     |              |        |   |                   | 4,207  
|Equity in (earnings) loss of subsidiaries |  |                                  | (10,756 | ) |                       | (1,486  | ) |                          |       |              | 12,242  |   |                   |       
|                                          |  |                                  |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Earnings (loss) before income taxes       |  |                                  | 15,002  |   |                       | 11,429  |   |                          | 2,095  |              | (12,242 | ) |                   | 16,284 
|Provision for income taxes                |  |                                  | 1,537   |   |                       | 673     |   |                          | 609    |              |        |   |                   | 2,819  
|                                          |  |                                  |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Net earnings (loss)                       |  | $                                | 13,465  |   |                       | 10,756  |   |                          | 1,486  |              | (12,242 | ) |                   | 13,465 
|                                          |  |                                  |         |   |                       |         |   |                          |        |              |         |   |                   |        



CONSOLIDATED STATEMENT OF
OPERATIONS



|                                          |  |                                |         |   |                       |         |   |                          |        |              |         |   |                   |        
|----------------------------------------- |  | ------------------------------ | ------- | - | --------------------- | ------- | - | ------------------------ | ------ | ------------ | ------- | - | ----------------- | -------
|                                          |  | Six Months Ended June 30, 2004
|(In Thousands)                            |  | Parent                         |         |   | GuarantorSubsidiaries |         |   | NonguarantorSubsidiaries |        | Eliminations |         |   | ConsolidatedTotal
|Net sales                                 |  | $                              |        |   |                       | 564,422 |   |                          | 64,429 |              | (31,271 | ) |                   | 597,580
|Cost of sales                             |  |                                |        |   |                       | 479,533 |   |                          | 52,076 |              | (31,271 | ) |                   | 500,338
|                                          |  |                                |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Gross profit                              |  |                                |        |   |                       | 84,889  |   |                          | 12,353 |              |        |   |                   | 97,242 
|Selling and administrative expense        |  |                                |        |   |                       | 49,927  |   |                          | 7,325  |              |        |   |                   | 57,252 
|                                          |  |                                |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Operating income                          |  |                                |        |   |                       | 34,962  |   |                          | 5,028  |              |        |   |                   | 39,990 
|Interest expense (income)                 |  |                                | (8,489  | ) |                       | 16,883  |   |                          | 158    |              |        |   |                   | 8,552  
|Equity in (earnings) loss of subsidiaries |  |                                | (18,026 | ) |                       | (3,523  | ) |                          |       |              | 21,549  |   |                   |       
|                                          |  |                                |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Earnings (loss) before income taxes       |  |                                | 26,515  |   |                       | 21,602  |   |                          | 4,870  |              | (21,549 | ) |                   | 31,438 
|Provision for income taxes                |  |                                | 3,073   |   |                       | 3,576   |   |                          | 1,347  |              |        |   |                   | 7,996  
|                                          |  |                                |         |   |                       |         |   |                          |        |              |         |   |                   |        
|Net earnings (loss)                       |  | $                              | 23,442  |   |                       | 18,026  |   |                          | 3,523  |              | (21,549 | ) |                   | 23,442 
|                                          |  |                                |         |   |                       |         |   |                          |        |              |         |   |                   |        



10



---

CONSOLIDATED BALANCE SHEET



|                                              |  |               |         |   |                       |           |   |                          |        |              |          |   |                   |         |  
|--------------------------------------------- |  | ------------- | ------- | - | --------------------- | --------- | - | ------------------------ | ------ | ------------ | -------- | - | ----------------- | ------- | -
|                                              |  | June 30, 2005 |        
|(In Thousands)                                |  | Parent        |         |   | GuarantorSubsidiaries |           |   | NonguarantorSubsidiaries |        | Eliminations |          |   | ConsolidatedTotal |        
|Assets                                        |  |               |         |   |                       |           |   |                          |        |              |          |   |                   |         |  
|Current assets:                               |  |               |         |   |                       |           |   |                          |        |              |          |   |                   |         |  
|Cash and cash equivalents                     |  | $             | (19     | ) |                       | 31,837    |   |                          | 4,067  |              |         |   |                   | 35,885  |  
|Receivables, net                              |  |               |        |   |                       | 146,362   |   |                          | 26,083 |              |         |   |                   | 172,445 |  
|Inventories                                   |  |               |        |   |                       | 329,377   |   |                          | 14,290 |              |         |   |                   | 343,667 |  
|Prepaid expenses and other current assets     |  |               |        |   |                       | 3,600     |   |                          | 224    |              |         |   |                   | 3,824   |  
|Deferred income taxes                         |  |               |        |   |                       | 29,773    |   |                          | 22     |              |         |   |                   | 29,795  |  
|                                              |  |               |         |   |                       |           |   |                          |        |              |          |   |                   |         |  
|Total current assets                          |  |               | (19     | ) |                       | 540,949   |   |                          | 44,686 |              |         |   |                   | 585,616 |  
|                                              |  |               |         |   |                       |           |   |                          |        |              |          |   |                   |         |  
|Property and equipment                        |  |               |        |   |                       | 34,532    |   |                          | 572    |              |         |   |                   | 35,104  |  
|Investment in subsidiaries                    |  |               | 766,233 |   |                       | 37,367    |   |                          |       |              | (803,600 | ) |                   |        |  
|Intercompany receivables                      |  |               |        |   |                       | 190,016   |   |                          |       |              | (190,016 | ) |                   |        |  
|Goodwill                                      |  |               |        |   |                       | 44,904    |   |                          | 1,939  |              |         |   |                   | 46,843  |  
|Intangible assets                             |  |               |        |   |                       | 200,991   |   |                          |       |              |         |   |                   | 200,991 |  
|Deferred income taxes                         |  |               |        |   |                       | 2,816     |   |                          | 410    |              |         |   |                   | 3,226   |  
|Other assets                                  |  |               | 5,998   |   |                       | 6,458     |   |                          | 4      |              |         |   |                   | 12,460  |  
|                                              |  |               |         |   |                       |           |   |                          |        |              |          |   |                   |         |  
|Total assets                                  |  | $             | 772,212 |   |                       | 1,058,033 |   |                          | 47,611 |              | (993,616 | ) |                   | 884,240 |  
|                                              |  |               |         |   |                       |           |   |                          |        |              |          |   |                   |         |  
|Liabilities and Shareholders Equity          |  |               |         |   |                       |           |   |                          |        |              |          |   |                   |         |  
|Current liabilities:                          |  |               |         |   |                       |           |   |                          |        |              |          |   |                   |         |  
|Current portion of long-term debt             |  | $             |        |   |                       | 1,145     |   |                          | 12     |              |         |   |                   | 1,157   |  
|Revolving line of credit                      |  |               |        |   |                       | 60,000    |   |                          | 661    |              |         |   |                   | 60,661  |  
|Cash overdrafts due to outstanding checks     |  |               | 4       |   |                       | 11,039    |   |                          | 258    |              |         |   |                   | 11,301  |  
|Accounts payable                              |  |               |        |   |                       | 161,599   |   |                          | 1,116  |              |         |   |                   | 162,715 |  
|Accrued expenses                              |  |               | 11,022  |   |                       | 36,662    |   |                          | 4,008  |              |         |   |                   | 51,692  |  
|                                              |  |               |         |   |                       |           |   |                          |        |              |          |   |                   |         |  
|Total current liabilities                     |  |               | 11,026  |   |                       | 270,445   |   |                          | 6,055  |              |         |   |                   | 287,526 |  
|                                              |  |               |         |   |                       |           |   |                          |        |              |          |   |                   |         |  
|Long-term debt                                |  |               | 200,000 |   |                       | 1,663     |   |                          | 34     |              |         |   |                   | 201,697 |  
|Intercompany payables                         |  |               | 171,989 |   |                       |          |   |                          | 18,027 |              | (190,016 | ) |                   |        |  
|Other liabilities                             |  |               |        |   |                       | 5,820     |   |                          |       |              |         |   |                   | 5,820   |  
|Commitments and contingencies                 |  |               |        |   |                       |          |   |                          |       |              |         |   |                   |        |  
|Shareholders equity                          |  |               |         |   |                       |           |   |                          |        |              |          |   |                   |         |  
|Common stock                                  |  |               | 360     |   |                       | 33        |   |                          | 7,542  |              | (7,575   | ) |                   | 360     |  
|Additional paid-in capital                    |  |               | 458,810 |   |                       | 867,597   |   |                          | 9,919  |              | (877,516 | ) |                   | 458,810 |  
|Retained earnings (accumulated deficit)       |  |               | (33,759 | ) |                       | (81,147   | ) |                          | 6,034  |              | 75,113   |   |                   | (33,759 | )
|Treasury stock, at cost                       |  |               | (28,589 | ) |                       |          |   |                          |       |              |         |   |                   | (28,589 | )
|Unearned compensation - restricted stock      |  |               | (1,247  | ) |                       |          |   |                          |       |              |         |   |                   | (1,247  | )
|Accumulated other comprehensive (loss) income |  |               | (6,378  | ) |                       | (6,378    | ) |                          |       |              | 6,378    |   |                   | (6,378  | )
|                                              |  |               |         |   |                       |           |   |                          |        |              |          |   |                   |         |  
|Total shareholders equity                    |  |               | 389,197 |   |                       | 780,105   |   |                          | 23,495 |              | (803,600 | ) |                   | 389,197 |  
|                                              |  |               |         |   |                       |           |   |                          |        |              |          |   |                   |         |  
|Total liabilities and shareholders equity    |  | $             | 772,212 |   |                       | 1,058,033 |   |                          | 47,611 |              | (993,616 | ) |                   | 884,240 |  
|                                              |  |               |         |   |                       |           |   |                          |        |              |          |   |                   |         |  



