<PAGE>


                                   UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                              Washington, D. C.  20549
                                     FORM 10-K

(Mark One)

     (X)  ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
          SECURITIES EXCHANGE ACT OF 1934

          For the year ended December 31, 1997

                                         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 0-28428
                                 -------

                           AirNet Systems, Inc.
--------------------------------------------------------------------------------
           (Exact name of registrant as specified in its charter)

              Ohio                                 31-1458309
--------------------------------------------------------------------------------
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
incorporation or organization)

      3939 International Gateway                              43219
--------------------------------------------------------------------------------
  (Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code:         614-237-9777
                                                            ------------

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class           Name of each exchange on which registered
     -------------------           -----------------------------------------
Common shares, $.01 par value                New York Stock Exchange
  (12,558,913 outstanding
   at February 27, 1998)

Securities registered pursuant to Section 12(g) of the Act: None

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  (X)

The aggregate market value of the voting stock held by non-affiliates of the
Registrant at February 27, 1998 was $199,119,189.

<PAGE>

                                       PART I


ITEM 1  -  BUSINESS

OVERVIEW OF THE COMPANY'S BUSINESS

AirNet Express-SM-, the fully integrated national air transportation network of
AirNet Systems, Inc. (the "Company"), operates between 100 cities in more than
40 states and delivers over 16,000 time-critical shipments each working day. The
Company's check delivery service, which generates approximately 83% of the
Company's revenues, is the leading transporter of canceled checks and related
information for the U.S. banking industry, meeting more that 2,200 daily
deadlines. The Company's small package service, which generates approximately
16% of the Company's revenues, provides specialized, high priority delivery
service for customers requiring late pick-ups and early deliveries combined with
prompt, on-line delivery information. The Company's fixed base operations, which
accounts for approximately 1% of the Company's revenues, also offers retail
aviation fuel sales and related ground services for customers in Columbus, Ohio.

During 1997, the Company acquired Data Air Courier, Inc, ("Data Air") and
Pacific Air Charter, Inc, ("PAC").   Both companies were in the business of
transporting cancelled checks.  In addition, Express Convenience Center, Inc.
("ECC") was acquired to provide an expanded customer base in the small package
market.

The Company currently operates a fleet of 113 aircraft (29 Learjets and 84 light
twin engine aircraft), which fly approximately 105,000 miles per operating
night, primarily Monday through Thursday. The Company also provides ground
pick-up and delivery services throughout the nation seven days per week,
utilizing a fleet of 243 Company-owned ground vehicles as well as a ground
transportation network of over 300 independent contractors. The Company uses its
air and ground network to support its banking industry customers, as well as its
LateNight, BusinessDay and SameNight small package customers.  The Company also
utilizes commercial airlines to provide SameDay delivery service for certain of
its banking and small package customers. Later pick-ups and earlier deliveries
than those offered by other national carriers are the differentiating
characteristics of the Company's time-critical delivery network. The Company has
consistently achieved on-time performance levels exceeding 97%. In order to
maintain this performance, the Company utilizes a number of proprietary customer
service and management information systems to track, sort, dispatch and control
the flow of checks and small packages throughout the Company's delivery system.
Delivery times and certain shipment information are available on-line and
through the Internet.

The Company believes that the market for reliable, time-critical deliveries is
growing as a result of a number of global trends, including: (i)  global
business strategies aimed at serving customers' time critical needs for the
dissemination of printed and graphic information; (ii) medical laboratories
requiring same-day  deliveries; and (iii) corporations requiring just-in-time
inventory parts to lower production costs. The Company believes that its
flexible and reliable air transportation network and its demonstrated expertise
in providing time-critical deliveries to the banking industry for over 24 years
position the Company to provide such additional services at premium prices.

AirNet Systems, Inc. was incorporated under the laws of the State of Ohio on
February 15, 1996. The Company's principal executive offices are located at 3939
International Gateway, Columbus, Ohio 43219 and its telephone number is
(614) 237-9777.


                                          2
<PAGE>

BUSINESS STRATEGY

The principal components of the Company's operating and growth strategy are as
follows:

GROW THE COMPANY'S SMALL PACKAGE DELIVERY SERVICE. The Company delivers packages
on a same-day/same-night basis for its small package customers, utilizing its
air transportation system and the commercial airline system. Through its
LateNight and BusinessDay Premium Products, which were introduced in 1997, the
Company believes that it offers a more flexible pick-up and delivery schedule
than those offered by other national and regional carriers and appeals to
customers with time-sensitive delivery requirements. The Company expanded its
small package sales force throughout 1997 and intends to utilize an aggressive
marketing strategy for Premium Products to the legal community, financial
printers, the entertainment industry and other potential customers requiring
these specialized services. The Company also believes its air and ground
delivery network provides a solid foundation from which to consolidate the
operations of other high-quality ground couriers and regional air freight
operators in the business of providing time critical shipment needs. The
fragmented nature of the air and ground package delivery industry, outside of
the major national carriers, provides such opportunities. In addition to
expanding both the air and ground route structures, the Company is also focused
on aligning with companies that have demonstrated a level of expertise in the
sales and marketing aspects of the industry. During 1997, the Company completed
three acquisitions, representing approximately $11.7 million in 1997 sales.