11



---

CONSOLIDATED BALANCE SHEET



|                                              |  |                   |         |   |                       |         |   |                          |        |              |            |   |                   |         |  
|--------------------------------------------- |  | ----------------- | ------- | - | --------------------- | ------- | - | ------------------------ | ------ | ------------ | ---------- | - | ----------------- | ------- | -
|                                              |  | December 31, 2004 |        
|(In Thousands)                                |  | Parent            |         |   | GuarantorSubsidiaries |         |   | NonguarantorSubsidiaries |        | Eliminations |            |   | ConsolidatedTotal |        
|Assets                                        |  |                   |         |   |                       |         |   |                          |        |              |            |   |                   |         |  
|Current assets:                               |  |                   |         |   |                       |         |   |                          |        |              |            |   |                   |         |  
|Cash and cash equivalents                     |  | $                 | (35     | ) |                       | 83,002  |   |                          | 8,665  |              |           |   |                   | 91,632  |  
|Receivables, net                              |  |                   |        |   |                       | 116,938 |   |                          | 27,149 |              |           |   |                   | 144,087 |  
|Inventories                                   |  |                   |        |   |                       | 315,298 |   |                          | 12,831 |              |           |   |                   | 328,129 |  
|Prepaid expenses and other current assets     |  |                   |        |   |                       | 2,824   |   |                          | 129    |              |           |   |                   | 2,953   |  
|Deferred income taxes                         |  |                   |        |   |                       | 40,410  |   |                          | 22     |              |           |   |                   | 40,432  |  
|                                              |  |                   |         |   |                       |         |   |                          |        |              |            |   |                   |         |  
|Total current assets                          |  |                   | (35     | ) |                       | 558,472 |   |                          | 48,796 |              |           |   |                   | 607,233 |  
|                                              |  |                   |         |   |                       |         |   |                          |        |              |            |   |                   |         |  
|Property and equipment                        |  |                   |        |   |                       | 33,318  |   |                          | 611    |              |           |   |                   | 33,929  |  
|Investment in subsidiaries                    |  |                   | 764,005 |   |                       | 34,284  |   |                          |       |              | (798,289   | ) |                   |        |  
|Intercompany receivables                      |  |                   |        |   |                       | 235,007 |   |                          |       |              | (235,007   | ) |                   |        |  
|Goodwill                                      |  |                   |        |   |                       | 44,904  |   |                          | 1,939  |              |           |   |                   | 46,843  |  
|Intangible assets                             |  |                   |        |   |                       | 46,525  |   |                          |       |              |           |   |                   | 46,525  |  
|Deferred income taxes                         |  |                   |        |   |                       | 2,816   |   |                          | 413    |              |           |   |                   | 3,229   |  
|Other assets                                  |  |                   | 6,498   |   |                       | 5,214   |   |                          | 5      |              |           |   |                   | 11,717  |  
|                                              |  |                   |         |   |                       |         |   |                          |        |              |            |   |                   |         |  
|Total assets                                  |  | $                 | 770,468 |   |                       | 960,540 |   |                          | 51,764 |              | (1,033,296 | ) |                   | 749,476 |  
|                                              |  |                   |         |   |                       |         |   |                          |        |              |            |   |                   |         |  
|Liabilities and Shareholders Equity          |  |                   |         |   |                       |         |   |                          |        |              |            |   |                   |         |  
|Current liabilities:                          |  |                   |         |   |                       |         |   |                          |        |              |            |   |                   |         |  
|Current portion of long-term debt             |  | $                 |        |   |                       | 1,429   |   |                          | 11     |              |           |   |                   | 1,440   |  
|Revolving line of credit                      |  |                   |        |   |                       |        |   |                          |       |              |           |   |                   |        |  
|Cash overdrafts due to outstanding checks     |  |                   | 4       |   |                       | 42,969  |   |                          | 50     |              |           |   |                   | 43,023  |  
|Accounts payable                              |  |                   |        |   |                       | 97,368  |   |                          | 1,261  |              |           |   |                   | 98,629  |  
|Accrued expenses                              |  |                   | 7,723   |   |                       | 35,827  |   |                          | 3,191  |              |           |   |                   | 46,741  |  
|                                              |  |                   |         |   |                       |         |   |                          |        |              |            |   |                   |         |  
|Total current liabilities                     |  |                   | 7,727   |   |                       | 177,593 |   |                          | 4,513  |              |           |   |                   | 189,833 |  
|                                              |  |                   |         |   |                       |         |   |                          |        |              |            |   |                   |         |  
|Long-term debt                                |  |                   | 200,000 |   |                       | 1,981   |   |                          | 9      |              |           |   |                   | 201,990 |  
|Intercompany payables                         |  |                   | 213,740 |   |                       |        |   |                          | 21,267 |              | (235,007   | ) |                   |        |  
|Other liabilities                             |  |                   |        |   |                       | 8,652   |   |                          |       |              |           |   |                   | 8,652   |  
|Commitments and contingencies                 |  |                   |        |   |                       |        |   |                          |       |              |           |   |                   |        |  
|Shareholders equity                          |  |                   |         |   |                       |         |   |                          |        |              |            |   |                   |         |  
|Common stock                                  |  |                   | 346     |   |                       | 33      |   |                          | 7,542  |              | (7,575     | ) |                   | 346     |  
|Additional paid-in capital                    |  |                   | 447,060 |   |                       | 862,357 |   |                          | 9,918  |              | (872,275   | ) |                   | 447,060 |  
|Retained earnings (accumulated deficit)       |  |                   | (62,130 | ) |                       | (83,698 | ) |                          | 8,515  |              | 75,183     |   |                   | (62,130 | )
|Treasury stock, at cost                       |  |                   | (28,218 | ) |                       |        |   |                          |       |              |           |   |                   | (28,218 | )
|Unearned compensation - restricted stock      |  |                   | (1,679  | ) |                       |        |   |                          |       |              |           |   |                   | (1,679  | )
|Accumulated other comprehensive (loss) income |  |                   | (6,378  | ) |                       | (6,378  | ) |                          |       |              | 6,378      |   |                   | (6,378  | )
|                                              |  |                   |         |   |                       |         |   |                          |        |              |            |   |                   |         |  
|Total shareholders equity                    |  |                   | 349,001 |   |                       | 772,314 |   |                          | 25,975 |              | (798,289   | ) |                   | 349,001 |  
|                                              |  |                   |         |   |                       |         |   |                          |        |              |            |   |                   |         |  
|Total liabilities and shareholders equity    |  | $                 | 770,468 |   |                       | 960,540 |   |                          | 51,764 |              | (1,033,296 | ) |                   | 749,476 |  
|                                              |  |                   |         |   |                       |         |   |                          |        |              |            |   |                   |         |  