FOCUS ON UNIQUE AIRCRAFT TYPE AND ROUTE STRUCTURE. The Company's fast and
reliable fleet of aircraft is positioned around a highly efficient and flexible
national route structure designed to facilitate late pick-up and early delivery
times, minimize delays and simplify flight scheduling. The Company's hub-and-
spoke system, with a primary hub in Columbus and several mini-hubs across the
nation, enables the Company to match the varying load capacities of its aircraft
with the shipment weight and volume of each destination city and to consolidate
shipments at its hubs. The hubs are located primarily in less congested regional
airports. These locations, in conjunction with the Company's off-peak departure
and arrival times, provide easy take-offs and landings, convenient loading and
unloading, and fast refueling and maintenance. Six strategically located
maintenance bases help minimize aircraft down time. The Company's focus on
Learjets and light twin engine aircraft has also enabled it to develop an in-
house expertise in purchasing, flying, maintaining and operating its fleet.

ATTRACT, RETAIN AND MOTIVATE THE HIGHEST QUALITY PERSONNEL AVAILABLE. As a
service organization,  the Company recognizes the importance of hiring,
retaining and motivating the highest quality personnel available who are focused
on a set of core values designed by the Company to provide a working environment
where accountability, integrity, quality performance, open communication, team
management and responsibility are explicitly stated goals. The Company provides
its associates with competitive compensation and benefits packages, including a
Company-wide stock option program. The Company believes that its compensation
and benefit package and corporate culture will give it a significant competitive
advantage in attracting and motivating its associates.

EXPAND ITS BANK SERVICES WITHIN THE BANKING INDUSTRY. The Company intends to
strengthen its leadership position in the transportation of canceled bank checks
by adding additional weekend ground routes to its current structure.  The
additional routes will utilize the Company's ground operations infrastructure
while allowing the Company to present a seamless canceled check transportation
structure to its banking customers.


                                          3
<PAGE>

GROUND OPERATIONS

Shipments are typically picked-up by Company couriers and delivered to the
originating airport where shipments are loaded into aircraft by Company ground
crews. Upon arrival at the main hub in Columbus, Ohio, packages are off-loaded,
fine sorted by destination and reloaded onto the aircraft.  During the thirty to
forty minute sort period, the aircraft are refueled by Company ground support
personnel. Fueling operations include trained fuelers and ground support
equipment, including six fuel trucks and approximately 86,500 gallons of fuel
storage capacity.

The Company operates a fleet of 243 ground transportation vehicles, all of which
are owned by the Company. The Company utilizes a computerized system for
monitoring vehicle maintenance and conducts in-house training sessions
throughout the year to maximize safety. Vehicles range in size from passenger
cars to full-size vans, depending on the market being served.  In addition,
where appropriate, the Company utilizes over 300 independent contractors to
further augment its ground delivery network.


FLIGHT OPERATIONS

The Company's flight operations are headquartered in Columbus. The Company hires
licensed pilots meeting certain experience requirements.  All new pilots attend
a Company-run, two-week training program. This flight school includes training
on the Company's flight simulator prior to any actual flight time. Additionally,
new pilots typically apprentice as co-pilots in order to gain a familiarity with
the Company's route system and the unique demands of night flying.

The Company's central dispatch system ties together all components of the air
operation. Departure and arrival times are continuously updated, and weather
conditions throughout the nation are constantly monitored. Company dispatchers
remain in constant contact with pilots, outbased hub managers, fuelers,
maintenance and ground delivery personnel to ensure that no gaps exist in the
Company's delivery process.  The Company also utilizes commercial airlines
primarily to transport shipments during the day when its aircraft typically do
not operate.  Operations personnel utilize FLIGHTTRAX, a computerized flight
tracking system that allows them to track the status of every commercial flight
in the country and schedule ground pick-up and delivery personnel appropriately.


                                          4
<PAGE>

AIRCRAFT FLEET

The Company owns and operates a fleet of 113 aircraft. The Company's fleet was
comprised of the following aircraft at December 31, 1997:

<TABLE>
<CAPTION>

                                          MAXIMUM       MAXIMUM       MAXIMUM
                                         PAYLOAD (1)   RANGE (2)     SPEED (3)
AIRCRAFT TYPE                  NUMBER      (LBS.)     (N. MILES)      (KNOTS)
-------------                  ------    ----------   ----------     ---------
<S>                            <C>       <C>          <C>            <C>
Learjets, Model 35/35A           25        4,200        2,000           440
Learjets, Model 25                4        3,500        1,000           440
Piper Navajo Chieftain           16        1,500          800           175
Piper Aerostar                   13        1,000          900           190
Beech Baron                      39        1,000          700           180
Cessna 310                       16          900          600           170

</TABLE>

---------------
(1)  Maximum payload in pounds for a one-hour flight plus required fuel
     reserves.
(2)  Maximum range in nautical miles, assuming zero wind, full fuel and full
     payload.
(3)  Maximum speed in knots, assuming full payload.