12



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CONSOLIDATED STATEMENT OF CASH FLOWS



|                                                     |  |                                |         |   |                       |          |   |                          |        |   |              |         |   |                   |          |  
|---------------------------------------------------- |  | ------------------------------ | ------- | - | --------------------- | -------- | - | ------------------------ | ------ | - | ------------ | ------- | - | ----------------- | -------- | -
|                                                     |  | Six Months Ended June 30, 2005 |        
|(In Thousands)                                       |  | Parent                         |         |   | GuarantorSubsidiaries |          |   | NonguarantorSubsidiaries |        |   | Eliminations |         |   | ConsolidatedTotal |         
|Operating activities:                                |  |                                |         |   |                       |          |   |                          |        |   |              |         |   |                   |          |  
|Net earnings (loss)                                  |  | $                              | 28,371  |   |                       | 22,446   |   |                          | 3,083  |   |              | (25,529 | ) |                   | 28,371   |  
|Depreciation and amortization                        |  |                                | 500     |   |                       | 11,367   |   |                          | 116    |   |              |        |   |                   | 11,983   |  
|Deferred income taxes                                |  |                                |        |   |                       | 10,635   |   |                          |       |   |              |        |   |                   | 10,635   |  
|Compensation expense on restricted stock awards      |  |                                | 432     |   |                       |         |   |                          |       |   |              |        |   |                   | 432      |  
|Changes in:                                          |  |                                |         |   |                       |          |   |                          |        |   |              |         |   |                   |          |  
|Receivables, net                                     |  |                                |        |   |                       | (29,424  | ) |                          | 1,066  |   |              |        |   |                   | (28,358  | )
|Inventories                                          |  |                                |        |   |                       | (14,079  | ) |                          | (1,459 | ) |              |        |   |                   | (15,538  | )
|Intercompany receivables and payables                |  |                                | (21,533 | ) |                       | 30,337   |   |                          | (8,804 | ) |              |        |   |                   |         |  
|Accounts payable                                     |  |                                |        |   |                       | 64,231   |   |                          | (145   | ) |              |        |   |                   | 64,086   |  
|Accrued expenses                                     |  |                                | 3,299   |   |                       | 835      |   |                          | 817    |   |              |        |   |                   | 4,951    |  
|Other, net                                           |  |                                |        |   |                       | (3,476   | ) |                          | (128   | ) |              |        |   |                   | (3,604   | )
|                                                     |  |                                |         |   |                       |          |   |                          |        |   |              |         |   |                   |          |  
|Net cash provided by (used for) operating activities |  |                                | 11,069  |   |                       | 92,872   |   |                          | (5,454 | ) |              | (25,529 | ) |                   | 72,958   |  
|                                                     |  |                                |         |   |                       |          |   |                          |        |   |              |         |   |                   |          |  
|Investing activities:                                |  |                                |         |   |                       |          |   |                          |        |   |              |         |   |                   |          |  
|Capital expenditures                                 |  |                                |        |   |                       | (5,615   | ) |                          | (23    | ) |              |        |   |                   | (5,638   | )
|Purchase of distribution rights                      |  |                                |        |   |                       | (160,846 | ) |                          |       |   |              |        |   |                   | (160,846 | )
|Investment in subsidiaries                           |  |                                | (22,446 | ) |                       | (3,083   | ) |                          |       |   |              | 25,529  |   |                   |         |  
|Sales of property, plant and equipment               |  |                                |        |   |                       | 344      |   |                          | 33     |   |              |        |   |                   | 377      |  
|                                                     |  |                                |         |   |                       |          |   |                          |        |   |              |         |   |                   |          |  
|Net cash provided by (used for) investing activities |  |                                | (22,446 | ) |                       | (169,200 | ) |                          | 10     |   |              | 25,529  |   |                   | (166,107 | )
|                                                     |  |                                |         |   |                       |          |   |                          |        |   |              |         |   |                   |          |  
|Financing activities:                                |  |                                |         |   |                       |          |   |                          |        |   |              |         |   |                   |          |  
|Debt issue costs paid                                |  |                                |        |   |                       | (1,898   | ) |                          |       |   |              |        |   |                   | (1,898   | )
|Issuance of common stock                             |  |                                | 11,764  |   |                       |         |   |                          |       |   |              |        |   |                   | 11,764   |  
|Purchase of treasury stock                           |  |                                | (371    | ) |                       |         |   |                          |       |   |              |        |   |                   | (371     | )
|Net change in revolving credit facility              |  |                                |        |   |                       | 60,000   |   |                          | 661    |   |              |        |   |                   | 60,661   |  
|Cash overdrafts due to outstanding checks            |  |                                |        |   |                       | (31,930  | ) |                          | 208    |   |              |        |   |                   | (31,722  | )
|Debt proceeds                                        |  |                                |         |   |                       | 62       |   |                          |        |   |              |         |   |                   | 62       |  
|Debt repaid                                          |  |                                |        |   |                       | (1,071   | ) |                          | (23    | ) |              |        |   |                   | (1,094   | )
|                                                     |  |                                |         |   |                       |          |   |                          |        |   |              |         |   |                   |          |  
|Net cash provided by financing activities            |  |                                | 11,393  |   |                       | 25,163   |   |                          | 846    |   |              |        |   |                   | 37,402   |  
|                                                     |  |                                |         |   |                       |          |   |                          |        |   |              |         |   |                   |          |  
|Change in cash and cash equivalents                  |  |                                | 16      |   |                       | (51,165  | ) |                          | (4,598 | ) |              |        |   |                   | (55,747  | )
|Cash and cash equivalents, beginning of period       |  |                                | (35     | ) |                       | 83,002   |   |                          | 8,665  |   |              |        |   |                   | 91,632   |  
|                                                     |  |                                |         |   |                       |          |   |                          |        |   |              |         |   |                   |          |  
|Cash and cash equivalents, end of period             |  | $                              | (19     | ) |                       | 31,837   |   |                          | 4,067  |   |              |        |   |                   | 35,885   |  
|                                                     |  |                                |         |   |                       |          |   |                          |        |   |              |         |   |                   |          |  



13



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CONSOLIDATED STATEMENT OF CASH FLOWS