The Learjet is among the most reliable, fastest and most fuel efficient small
jet aircraft available in the world. The Learjet 35 meets all Stage Three noise
requirements currently being implemented across the country. The Learjet 25 is a
smaller aircraft with slightly smaller payload and range capabilities. The
Company intends to either equip these aircraft with approved hush kits, allowing
them to continue operations in most airports or phase-out the Learjet 25's from
scheduled operations and replace them with the more efficient Learjet 35 or
other Stage Three aircraft.

The Company's Learjet fleet provides it with nationwide connectivity. Long lane
segments from all corners of the nation converge on the Company's hub in
Columbus, as well as "mini-hubs" located in Atlanta, Chicago, Charlotte, Dallas,
Denver, Des Moines, and New York. Smaller, light twin engine aircraft provide
service to the various "spoke" cities in the Company's network, which include
virtually all of the nation's large metropolitan areas.

The Company acquires and operates pre-owned aircraft, typically between 15 and
20 years old. These aircraft are reasonably priced and are relatively modern, as
they have undergone no significant design changes in the last 20 years. Further,
when appropriately maintained (the Company performs its own major inspections
and overhauls on its aircraft fleet), these aircraft show little or no evidence
of erosion in performance.

Aircraft maintenance is also headquartered in Columbus. This facility operates
24 hours a day, 365 days a year. The Company employs over 70 experienced
aircraft and avionics technicians in six separate locations across the country
(Columbus, Dallas, Denver, Hartford, Minneapolis and San Diego), performing all
levels of maintenance from 100-hour inspections on its light twin engine
aircraft to 7,200-hour/12-year inspections on its fleet of Learjets. The Company
has an in-house engine shop where certain of the piston engines can be
overhauled on-site, thereby reducing aircraft downtime and controlling costs.
Avionics trouble-shooting and repair, done internally by the Company since 1989,
provide for maximum efficiency and minimum aircraft downtime for its entire
fleet.


                                          5
<PAGE>

DELIVERY SERVICES

A typical shipment is picked up from the sending bank or a small package
customer by a Company courier. Canceled check shipments are pre-sorted by bank
personnel and bundled as to final destination using Company-supplied,
color-coded bags. The shipment is then transported to the local airport where it
enters the Company's air transportation system and is scanned via bar code
technology, which reads information pertaining to the shipper, receiver, airbill
number and applicable deadline. This data is then downloaded into the Company's
ComCheck or AirNet Connect computer systems, where it is available to the
Company's customer service representatives ("CSRs").

Upon arrival at the Company's Columbus hub or one of its mini-hubs, the shipment
is off-loaded, sorted by destination and reloaded onto the Company's aircraft.
At the destination city, the shipment is off-loaded for the final time and
delivered by Company courier to the receiver. When delivered, the shipment is
once again scanned and downloaded into the Company's computer system. Delivery
information for all shipments is then available on-line to the customers and all
Company CSRs. The Company's customer service department is available to handle
any inquiries, discrepancies or supply requests, as well as provide proof of
delivery documentation, all of which are value-added features of the Company's
service.

The Company provides delivery service for three sets of banking deadlines. Basic
deadlines, which have a 9:30 p.m. - 10:00 p.m. hub time in Columbus, provide
delivery service between 12:01 a.m. and 2:00 a.m. to approximately the
northeastern third of the nation. Premium deadlines, which have an 11:00 p.m. -
11:30 p.m. hub time in Columbus and Charlotte, provide delivery service at
approximately 3:00 a.m. to the eastern half of the nation. Finally, City
deadlines, which have a 4:00 a.m. - 5:30 a.m. hub time in Columbus, provide
delivery service at approximately 8:00 a.m. to all cities served by the network.
The Company prices these services based on the tier of service and by the pound
on a customer by customer basis.

The Company's SameDay service provides canceled check delivery services to
banking customers meeting daytime banking deadlines and to other small package
customers requiring "next-flight-out" timing. These shipments are typically
picked up by Company couriers and transported via commercial airlines to
destination cities, where Company couriers accept the packages and deliver them
to the destinations.


CUSTOMERS

The highly specialized needs of the Company's customer base combined with the
Company's performance level over the years have resulted in a high level of
customer retention. This customer retention level, in turn, creates a level of
stability in the Company's revenue base that allows for product development and
continued dedication of resources to providing the highest possible level of
service to customers.  The U. S. banking industry, including commercial banks,
savings banks and Federal Reserve banks, represents the Company's largest
category of customers and in 1997 accounted for approximately 83% of the
Company's revenues. This customer list represents all 100 of the nation's
largest bank holding companies.  The Company's time-critical canceled check
delivery service enables the Company's banking customers to offer competitive
products and pricing. Small package delivery customers, which accounted for 16%
of the Company's 1997 revenues, include industrial and service corporations,
medical companies, national integrated carriers and consolidating freight
forwarders.  Although the Company maintains a base of small package delivery
customers who ship nightly and have a high level of retention, it is also
expanding its services to retail customers who tend to ship less frequently.  No
single customer accounted for more than 10% of the Company's fiscal 1997
revenues.


                                          6
<PAGE>

MARKETING

With the introduction of the LateNight and BusinessDay Premium products in 1997,
the Company has begun to aggressively market its services to the legal
community, financial printers, the entertainment industry and other potential
customers requiring these specialized services. Initial efforts have begun in
Atlanta, New York City, Los Angeles, Philadelphia, Chicago, Dallas, Detroit,
Columbus, Houston, Washington, D.C., Phoenix, and Minneapolis through the
addition of a highly trained sales force. A direct mail campaign, new service
brochures and customized packaging were launched in 1997 to assist the sales
force in penetrating market share.  A website at www.AirNet.com was launched in
October, 1997 to introduce the Company's new services to potential customers.


HUMAN RESOURCES

The Company believes it has achieved a significant competitive advantage within
its industry through its major commitment to human resources. All levels of the
Company's management strive to operate within the spirit of the Company's core
values, which are: (i) Accountability, (ii) Honesty, Integrity, Trust and
Respect, (iii) Quality Performance, (iv) Open and Free Communication, (v) Team
Management Style with Shared Responsibilities, and (vi) Remember to Enjoy Life -
It is a Gift!

All Company personnel are part of the Company-wide drug-testing program.
Management believes this program, which goes beyond the requirements of the
Company's regulators, helps to ensure the highest possible performance levels.
The management training and professional development seminars are periodically
held for, and attended by, all levels of Company personnel. The Company also
aggressively compensates for performance, with excellent performance recognized
and rewarded through incentive-based compensation.


ASSOCIATES

The chart below summarizes the Company's workforce at December 31, 1997 and 1996
and September 30, 1996 and 1995.  The Company's associates are not represented
by any union or covered by any collective bargaining agreement. The Company has
experienced no work stoppages and believes that its relationship with associates
is good.

<TABLE>
<CAPTION>

                                 DECEMBER 31,      SEPTEMBER 30,
                               ---------------     -------------
DEPARTMENT                     1997      1996      1996      1995
----------                     ----      ----      ----      ----
<S>                           <C>        <C>       <C>       <C>
Management/Administration       206       134       115       110
Flight                          179       149       137       123
Maintenance                      73        68        82        72
Driver/Courier/Ramp/Sort        765       347       322       281
                              -----       ---       ---       ---
   Total                      1,223       698       656       586

</TABLE>

COMPETITION

The air and ground courier industry is highly competitive. The Company's primary
competitor is the Federal Reserve's Interdistrict Transportation System ("ITS").
The actions of the Federal Reserve are regulated by the Monetary Control Act,
which, in summary, requires the Federal Reserve to price its services at actual
cost plus a private sector adjustment factor. The Company believes that the
purpose of the Monetary Control Act is to curtail the possibility of predatory
pricing by the Federal Reserve when it competes with the private sector. No
assurance beyond the remedies of law can be given that the Federal Reserve will
comply with the Monetary Control Act.


                                          7
<PAGE>

In the private sector, there are a large number of smaller, regional carriers
that transport canceled checks, none with a significant interstate market share.
The two largest private sector air couriers, Federal Express Corporation
("FedEx") and United Parcel Service ("UPS"), both carry canceled checks where
the deadlines being pursued fit into their existing system, but this has not
represented a significant market share of this industry market to date. The
Company provides customized service for its customer base, often with later
pick-ups and earlier deliveries than the large, national couriers. Both FedEx
and UPS utilize the Company's  transportation network for certain situations
where they require customized service.

The Company competes with commercial airlines and numerous other carriers in its
small package transportation business. The Company's market share in this
industry is less than 1%. The Company believes that this market represents a
significant expansion opportunity. The Company also has a minor presence in the
same-day or next-flight-out industry. The Company believes that there are a
number of competitors in this industry. To the extent the Company elects to
increase its presence in the same-day industry, it will compete against these
companies. The Company will emphasize its information technology, competitive
pricing and historically high on-time performance levels to compete in this
market.


REGULATION

The Company is regulated under Part 135 of the Federal Aviation Regulations by
the Federal Aviation Administration. In connection with the operation of Company
vehicles and aircraft, the Company is subject to regulation by the U. S.
Department of Transportation with respect to the handling of hazardous
materials. The Company holds nationwide general commodities authority from the
Interstate Commerce Commission to operate as a common carrier on an interstate
basis within the contiguous 48 states. The Company's delivery operations are
subject to various state and local regulations, and in many instances, require
permits and licenses from state authorities.

The Company believes that it has all permits, approvals and licenses required to
conduct its operations and that it is in compliance with applicable regulatory
requirements relating to its operations. Failure of the Company to comply with
the applicable regulations could result in substantial fines or possible
revocation of one or more of the Company's operating permits.


ENVIRONMENTAL MATTERS

The Company believes that compliance with environmental matters has not had, and
is not expected to have, a material effect on operations. Although the Company
believes that it is in compliance with all applicable noise level regulations
and is working proactively with various local governments to minimize noise
issues, future noise pollution regulations could require the replacement of
several of the Company's aircraft.