|                                                     |  |                                |         |   |                       |         |   |                          |        |   |              |         |   |                   |         |  
|---------------------------------------------------- |  | ------------------------------ | ------- | - | --------------------- | ------- | - | ------------------------ | ------ | - | ------------ | ------- | - | ----------------- | ------- | -
|                                                     |  | Six Months Ended June 30, 2004 |        
|(In Thousands)                                       |  | Parent                         |         |   | GuarantorSubsidiaries |         |   | NonguarantorSubsidiaries |        |   | Eliminations |         |   | ConsolidatedTotal |        
|Operating activities:                                |  |                                |         |   |                       |         |   |                          |        |   |              |         |   |                   |         |  
|Net earnings (loss)                                  |  | $                              | 23,442  |   |                       | 18,026  |   |                          | 3,523  |   |              | (21,549 | ) |                   | 23,442  |  
|Depreciation and amortization                        |  |                                | 508     |   |                       | 8,025   |   |                          | 141    |   |              |        |   |                   | 8,674   |  
|Deferred income taxes                                |  |                                |        |   |                       | 6,439   |   |                          | (3     | ) |              |        |   |                   | 6,436   |  
|Compensation expense on restricted stock awards      |  |                                | 331     |   |                       |        |   |                          |       |   |              |        |   |                   | 331     |  
|Changes in:                                          |  |                                |         |   |                       |         |   |                          |        |   |              |         |   |                   |         |  
|Receivables, net                                     |  |                                |        |   |                       | (25,036 | ) |                          | (2,128 | ) |              |        |   |                   | (27,164 | )
|Inventories                                          |  |                                |        |   |                       | 33,312  |   |                          | (838   | ) |              |        |   |                   | 32,474  |  
|Intercompany receivables and payables                |  |                                | (19,039 | ) |                       | 17,318  |   |                          | 1,721  |   |              |        |   |                   |        |  
|Accounts payable                                     |  |                                | (34     | ) |                       | 5,568   |   |                          | 368    |   |              |        |   |                   | 5,902   |  
|Accrued expenses                                     |  |                                | 7,625   |   |                       | 2,181   |   |                          | 2,018  |   |              |        |   |                   | 11,824  |  
|Other, net                                           |  |                                | 3,072   |   |                       | (4,956  | ) |                          | 22     |   |              |        |   |                   | (1,862  | )
|                                                     |  |                                |         |   |                       |         |   |                          |        |   |              |         |   |                   |         |  
|Net cash provided by (used for) operating activities |  |                                | 15,905  |   |                       | 60,877  |   |                          | 4,824  |   |              | (21,549 | ) |                   | 60,057  |  
|                                                     |  |                                |         |   |                       |         |   |                          |        |   |              |         |   |                   |         |  
|Investing activities:                                |  |                                |         |   |                       |         |   |                          |        |   |              |         |   |                   |         |  
|Capital expenditures                                 |  |                                |        |   |                       | (4,378  | ) |                          | (12    | ) |              |        |   |                   | (4,390  | )
|Purchase of distribution rights                      |  |                                |        |   |                       | (800    | ) |                          |       |   |              |        |   |                   | (800    | )
|Investment in subsidiaries                           |  |                                | (18,026 | ) |                       | (3,523  | ) |                          |       |   |              | 21,549  |   |                   |        |  
|Sales of property, plant and equipment               |  |                                |        |   |                       | 5       |   |                          |       |   |              |        |   |                   | 5       |  
|                                                     |  |                                |         |   |                       |         |   |                          |        |   |              |         |   |                   |         |  
|Net cash provided by (used for) investing activities |  |                                | (18,026 | ) |                       | (8,696  | ) |                          | (12    | ) |              | 21,549  |   |                   | (5,185  | )
|                                                     |  |                                |         |   |                       |         |   |                          |        |   |              |         |   |                   |         |  
|Financing activities:                                |  |                                |         |   |                       |         |   |                          |        |   |              |         |   |                   |         |  
|Debt issue costs paid                                |  |                                | (130    | ) |                       | (606    | ) |                          |       |   |              |        |   |                   | (736    | )
|Issuance of common stock                             |  |                                | 2,627   |   |                       |        |   |                          |       |   |              |        |   |                   | 2,627   |  
|Purchase of treasury stock                           |  |                                | (351    | ) |                       |        |   |                          |       |   |              |        |   |                   | (351    | )
|Net change in revolving credit facility              |  |                                |        |   |                       |        |   |                          | (142   | ) |              |        |   |                   | (142    | )
|Cash overdrafts due to outstanding checks            |  |                                | 1       |   |                       | (36,510 | ) |                          | (42    | ) |              |        |   |                   | (36,551 | )
|Debt repaid                                          |  |                                |        |   |                       | (1,756  | ) |                          | (6     | ) |              |        |   |                   | (1,762  | )
|                                                     |  |                                |         |   |                       |         |   |                          |        |   |              |         |   |                   |         |  
|Net cash provided by (used for) financing activities |  |                                | 2,147   |   |                       | (38,872 | ) |                          | (190   | ) |              |        |   |                   | (36,915 | )
|                                                     |  |                                |         |   |                       |         |   |                          |        |   |              |         |   |                   |         |  
|Change in cash and cash equivalents                  |  |                                | 26      |   |                       | 13,309  |   |                          | 4,622  |   |              |        |   |                   | 17,957  |  
|Cash and cash equivalents, beginning of period       |  |                                |        |   |                       | 21,187  |   |                          | 2,237  |   |              |        |   |                   | 23,424  |  
|                                                     |  |                                |         |   |                       |         |   |                          |        |   |              |         |   |                   |         |  
|Cash and cash equivalents, end of period             |  | $                              | 26      |   |                       | 34,496  |   |                          | 6,859  |   |              |        |   |                   | 41,381  |  
|                                                     |  |                                |         |   |                       |         |   |                          |        |   |              |         |   |                   |         |  



14



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Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations



Executive Overview



We are the largest independent global provider of new parts, supply-chain
management and other related value-added services to the aerospace aftermarket. The aerospace aftermarket consists of parts needed for the scheduled and unscheduled maintenance, repair and modification of aircraft and engines already in use but does
not include parts used in the construction of new aircraft or engines. We serve this market through our two wholly owned subsidiaries, Aviall Services, Inc., or Aviall Services, and Inventory Locator Service, LLC, or ILS. Aviall Services provides
new parts and related supply-chain management services to the aerospace industry, and ILS operates electronic marketplaces for buying and selling parts, equipment and services for the global aerospace, defense and marine industries.



Aviall Services purchases a broad range of new parts, components and supplies
from original equipment manufacturers, or OEMs, and resells them to its customers. As of December 31, 2004, Aviall Services purchased new parts, components and supplies from over 220 OEMs, including in some cases several business units within such
manufacturers, and resold them to over 18,500 government/military, general aviation/corporate and commercial airline customers, including over 300 airlines. Aviall Services also provides value-added services to our customers and suppliers, such as
repair services, supply-chain management services and information-gathering and delivery services.



ILS operates electronic marketplaces for buying and selling parts, equipment and services for the global aerospace, defense and marine industries. As of
December 31, 2004, ILS had more than 14,000 users in more than 85 countries, ILSs electronic marketplaces contained more than 55 million line items representing over five billion parts for sale and ILS also maintained databases of over 119
million cross-referenced United States, or U.S., government records, allowing users to research manufacturers and prices for specific parts, locate alternate parts, find additional uses and markets for parts and review U.S. government procurement
histories.



Our second quarter 2005 net earnings of $15.4
million, or $0.44 diluted earnings per share, increased 14.1% compared to net earnings of $13.5 million, or $0.40 diluted earnings per share, in the second quarter of 2004. Our operating income in the second quarter of 2005 was $29.0 million, an
increase of $8.5 million or 41.4%, from the same quarter in 2004. These results were driven primarily by the addition of commissions received from General Electric, or GE, for the sales of unique parts of GE CF6-50 and CF6-80A, or CF6 engines, which
commenced in February 2005. During the GE transition period, Aviall Services recorded only commissions, and not net sales, on parts directly shipped by GE. On July 18, 2005, Aviall Services began shipping CF6 engine parts and began recording net
sales from these parts. In the second quarter of 2005, our selling and administrative expense increased only $1.8 million compared to the second quarter of 2004 largely due to year-over-year higher salary and benefit expenses. This continues our
strategy of increasing revenues using proportionately less selling and administrative expense. However, because we did not recognize the full sales amount from direct GE shipments to customers during the GE transition period but did increase expense
in preparation for assuming our responsibilities for GE shipments in July 2005, our selling and administrative expense as a percentage of sales increased to 9.8% from 9.4% in the second quarter of 2004.



We saw little change in market conditions during the second quarter of 2005.
The combination of record high fuel costs, the slowing economic growth in many regions and the uncertain future being faced by many of our airline customers and some general aviation aircraft operators have combined to make our future performance
and opportunities less certain. However, we believe these conditions also continue to support the need for the services offered by Aviall Services and ILS, which we believe is the principal reason for Avialls improved results in 2004 and into
2005.



Our future strategy will continue to focus on the
acquisition of new long-term supplier contracts as well as adding other traditional supplier relationships, delivering superior customer service and investing in technology and infrastructure to increase supplier and customer efficiencies. We will
also continue to evaluate potential strategic acquisitions and changes to our capital structure. We believe our ability to grow at a pace similar to that which we have experienced since 2000 will depend on the award of one or a series of new
long-term supplier contracts, the expansion of our traditional supplier base and product offerings and/or completion of a strategic acquisition. The timing and length of the process to procure new long-term agreements or relationships or a strategic
acquisition is unpredictable. We are currently actively pursuing a number of opportunities for additional growth, including possible significant, new long-term supplier agreements. No assurance can be given that we will be able to procure any such
new arrangements. To the extent we do secure any such relationship, the economies of scale derived from recent contracts may not be indicative of our future results, particularly in the early stages of new contract implementation. As an example of
the implementation of this strategy, we announced in April 2005 the signing of an agreement with NetJets Services, Inc., or NetJets, to assume the supply chain management of spare parts for the maintenance, repair and operation of their fleet. This
agreement is a complex supply-chain management services contract designed to simplify logistics and lower NetJets overall operating costs.