ITEM 2  -  PROPERTIES

In October 1997, the Company purchased its corporate and operational
headquarters at 3939 International Gateway in Columbus, Ohio for $4.1 million
from Gerald G. Mercer, Chairman, Chief Executive Officer and President of the
Company, which represented fair market value as determined by an independent
appraisal.   In addition to the building, the Company assumed Mr. Mercer's
25-year land lease with The Port Authority of Columbus ("Port Authority"), which
expires on December 31, 2009.  The complex has 80,000 square feet, of which the
Company utilizes 77,000 square feet.  The remainder is subleased to unrelated
third parties. The Company's headquarters is currently used for operations,


                                          8
<PAGE>

aircraft maintenance, vehicle maintenance, general and administrative functions,
and training.  The Company is currently in discussions with the Port Authority
to construct a new headquarters facility at the Columbus International Airport.
Upon the completion of the new facility, the Company intends to sell its current
headquarters to the Port Authority in exchange for credits to be applied to a
land lease for the new facility.  No definitive agreements had been reached.

The Company leases additional space at 4700 East Fifth Avenue, also located on
Columbus International Airport grounds.  The space is used for administrative
support personnel.  Upon completion of the Company's new headquarters, this
lease is expected to be terminated and the Company is expected to purchase the
4700 East Fifth Avenue facility from the Port Authority.  The Company operates
at approximately 50 additional locations throughout the country. The locations,
which are leased from unrelated third parties, generally include office space
and/or a section of the lessor's hangar or ramp.

For additional information concerning the Company's leases, see the Company's
Consolidated Financial Statements, included with this Annual Report on
Form 10-K.


ITEM 3  -  LEGAL PROCEEDINGS

There are no pending legal proceedings involving the Company other than routine
litigation incidental to the Company's business. In the opinion of the Company's
management, such proceedings should not, individually or in the aggregate, have
a material adverse effect on the Company's results of operations or financial
condition.


ITEM 4  -  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of 1997.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the executive officers of AirNet Systems, Inc.
The executive officers are elected annually and serve at the pleasure of the
Board of Directors.

Name                Age                      Position
----                ---       ---------------------------------------------
Gerald G. Mercer    50        Chairman of the Board, President and Chief
                              Executive Officer
Eric P. Roy         42        Director, Executive Vice President, Treasurer and
                              Chief Financial Officer
Donald D. Strench   41        Vice President, Corporate Development
Glenn M. Miller     51        Vice President, Operations
Guy S. King         45        Vice President, Sales
Kendall W. Wright   50        Vice President, Sales
William R. Sumser   42        Vice President, Finance, Controller and Secretary
Jeffrey B. Harris   38        Vice President, Sales

Gerald G. Mercer has served as Chairman of the Board, President and Chief
Executive Officer of the Company since founding the Company in 1974.  He won
Ohio's "Entrepreneur of the Year" Award in 1996 and has been a member of the
Young Presidents' Organization since 1986.  Mr. Mercer has been a guest speaker
at several major universities throughout the country.

Eric P. Roy has been a Director of the Company since 1994 and has served as
Chief Financial Officer of the Company since 1986.  Mr. Roy was named Executive
Vice President and Treasurer in 1991.


                                          9
<PAGE>

Donald D. Strench has served the Company as Vice President, Corporate
Development since April 1996.  Prior to joining the Company, Mr. Strench served
in various financial positions for American Airlines, Inc. between September
1986 and March 1996, including Vice President, Corporate Development (American
Eagle).

Glenn M. Miller has served as Vice President, Operations for the Company since
1975.

Guy S. King has served as Vice President, Sales for the Company since 1989.
Prior to 1989, Mr. King served the Company in numerous functions dating back to
1976, including dispatch and pilot, before eventually founding the Company's
small package delivery division in 1984.  Mr. King has served on the Board of
Directors of the Air Courier Conference of America since 1993.

Kendall W. Wright has served as Vice President, Sales for the Company since
1988.

William R. Sumser has served the Company as Vice President and Secretary since
March 1996, as Controller since 1988 and as Assistant Vice President from 1988
through March 1996.  Mr. Sumser is responsible for the Company's daily cash
management, financial reporting and purchasing functions.

Jeffrey B. Harris has served the Company as Vice President, Sales since October,
1997.  Prior to joining AirNet in June 1996 as the West Coast Manager for
Banking Sales, Mr. Harris served as Vice President and Senior Transit Product
Manager for Mellon Bank from 1994 to 1996 and as Vice President for Nations Bank
from 1992 to 1994.


                                      PART II

ITEM 5  -  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

Effective June 3, 1997, the Common Shares of the Company began trading on the
New York Stock Exchange under the symbol "ANS".  Prior to June 3, 1997, the
Common Shares of the Company were traded on The Nasdaq National Market under the
symbol "ANSY".  The table below sets forth the high and low reported prices of
the Common Shares for the periods indicated.

<TABLE>
<CAPTION>

                              1997                1996
     Quarter ended       High        Low      High       Low
     -------------       ----        ---      ----       ---
     <S>                <C>        <C>       <C>       <C>
     March 31           $16.75     $13.75         -         -
     June 30 (Note 1)    18.00      14.25    $16.00    $14.50
     September 30        27.06      16.25     16.00     10.75
     December 31         26.12      19.25     16.00     12.25

</TABLE>

---------------
(Note1) The 1996 period represents the period from May 31,1996 (date of the
initial public offering of the Company's Common Shares) through June 30, 1996.

The Company has not paid any dividends on its Common Shares and does not intend
to pay any such dividends in the foreseeable future.  The Company anticipates
using future earnings to finance operations and future growth and development of
the Company.  Certain restrictive covenants in the Company's revolving credit
facility impose limitations on the payment of dividends by the Company.  Such
covenants prohibit the Company from paying cash dividends on its Common Shares
in excess of 50% of net income.

On March 6, 1998, there were approximately 2,200 holders of Common Shares, based
upon the number of holders of record and the number of individual participants
in certain security position listings.


                                          10
<PAGE>

ITEM 6  -  SELECTED FINANCIAL DATA

(in thousands, except per share data)

<TABLE>
<CAPTION>


                                                                                                              Three Months
                                    Year Ended                      Years Ended September 30,                     Ended
                                    December 31,     -----------------------------------------------------     December 31,
                                        1997           1996           1995           1994           1993           1996
                                    ---------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA                                          (Restated for ECC Pooling)
                                                     ----------------------------------------------------------------------
<S>                                 <C>              <C>            <C>            <C>            <C>         <C>
Net revenues
     Check delivery                   $80,707        $65,025        $58,264        $54,046        $49,358        $16,811
     Small package delivery            15,660         13,864         12,424         12,489         11,754          3,614
     Fixed base operations              1,395          1,063          1,007          1,158          1,265            366
                                     --------------------------------------------------------------------------------------
Total net revenues                     97,762         79,952         71,695         67,693         62,377         20,791

Costs and Expenses
     Air transportation                66,032         53,797         49,246         47,747         46,154         14,383
     Fixed base operations              1,101          1,033            956          1,082          1,150            309
     Selling, general and
       administrative                   8,550         11,875         13,418         11,626          9,238          1,916
                                     --------------------------------------------------------------------------------------
Total costs and expenses               75,683         66,705         63,620         60,455         56,542         16,608

Income from operations                 22,079         13,247          8,075          7,238          5,835          4,183

Interest expense                          109          1,072          1,469          1,106          1,131             10
Offering-related, non-recurring
  expenses (Note 1)                         -         13,704              -              -              -              -

                                     --------------------------------------------------------------------------------------
Income (loss) before income taxes      21,970         (1,529)         6,606          6,132          4,704          4,173

Income tax expense (benefit),
  net (Note 2)                          8,767          4,200            (13)           (48)            27          1,688

                                     --------------------------------------------------------------------------------------
Net income (loss)                     $13,203        ($5,729)        $6,619         $6,180         $4,677        $2,485
                                     --------------------------------------------------------------------------------------

Net income per share                    $1.05                                                                     $0.20
Net income per share - assuming
  dilution                              $1.04                                                                     $0.20

Pro forma information - unaudited
  (Note 3)
     Net income (loss) before taxes                  ($1,529)        $6,606
     Pro forma adjustments, other
       than income taxes                               4,429          7,367
     Pro forma income taxes                            5,618          5,589
                                                     ----------------------
Pro forma net income (loss)                          ($2,718)        $8,384
                                                     ----------------------
                                                     ----------------------

Pro forma net income (loss)
  per share - basic and
  assuming dilution                                   ($0.34)         $1.43

Adjusted pro forma information -
  unaudited
     Pro forma net income (loss)                     ($2,718)        $8,384
     Effects of eliminating
       offering-related
       non-recurring expense,
       net of tax (Note 1)                            12,681              -
                                                     ----------------------
Adjusted pro forma net income                         $9,963         $8,384
                                                     ----------------------
                                                     ----------------------

Adjusted pro forma net income
  per share (Note 4)                                   $0.80          $0.67


BALANCE SHEET DATA
Total assets                         $103,986        $75,866        $49,929        $43,024        $36,822        $79,495
Total debt                              9,729            197         19,431         16,426         13,289            111
Shareholders' equity                   80,260         66,287         20,875         18,341         17,242         70,719

</TABLE>



Note 1    Represents non-cash, non-recurring expenses incurred as a result of
          the initial public offering, effective May 31, 1996.  (See Note 2 to
          the Consolidated Financial Statements).

Note 2    Prior to the Company's initial public offering, it operated as an S
          Corporation under the Internal Revenue Code for tax purposes and,
          consequently, was not subject to federal and certain state income
          taxes, except for the portion of income (loss) related to the
          operations of Express Convenience Center, Inc. ("ECC").

Note 3    Includes pro forma adjustments related to the initial public offering.
          Such adjustments reflect restructured executive compensation plans,
          the elimination of a deferred compensation plan, the reduction of
          interest expense and the termination of a covenant not to compete and
          corresponding payments as if the events occurred at the beginning of
          the period.  All such changes were effective with the consummation of
          the initial public offering on May 31, 1996.  (See Note 14 to the
          Consolidated Financial Statements.)

Note 4    Assumes shares issued in the initial public offering were outstanding
          for the entire period.

Note 5    The net income (loss) per share amounts prior to 1997 have been
          restated as required to comply with Statement of Financial Accounting
          Standards No. 128, Earnings Per Share.  For further discussion of
          earnings per share and the impact of Statement No. 128, see Notes to
          the Consolidated Financial Statements, included herein.


                                          11
<PAGE>

ITEM 7  -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

GENERAL

The Company's Consolidated Financial Statements have been and will be affected
by several factors, including the following.