15



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Critical Accounting Policies



For a discussion of our critical accounting policies, refer to Item 7: Managements Discussion and Analysis of
Financial Condition and Results of Operations - Critical Accounting Policies included in our Annual Report on Form 10-K for the year ended December 31, 2004. There have been no material changes to the critical accounting policies discussed in
our Annual Report on Form 10-K for the year ended December 31, 2004.



Results of Operations-Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004



Net Sales. Net sales for Aviall Services were $314.6 million, an increase of $7.7 million or 2.5%, from the $306.9 million recorded in the second
quarter of 2004.



The following table presents sales for Aviall
Services in each of its geographic regions and in all market sectors (amounts in millions):



|                           |  |                               |      |   |                                 |      |   
|-------------------------- |  | ----------------------------- | ---- | - | ------------------------------- | ---- | --
|                           |  | Amount ofIncrease/ (Decrease) |      |   | Percentage Increase/ (Decrease) |     
|Geographic region:         |  |                               |      |   |                                 |      |   
|Americas                   |  | $                             | 5.3  |   |                                 | 2.1  | % 
|Europe                     |  | $                             | 5.1  |   |                                 | 26.5 | % 
|Asia-Pacific               |  | $                             | (2.7 | ) |                                 | (7.7 | )%
|                           |  |                              
|Market sector:             |  |                               |      |   |                                 |      |   
|General aviation/corporate |  | $                             | 7.9  |   |                                 | 11.0 | % 
|Commercial airline         |  | $                             | 5.1  |   |                                 | 6.9  | % 
|Government/military/other  |  | $                             | (5.3 | ) |                                 | (3.3 | )%



Sales in the general
aviation/corporate sector increased because of additional flight activity tempered by the effect of high fuel prices. Sales in the commercial airline sector increased primarily due to the addition of GE CF6 engine parts sales commissions, which
commenced in February 2005, and slightly stronger sales volumes in the sector. Sales in the government/military sector decreased slightly. Aggregate sales of products supplied by Rolls-Royce and Honeywell pursuant to exclusive contracts were $203.1
million and $206.8 million in the second quarter of 2005 and 2004, respectively.



Net sales for ILS were $7.4 million, an increase of $0.3 million or 3.7%, compared to the second quarter of 2004.



Gross Profit. Gross profit of $60.4 million increased $10.3 million or 20.5% in the second quarter of 2005 compared to $50.1 million in the second
quarter of 2004. Gross profit as a percentage of net sales was 18.8% in the second quarter of 2005 as compared to 16.0% in the second quarter of 2004. The increased gross profit percentage was due to the addition of GE CF6 engine parts sales
commissions, which commenced in February 2005. During the GE transition period, we recorded only commissions, and not net sales, on parts directly shipped by GE.



Selling and Administrative Expense. Selling and administrative expense increased $1.8 million to $31.4 million in the
first quarter of 2005 and increased as a percentage of net sales to 9.8% from 9.4% in the second quarter of 2004. Selling and administrative expense increased primarily as a result of higher salary and benefit expenses.



Interest Expense. Interest expense increased $1.1 million to $5.3
million in the second quarter of 2005 from $4.2 million in the second quarter of 2004. Noncash interest expense amounted to $0.5 million and $0.4 million in 2005 and 2004, respectively. Our net interest expense increased primarily due to higher
borrowings, at higher effective interest rates, outstanding under our senior secured credit facility, or the Credit Facility, which had a balance of $60.0 million at June 30, 2005.



16



---

Provision for Income Taxes. Our income tax expense for the second quarter of 2005 was $8.3
million, and our effective tax rate was 35.2%. Our income tax expense for the second quarter of 2004 was $2.8 million, and our effective tax rate was 17.3%. The increase in our effective tax rate from 17.3% in 2004 to 35.2% in 2005 is primarily due
to the release in the second quarter of 2004 of a $2.8 million valuation allowance for state tax net operating loss, or NOL, carryforwards.



Actual cash payments made for federal, state and foreign income taxes were $1.2 million and $0.9 million in the second quarter of 2005 and 2004,
respectively. Our cash income tax expense is primarily comprised of Alternative Minimum Tax and foreign taxes on our foreign operations. Our cash income tax expense continues to be substantially lower than the U.S. federal statutory rate through the
use of our U.S. federal NOL carryforward.



Results of Operations-Six
Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004



Net Sales. Net sales for Aviall Services were $598.7 million, an increase of $15.4 million or 2.6%, from the $583.3 million recorded in the first six months of 2004.



The following table presents sales for Aviall Services in each of its
geographic regions and in all market sectors (amounts in millions):



|                           |  |                               |      |   |                                 |      |   
|-------------------------- |  | ----------------------------- | ---- | - | ------------------------------- | ---- | --
|                           |  | Amount ofIncrease/ (Decrease) |      |   | Percentage Increase/ (Decrease) |     
|Geographic region:         |  |                               |      |   |                                 |      |   
|Europe                     |  | $                             | 10.7 |   |                                 | 27.2 | % 
|Americas                   |  | $                             | 4.6  |   |                                 | 1.0  | % 
|Asia-Pacific               |  | $                             | 0.1  |   |                                 | 0.1  | % 
|                           |  |                              
|Market sector:             |  |                               |      |   |                                 |      |   
|Commercial airline         |  | $                             | 13.6 |   |                                 | 9.8  | % 
|General aviation/corporate |  | $                             | 9.8  |   |                                 | 7.0  | % 
|Government/military/other  |  | $                             | (8.0 | ) |                                 | (2.6 | )%



Sales in the
commercial airline sector increased primarily due to the addition of GE CF6 engine parts sales commissions, which commenced in February 2005, and slightly stronger sales volumes in the sector. Sales in the general aviation/corporate sector increased
because of additional flight activity tempered by the effect of high fuel prices. Sales in the government/military sector decreased slightly. Aggregate sales of products supplied by Rolls-Royce and Honeywell pursuant to exclusive contracts were
$383.4 million and $392.7 million in the first six months of 2005 and 2004, respectively.



Net sales for ILS were $14.9 million, an increase of $0.6 million or 4.1%, from the $14.3 million recorded in the first six months of 2004.



Gross Profit. Gross profit of $113.6 million increased $16.4 million or 16.8% in the first six months of 2005
compared to $97.2 million in the first six months of 2004. Gross profit as a percentage of net sales was 18.5% in the first six months of 2005 as compared to 16.3% in the first six months of 2004. The increased gross profit percentage was due to the
addition of GE CF6 engine parts sales commissions, which commenced in February 2005. During the GE transition period, we recorded only commissions, and not net sales, on parts directly shipped by GE.



Selling and Administrative Expense. Selling and administrative expense
increased $2.3 million to $59.5 million in the first six months of 2005 and slightly increased as a percentage of net sales to 9.7% from 9.6% in the first six months of 2004. Selling and administrative expense increased largely as a result of higher
salary and benefit expenses offset by lower bad debt expense.



Interest Expense. Interest expense increased $1.8 million to $10.4 million in the first six months of 2005 from $8.6 million in the first six months of 2004. Noncash interest expense amounted to $0.9 million and $0.8 million in 2005
and 2004, respectively. Our net interest expense increased primarily due to borrowings related to the initial funding of the GE CF6 agreement and the continued borrowings outstanding under the Credit Facility, which had a balance of $60.0 million at
June 30, 2005.



17



---

Provision for Income Taxes. Our income tax expense for the first six months of 2005 was $15.3
million, and our effective tax rate was 35.1%. Our income tax expense for the first six months of 2004 was $8.0 million, and our effective tax rate was 25.4%. The increase in our effective tax rate from 25.4% in 2004 to 35.1% in 2005 is primarily
due to the release in the first six months of 2004 of a $2.8 million valuation allowance for state tax NOL carryforwards.



Actual cash payments made for federal, state and foreign income taxes were $1.8 million and $0.7 million in the first six months of 2005 and 2004,
respectively. Our cash income tax expense is primarily comprised of Alternative Minimum Tax and foreign taxes on our foreign operations. Our cash income tax expense continues to be substantially lower than the U.S. federal statutory rate through the
use of our U.S. federal NOL carryforward.



Liquidity and Capital
Resources



Cash Flow. Net cash flow provided by
operations was $73.0 million in the first six months of 2005 compared to $60.1 million in the first six months of 2004. The $12.9 million increase in cash provided by operating activities in 2005 compared to the same period in 2004 resulted from an
unusually high June 30, 2005 ending accounts payable balance due to the timing of month end settlements with our suppliers and increased cash earnings in 2005, partially offset by higher inventory levels at June 30, 2005. Aviall Services
inventory turns improved from 3.2 turns in December 2004 to 3.6 turns in June 2005 due to the increased sales volumes in the second quarter of 2005. The days sales outstanding for Avialls receivables decreased from 51 days at December
31, 2004 to 46 days at June 30, 2005 due to the increased sales volume in the second quarter of 2005.



Capital expenditures were $6.1 million in the first six months of 2005, including $0.4 million for noncash capital expenditures, compared to $4.5 million
in the first six months of 2004, including $0.1 million for noncash capital expenditures. Capital spending in both 2005 and 2004 was primarily for upgrades to Aviall Services enterprise resource planning software, computer hardware and
operations infrastructure. During the second quarter of 2005, we successfully upgraded our enterprise resource planning system with no disruptions to our business. This was our largest capital expenditure item over the last two years, with an
aggregate cost of approximately $6.9 million. We expect to make capital expenditures, including noncash capital amounts, totaling between $12.0 million and $15.7 million in 2005. These projects include upgrades and enhancements associated with both
our systems and operations infrastructure at Aviall Services and ILS. We review our capital expenditure program periodically and modify it as required to meet current business needs. Under the Credit Facility, our 2005 capital expenditure limit is
approximately $17.2 million, comprised of a $12.0 million limit for 2005 plus $5.2 million of carryover amounts from prior years.



In January 2005, we entered into a distribution agreement with GE Engine Services Distribution LLC and GE, whereby GE has appointed us as the exclusive
worldwide distributor of unique parts for the CF6 engines for as long as these engines remain in service. In April 2005, we entered into two distribution agreements with Hamilton Sundstrand which give us exclusive distribution rights for Hamilton
Sundstrand-built spare parts that are unique to the 60kVA family of generators, the JT8D mechanical fuel controls and the JT9D engine accessories. We paid approximately $160.8 million for the GE and Hamilton Sundstrand distribution rights.



Variable Working Capital (see definition below) decreased
$20.2 million in the first six months of 2005 as compared to a decrease of $11.2 million in the first six months of 2004. In 2005, we invested $166.1 million in net capital expenditures and distribution rights as compared to $5.2 million in 2004.
The combined cash used in the first six months of 2005 of $93.1 million by both operating and investing activities was funded by $11.8 million received for common stock issued pursuant to the exercise of employee stock options, $60.7 million of net
borrowings under our revolving credit facilities and a portion of the $91.6 million of cash on hand at the beginning of 2005. In addition, our cash overdraft position decreased $31.7 million in the first six months of 2005. As a result, our cash
balance decreased by $55.7 million.



By way of comparison, the
combined cash provided in the first six months of 2004 of $54.9 million for both operating and investing activities together with the $2.6 million received for common stock issued pursuant to the exercise of employee stock options was primarily used
to fund the $36.6 million decrease in our cash overdraft position. As a result, our cash balance increased by $18.0 million. Overdraft positions arise when we settle our accounts payable by issuing checks at month end, and the recipients of these
checks have not presented them to our banks for payment before period end. We classify these overdraft positions as a separate current liability in our accompanying consolidated balance sheet because no right of offset exists against other cash
accounts within the same bank. Generally accepted accounting principles, or GAAP, treat these amounts similar to debt in the statement of cash flows by presenting cash overdrafts as a financing activity. We expect to continue large month end
settlements with our major suppliers, but the overdrafts will change in accordance with the fluctuating amounts of products shipped to us from time to time.



18



---

Assuming our current level of internal growth, profitability, and the present relationship between
increased revenues, Variable Working Capital requirements and our annual capital expenditures, we expect to generate strong positive cash flows from operations, although these may be offset from time to time by overdraft obligations and increases in
Variable Working Capital, particularly when our business is growing. Assuming the foregoing, we project cash flow in 2005 for operating activities will exceed $50.0 million. Our cash flow from operating activities also depends on the timing of the
delivery and payment for inventory as discussed above. In some months, we receive much larger deliveries than the average of the preceding several months. These larger deliveries can significantly alter our cash flow for that month and on a
cumulative basis for both the quarter and the fiscal year to date.



In 2005, we expect to fund our internal growth and any related capital expenditures out of cash flow from operations and borrowings under the Credit Facility. If we are awarded one or more additional long-term supplier agreements in 2005
that require significant investments in distribution rights and inventory, we may be required to increase availability and borrow significant amounts under the Credit Facility, or we may be required to sell debt, equity or other securities under our
shelf registration statement or otherwise to fund the costs associated with the investment. Likewise, if we enter into a strategic acquisition or if our current projections prove to be inaccurate in 2005, we may be required to borrow significant
amounts under the Credit Facility or to sell securities.



The
following table presents a reconciliation of our Variable Working Capital to working capital for the periods presented:



|                                          |  |              |          |   |                  |         |   |              |          |   |                  |         |  
|----------------------------------------- |  | ------------ | -------- | - | ---------------- | ------- | - | ------------ | -------- | - | ---------------- | ------- | -
|(In Thousands)                            |  | June 30,2005 |          |   | December 31,2004 |         |   | June 30,2004 |          |   | December 31,2003 |        
|Receivables, net                          |  | $            | 172,445  |   |                  | 144,087 |   |              | 166,443  |   |                  | 139,279 |  
|Plus: Inventories                         |  |              | 343,667  |   |                  | 328,129 |   |              | 295,386  |   |                  | 327,860 |  
|Less: Accounts payable                    |  |              | (162,715 | ) |                  | (98,629 | ) |              | (100,725 | ) |                  | (94,822 | )
|                                          |  |              |          |   |                  |         |   |              |          |   |                  |         |  
|Variable Working Capital                  |  |              | 353,397  |   |                  | 373,587 |   |              | 361,104  |   |                  | 372,317 |  
|                                          |  |              |          |   |                  |         |   |              |          |   |                  |         |  
|Plus:                                     |  |              |          |   |                  |         |   |              |          |   |                  |         |  
|Cash and cash equivalents                 |  |              | 35,885   |   |                  | 91,632  |   |              | 41,381   |   |                  | 23,424  |  
|Prepaid expenses and other current assets |  |              | 3,824    |   |                  | 2,953   |   |              | 3,701    |   |                  | 2,501   |  
|Deferred income taxes                     |  |              | 29,795   |   |                  | 40,432  |   |              | 19,075   |   |                  | 19,075  |  
|Less:                                     |  |              |          |   |                  |         |   |              |          |   |                  |         |  
|Current portion of long-term debt         |  |              | (1,157   | ) |                  | (1,440  | ) |              | (2,495   | ) |                  | (3,293  | )
|Cash overdrafts due to outstanding checks |  |              | (11,301  | ) |                  | (43,023 | ) |              | (7,063   | ) |                  | (43,615 | )
|Revolving line of credit                  |  |              | (60,661  | ) |                  |        |   |              | (367     | ) |                  | (509    | )
|Accrued expenses                          |  |              | (51,692  | ) |                  | (46,741 | ) |              | (51,391  | ) |                  | (39,567 | )
|                                          |  |              |          |   |                  |         |   |              |          |   |                  |         |  
|Working capital                           |  | $            | 298,090  |   |                  | 417,400 |   |              | 363,945  |   |                  | 330,333 |  
|                                          |  |              |          |   |                  |         |   |              |          |   |                  |         |  



We define Variable
Working Capital as receivables plus inventories less accounts payable. In no event should Variable Working Capital be considered as an alternative to working capital or any GAAP measure as an indicator of our performance, nor should Variable Working
Capital be considered as an alternative to working capital as an indicator of our relative liquidity to meet our obligations within an ordinary business cycle. We believe that Variable Working Capital is a useful measure, along with measurements
under GAAP, in evaluating our financial performance and our ability to leverage sales and earnings from our Variable Working Capital. In addition, we use Variable Working Capital as a financial measure to evaluate our management of working capital
and as a metric to measure contract and supplier performance.