ACQUISITIONS
The Company has completed five acquisitions since September, 1996 as follows:
(i) MIDWAY AVIATION, INC.  All of the outstanding shares of common stock of
Midway Aviation, Inc. ("Midway"), a regional air carrier of canceled checks,
were acquired for $3.1 million cash. The results of Midway's operations are
included in the financial data since its purchase date, September 26, 1996; (ii)
FLOAT CONTROL, INC.  All of the outstanding shares of common stock of Float
Control, Inc. ("Float Control") were acquired for 0.2 million of the Company's
common shares and approximately $0.7 million cash. Float Control holds a 19%
interest in Check Exchange System Co., an industry leader in payment
initiatives. The results of Float Control's operations are included in the
financial data since its purchase date, October 24, 1996; (iii) EXPRESS
CONVENIENCE CENTER, INC.  All of the outstanding shares of common stock of
Express Convenience Center, Inc. ("ECC"), a national small package forwarder,
were acquired for 0.1 million of the Company's common shares on January 30,
1997.  The transaction was treated as a pooling-of-interests.  Consequently, all
financial data has been restated to reflect the operations of ECC; (iv) PACIFIC
AIR CHARTER, INC.  All of the outstanding shares of common stock of Pacific Air
Charter, Inc. ("PAC"), a regional airline in the business of transporting
canceled checks, were acquired for $0.4 million cash. The results of PAC's
operations are included in the financial data since its purchase date, June 6,
1997;  and (v) DATA AIR COURIER, INC.  All of the outstanding shares of common
stock of Data Air Courier, Inc. ("Data Air"), a national transporter of canceled
checks and small packages through a ground delivery network and commercial
airlines, were acquired for $4.0 million cash. The results of Data Air's
operations are included in the financial data since its purchase date, July 31,
1997.

INITIAL PUBLIC OFFERING
On June 5, 1996, the Company completed its initial public offering (the
"Offering"), raising net proceeds of approximately $82.7 million. Proceeds were
used to repay outstanding debt, repurchase an outstanding warrant, make
distributions to former shareholders and to provide working capital to finance
future acquisitions and internal growth. Pursuant to the terms of the Offering,
the Company issued 6,440,000 Common Shares at $14.00 per share.

WIE WARRANT AND COVENANT NOT TO COMPETE
In 1988, the Company purchased certain assets of Wright International Express,
Inc. ("WIE"). In connection with the purchase agreement, the Company entered
into a non-compete agreement that required annual payments to the former WIE
shareholders. Upon the closing of the Offering, the non-compete agreement was
terminated, resulting in a non-cash, non-recurring expense of $2.6 million. Also
in consideration for the purchase of WIE, the Company issued a warrant to a
former WIE shareholder which was exercisable upon the closing of an initial
public offering.  Upon closing of the Offering, the Company purchased the WIE
warrant for $29.9 million and canceled the warrant, resulting in a reduction in
shareholders' equity. The Company expects to receive a tax benefit from the
repurchase and cancellation of the WIE warrant of approximately $7.0 million.
The tax benefit from this asset was realized as cash savings through the offset
of subsequent tax liabilities.  The tax benefit had no effect on the Company's
statements of operations.

CHANGE IN S CORP STATUS AND DISTRIBUTIONS
Prior to the Offering, the Company operated as an S Corporation under Subchapter
S of the Internal Revenue Code (the "Code") and comparable provisions of certain
state tax laws, and historically paid no federal income tax. While an S
Corporation, the Company made distributions to its shareholders for the purpose
of funding their income tax payments on the income generated by the Company,
which income is taxable to the shareholders whether or not distributed.  In
addition, in connection with the Offering and


                                          12
<PAGE>

the conversion to a C Corporation status, the Company made distributions of the
accumulated adjustments accounts ("AAA distributions") totaling $21.0 million,
which approximated the value of the Company's AAA account at the time of the
Offering. The Company has been responsible for federal and state income taxes
from the date of the termination of its S Corporation status in connection with
the Offering.

NON-CASH, NON-RECURRING EXPENSES
The Company incurred significant non-cash, non-recurring expenses in conjunction
with the Offering. These expenses included (i) $14.8 million of compensation
expense related to the portion of AAA distributions to certain executive
officers not previously recorded as expense in connection with the termination
of the Company's S Corporation status, plus the difference between the net
offering price and the net book value per Common Share held by the executives
under certain stock purchase agreements, which predated the Offering; and (ii)
$2.6 million related to the write-off of the WIE covenant not to compete. These
expenses were offset with a $1.7 million elimination of a deferred compensation
liability associated with certain stock purchase agreements and a $2.0 million
elimination of a liability related to deferred compensation agreements with
certain executive officers.

FUEL SURCHARGE  / REBATE PROGRAM
The Company maintains a fuel surcharge / rebate program.  Pursuant to this
program, as the OPIS-CMH (Ohio Price Information Service - Columbus, Ohio
Station) price of jet fuel exceeds $.75 per gallon, certain of the Company's
customers are surcharged.  In turn, as the OPIS-CMH price falls below $.68 per
gallon, the same customers receive a rebate.

RESULTS OF OPERATIONS

TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO TWELVE MONTHS ENDED SEPTEMBER
30, 1996

During 1997, the Company changed its fiscal year end from September 30 to
December 31.