Senior Unsecured Debt. We have $200.0 million of senior unsecured notes, or the Senior Notes, outstanding. The Senior Notes bear interest at 7.625% per annum and mature on July 1, 2011, unless previously redeemed at our option. We
may redeem some or all of the Senior Notes at specified redemption prices at any time after July 1, 2007. In addition, prior to July 1, 2006, we may redeem up to 35% of the Senior Notes from the proceeds of qualifying equity offerings.



The Senior Notes are our senior unsecured obligations and are equal in
right of payment to all of our senior indebtedness. The Senior Notes are guaranteed on a senior unsecured basis by each of our domestic subsidiaries.



In November 2003, we entered into an interest rate swap agreement to manage interest rate risk exposure on $50.0 million of the $200.0 million principal
amount of Senior Notes. Under this agreement which expires in 2011, we pay floating interest amounts in exchange for giving up the right to pay a fixed amount without an exchange of the underlying principal amount.



19



---

Senior SecuredDebt. The Credit Facility consists of a $260.0 million revolving credit and
letter of credit facility due as a balloon payment in 2008, with availability determined by reference to a borrowing base calculated using our eligible accounts receivable and inventory and after deducting reserves required by the lenders. As of
June 30, 2005, we had $60.0 million of borrowings outstanding under the Credit Facility and had issued letters of credit for $0.9 million. In addition, we had $188.0 million available for additional borrowings under the Credit Facility and our
borrowing base was $248.9 million. As of June 30, 2005, borrowings under the Credit Facility bear interest based upon either: (1) a Eurodollar Rate plus an applicable margin ranging from 1.5% to 2.5% depending upon our financial ratios, or (2) a
Base Rate plus an applicable margin ranging from 0.5% to 1.5% depending upon the same financial ratios. We expect to utilize both of these interest rate options during 2005. As of June 30, 2005, the weighted average interest rate on the Credit
Facility was 5.20%. An annual commitment fee of 0.5% is payable monthly in arrears on the daily unused portion of the Credit Facility. Obligations under the Credit Facility are collateralized by substantially all of our domestic assets and 65% of
the stock of certain of our foreign subsidiaries. The Credit Facility also contains default clauses that permit the acceleration of all amounts due following an event of default at the discretion of the lenders, and lock-box provisions that apply
our cash collections to outstanding borrowings. Based on the terms of the Credit Facility and pursuant to EITF Issue No. 95-22, Balance Sheet Classification of Revolving Credit Agreement Obligations Involving Lock-Box Arrangements, we
classify amounts outstanding under the Credit Facility, if any, as current.



We also maintain a Canadian $6.0 million secured revolving credit facility, or the Canadian Revolver. As of June 30, 2005, we had borrowings of $0.7 million outstanding under the Canadian Revolver.



Debt Covenants. The Credit Facility contains various restrictive
operating and financial covenants, including several that are based on earnings before interest, taxes, depreciation, amortization, extraordinary gains or losses, and one-time items, or Adjusted EBITDA. We must comply with a maximum leverage ratio
covenant that measures the ratio of our outstanding debt to our Adjusted EBITDA for the trailing four quarters. We must maintain a maximum leverage ratio of: 4.50 to 1 for the fiscal quarters ending on or before June 30, 2005; 4.00 to 1 for the
fiscal quarter ending September 30, 2005; 3.50 to 1 for the fiscal quarter ending December 31, 2005; and 3.25 to 1 for the fiscal quarters ending on or after March 31, 2006. This maximum leverage ratio covenant was 4.50 to 1 at June 30, 2005. We
must also comply with a minimum interest coverage ratio covenant that measures the ratio of our Adjusted EBITDA for the trailing four quarters to our interest expense during the trailing four quarters. The minimum interest coverage ratio covenant
was 3.50 to 1 at June 30, 2005 and will remain at that level for all periods thereafter. Furthermore, we must maintain a tangible net worth of not less than $205.8 million plus 75% of the cumulative consolidated net income for each fiscal quarter
ending on or after June 30, 2004. As of June 30, 2005, the required tangible net worth was $252.0 million. We are permitted to make capital expenditures under the Credit Facility in any fiscal year up to $12.0 million, plus any unused carryover of
up to $10.0 million from prior years. As a result, we must limit our capital expenditures in 2005 to no more than $17.2 million, which includes $5.2 million of allowed carryover spending from prior years.



The Senior Notes also contain various restrictive covenants. We may not incur
additional indebtedness unless we maintain a consolidated interest coverage ratio of at least 2.0 to 1.0 or unless the debt is otherwise permitted under the indenture. The consolidated interest coverage ratio measures the ratio of our EBITDA, as
defined in the indenture relating to the Senior Notes, for the trailing four quarters to our interest expense for such quarters. Subject to specified exceptions, we may not make payments on or redeem our capital stock, make certain investments or
make other restricted payments unless we maintain a consolidated interest coverage ratio of at least 2.0 to 1.0 and otherwise have available 50% of cumulative consolidated net income or capital stock sale proceeds from which such payments may be
made. We are unable to incur liens unless expressly permitted under the Senior Notes or unless the Senior Notes are equally and ratably secured. We may not sell or otherwise dispose of any of the capital stock of our subsidiaries unless specifically
authorized. We must receive fair market value for any asset sales and the consideration must be paid at least 75% in cash, cash equivalents or assumed liabilities. To the extent such proceeds are received, we must reinvest any proceeds exceeding $10
million in additional assets within a period of 365 days or thereafter repay senior debt or repurchase Senior Notes. Additionally, we must repurchase the Senior Notes at a price equal to 101% of the principal amount of the Senior Notes upon a change
of control. The indenture relating to the Senior Notes also contains additional covenants.



We are currently, and expect to remain, in compliance for at least the next twelve months in all material respects with the covenants in the Credit Facility and the Senior Notes.



20



---

The following table presents a reconciliation of our EBITDA and Adjusted EBITDA, as defined in the Credit
Facility, to net earnings for the trailing four quarters ended June 30, 2005:



|                                      |  |                  |        |   |                   |        |   |                  |        |   |                   |        |       |         |  
|------------------------------------- |  | ---------------- | ------ | - | ----------------- | ------ | - | ---------------- | ------ | - | ----------------- | ------ | ----- | ------- | -
|(In Thousands)                        |  | ThirdQuarter2004 |        |   | FourthQuarter2004 |        |   | FirstQuarter2005 |        |   | SecondQuarter2005 |        | Total |        
|Net earnings                          |  | $                | 10,021 |   |                   | 9,706  |   |                  | 13,000 |   |                   | 15,371 |       | 48,098  |  
|Plus:                                 |  |                  |        |   |                   |        |   |                  |        |   |                   |        |       |         |  
|Income tax expense                    |  |                  | 3,961  |   |                   | 4,472  |   |                  | 6,978  |   |                   | 8,347  |       | 23,758  |  
|Interest expense                      |  |                  | 4,169  |   |                   | 4,021  |   |                  | 5,103  |   |                   | 5,262  |       | 18,555  |  
|Depreciation and amortization expense |  |                  | 4,020  |   |                   | 3,736  |   |                  | 4,876  |   |                   | 6,114  |       | 18,746  |  
|                                      |  |                  |        |   |                   |        |   |                  |        |   |                   |        |       |         |  
|EBITDA                                |  |                  | 22,171 |   |                   | 21,935 |   |                  | 29,957 |   |                   | 35,094 |       | 109,157 |  
|Noncash (gains) losses                |  |                  | (490   | ) |                   | (110   | ) |                  | (78    | ) |                   | 112    |       | (566    | )
|                                      |  |                  |        |   |                   |        |   |                  |        |   |                   |        |       |         |  
|Adjusted EBITDA                       |  | $                | 21,681 |   |                   | 21,825 |   |                  | 29,879 |   |                   | 35,206 |       | 108,591 |  
|                                      |  |                  |        |   |                   |        |   |                  |        |   |                   |        |       |         |  



The Adjusted EBITDA
calculation above is prepared in accordance with the terms of the Credit Facility. The noncash gains and losses, which are included in the Adjusted EBITDA calculation in accordance with the terms of the Credit Facility, may occur again. The
depreciation and amortization expense above excludes debt issuance cost amortization. Adjusted EBITDA is presented solely to provide information on our debt covenants, and EBITDA and Adjusted EBITDA should not be considered an alternative to
operating results or cash flows calculated in accordance with GAAP.



Contractual Obligations. As of June 30, 2005, there have been no material changes in our contractual obligations as set forth in Item 7: Managements Discussion and Analysis of Financial Condition and Results of Operations
- Contractual Obligations in our Annual Report on Form 10-K for the year ended December 31, 2004.



New Accounting Pronouncements. In June 2005, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards
No, 154, or SFAS 154, Accounting Changes and Error Corrections - a replacement of APB No. 20 and FAS No. 3. SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial
statements presented on the basis of the new accounting principle. SFAS 154 also requires that a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for prospectively as a change in estimate, and correction of
errors in previously issued financial statements should be termed a restatement. SFAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. We will adopt SFAS 154 effective January
1, 2006 and expect no material impact on our consolidated financial statements as a result of the adoption.



In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), or SFAS 123R, Share-Based Payment, which
replaces Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and Statement of
Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FAS 123. SFAS 123R addresses the accounting for share-based payment transactions in which a company receives
employee services in exchange for either equity instruments of the company or liabilities that are based on the fair value of the companys equity instruments or that may be settled by the issuance of such equity instruments. SFAS 123R
addresses all forms of share-based payment awards, including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. SFAS 123R eliminates the ability to account for share-based compensation
transactions using the intrinsic method and generally would require that such transactions be accounted for using a fair-value-based method and recognized as expense over the period during which an employee is required to provide services in
exchange for the award. SFAS 123R is effective for annual periods beginning after June 15, 2005. As such, we will implement the provisions of SFAS 123R effective January 1, 2006. We are in the process of evaluating the three allowable methods of
transition to SFAS 123R but have not yet determined which method will be used. In 2006, we will incur compensation expense under SFAS 123R, as currently written, related to unvested options granted prior to January 1, 2006. Although we have not
completed evaluating the impact the adoption of SFAS 123R will have on our future results of operations, we currently estimate the impact on an annual basis will be similar to that in our pro forma disclosures for SFAS 123 detailed in Note 2 as set
forth in our accompanying consolidated financial statements.



21



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Forward-Looking Statements



This report contains certain forward-looking statements (as such term is defined in the Private Securities Litigation Reform
Act of 1995) that are based on the beliefs of our management, as well as assumptions and estimates made by, and information currently available to, our management. When used in this report, the words anticipate, believe,
estimate, expect, intend and similar expressions, as they relate to us or our management, identify forward-looking statements. Such statements reflect our current views with respect to future events and are
subject to risks, uncertainties and assumptions relating to our operations and results of operations as well as those of our customers and suppliers, including as a result of competitive factors and pricing pressures, shifts in market demand,
general economic conditions and other factors including, among others, those that effect flight activity in the commercial, business, government/military, and general/corporate aviation segments, the business activities of our customers and
suppliers and developments in information and communication technology. Additional risks are set forth in our Annual Report on Form 10-K for the year ended December 31, 2004. Should one or more of these risks or uncertainties materialize, or should
underlying assumptions or estimates prove incorrect, actual results may vary materially from those described in the forward-looking statements.



Item 3: Quantitative and Qualitative Disclosures About Market Risk



We are exposed to market risk from changes in interest rates and foreign exchange rates. From time to time, we have used financial instruments to offset
these risks. These financial instruments are not used for trading or speculative purposes. We did not experience any significant changes in market risk during the first six months of 2005. Our market risk is described in more detail in Item
7A: Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the year ended December 31, 2004.



Item 4: Controls and Procedures



The term disclosure controls and procedures is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the
Exchange Act. This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified by the Securities and Exchange Commission. Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this quarterly report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of
the period covered by this quarterly report.



There were no
changes to our internal control over financial reporting during the second quarter of 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



PART II - OTHER INFORMATION



Item 1: Legal Proceedings



Not applicable.



Item 2: Unregistered Sales of Equity Securities and Use of Proceeds



Not applicable.



Item 3: Defaults Upon Senior Securities



Not applicable.



22



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Item 4: Submission of Matters to a Vote of Security Holders



We held our 2005 Annual Meeting of Stockholders on June 9, 2005. The three
matters voted upon at that meeting and the votes recorded were as follows:



| | (1) | The election of Richard J. Schnieders, Bruce N. Whitman, Allan M. Holt and Chris A. Davis to serve as directors for a term expiring at our 2008 Annual Meeting of Stockholders.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                      |  |            |  |               
|--------------------- |  | ---------- |  | --------------
|Nominee               |  | Votes For  |  | Votes Withheld
|Richard J. Schnieders |  | 31,589,196 |  | 534,990       
|Bruce N. Whitman      |  | 31,508,426 |  | 615,759       
|Allan M. Holt         |  | 31,189,353 |  | 934,833       
|Chris A. Davis        |  | 23,003,730 |  | 9,120,456     



| |  | In addition, the terms of office as a director of Donald R. Muzyka, Jonathan M. Schofield, Peter J. Clare, Alberto F. Fernández, Paul E. Fulchino and Arthur E. Wegner
continued after the meeting.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | The approval of an amendment to the Aviall, Inc. Amended and Restated 1998 Directors Stock Plan to change the grant date for the issuance of shares of restricted common stock and
options to January 26th of each calendar year.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|           |  |               |  |                  |  |                
|---------- |  | ------------- |  | ---------------- |  | ---------------
|Votes For  |  | Votes Against |  | Votes Abstaining |  | Broker Non-Vote
|27,090,322 |  | 1,156,356     |  | 179,227          |  | 3,698,281      



| | (3) | The approval of the Management Incentive Plan.
| | --- | ----------------------------------------------



|           |  |               |  |                  |  |                
|---------- |  | ------------- |  | ---------------- |  | ---------------
|Votes For  |  | Votes Against |  | Votes Abstaining |  | Broker Non-Vote
|30,620,289 |  | 1,319,618     |  | 184,279          |  | 0              



Item 5: Other Information



Not applicable.



Item 6: Exhibits



10.1

Amendment Number Four to the Aviall, Inc. Amended and Restated 1998 Directors Stock Plan, dated as of June 14, 200531.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 193431.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 193432.1

Certifications pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002




23



---

SIGNATURES



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.



|              |  |              |  |                                                  
|------------- |  | ------------ |  | -------------------------------------------------
|              |  | AVIALL, INC.
|              |  |             
|July 28, 2005 |  | By:          |  | /s/ Colin M. Cohen                               
|              |  |              |  | Colin M. Cohen                                   
|              |  |              |  | Senior Vice President and Chief Financial Officer
|              |  |              |  | (Principal Financial Officer)                    



24



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INDEX TO EXHIBITS



|            |  |                                                                                                                                                                                  
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                      
|            | 
|10.1        |  | Amendment Number Four to the Aviall, Inc. Amended and Restated 1998 Directors Stock Plan, dated as of June 14, 2005                                                              
|            | 
|31.1        |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934                                                                       
|            | 
|31.2        |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934                                                                       
|            | 
|32.1        |  | Certifications pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002



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