Revenues were a record $97.8 million in the twelve months ended December 31,
1997 ("fiscal 1997"), an increase of $17.8 million, or 22.3%, over the twelve
months ended September 30, 1996 ("fiscal 1996"). Net revenues from check
delivery increased $15.7 million, or 24.1%.  Of the increase in revenues from
check delivery, $2.9 million can be attributed to price increases effective
January 1, 1997 and 1996 and approximately $8.7 million can be attributed to the
Midway, PAC and Data Air acquisitions.  The balance of the increase can be
attributed to the introduction of a weekend delivery program in April, 1997 and
increased business activity from both new and existing customers, offset by a
decrease in the number of flying days from 200 in fiscal 1996 to 199 in fiscal
1997.   Net revenues from small package delivery increased $1.8 million, or
13.0%, from fiscal 1996 to fiscal 1997 due to increased activity from both new
and existing customers.

Total costs and expenses were $75.7 million in fiscal 1997, an increase of $9.0
million, or 13.5%, over fiscal 1996 levels, resulting in income from operations
of $22.1 million in fiscal 1997 compared to $13.2 million in fiscal 1996.  Air
transportation expenses were up $12.2 million, or 22.7%, while selling, general
and administrative expenses decreased $3.3 million, or 28.0%, for the fiscal
year.

Air transportation costs increased due, in part, to the addition of air and
ground personnel required to service a larger fleet of aircraft and the
increased volume of activity. Fuel expense increased $2.0 million, or 24.4%,
over the period primarily due to a 24% increase in flight hours.  Maintenance
expense also increased $1.0 million, or 14.3%, due to the increased flight hours
and the increased size of the fleet, from 94 aircraft at September 30, 1996 to
113 at December 31, 1997.  The Company's costs for shipping packages on
commercial airlines increased $3.0 million due to the addition of Data Air check
delivery shipments and an increase in SameDay small package shipments, of which
a significant portion are moved during daytime hours when the Company's aircraft
do not fly.


                                          13
<PAGE>

Selling, general and administrative expenses decreased primarily due to the
restructuring of executive compensation plans (which resulted in a $1.8 million
decrease), the termination of stock purchase agreements (which resulted in a
$2.1 million decrease) and the termination of a covenant not to compete (which
resulted in a $0.9 million decrease).  All were effective in conjunction with
the Offering in May 1996.  The stock purchase agreements were with certain
executive officers and had been tied to the appreciation in the book value of
the Common Shares of the Company.  The covenant not to compete required payments
based on the Company's cash flow and debt-to-equity ratio.  These decreases were
offset by an increase in wages related to the hiring of additional personnel,
general insurance increases and increases in the amounts paid for legal,
accounting and consulting services.

Interest costs decreased $1.0 million as a result of the repayment of
outstanding debt in June 1996 with proceeds from the Offering.  Borrowings did
not resume on the Company's credit facility until September  1997.

During fiscal 1996, the Company incurred $13.7 million of non-cash, non-
recurring expenses in connection with its Offering.  These expenses included (i)
$14.8 million of compensation expense related to the portion of AAA
distributions to certain executive officers not previously recorded as expense
in connection with the termination of the Company's S Corporation status, plus
the difference between the net offering price and the net book value per Common
Share held by the executives under certain stock purchase agreements which
predated the Offering and (ii) $2.6 million related to the write-off of a
covenant not to compete with former WIE shareholders.  These expenses were
offset with a $1.7 million elimination of a deferred compensation liability
associated with the stock purchase agreements and a $2.0 million elimination of
a liability related to deferred compensation agreements with certain executive
officers.

The Company recorded tax expense of $8.8 million for fiscal 1997 on income for
the period.  The Company operated as an S Corporation under the Internal Revenue
Code from 1988 until it elected to terminate its S Corporation status in
conjunction with the Offering.  Under its Subchapter S election, the Company was
not subject to federal and certain state income taxes at the corporate level for
the fiscal 1996 period prior to the Offering, except for the portion of business
that related to the ECC acquisition, which was taxed as a C Corporation.  The
Company recorded net deferred tax expense of $1.8 million for fiscal 1996.

The fiscal 1996 pro forma information reflects the effects of certain Offering-
related transactions on the statements of operations as if they occurred at the
beginning of the periods presented. See Note 3 to the Selected Financial Data
table included in Item 6 of this Annual Report on Form 10-K.


TWELVE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO TWELVE MONTHS ENDED SEPTEMBER
30, 1995

Revenues were a then-record $80.0 million in fiscal 1996, an increase of $8.3
million, or 11.5%, over fiscal 1995.  Of the increase, $2.0 million is
attributable to price increases effective January 1, 1996 and 1995.  Revenues
from check delivery increased $6.8 million, or 11.6%, primarily due to increased
business activity and increases in total weight shipped, while small package
delivery revenues increased $1.4 million, or 11.6%, due primarily to increased
activity from both new and existing customers.

Total costs and expenses were $66.7 million in fiscal 1996, an increase of $3.1
million, or 4.8%, over 1995 levels, resulting in income from operations of $13.2
million in fiscal 1996 compared to $8.1 million in fiscal 1995.  Air
transportation expenses were up $4.6 million, or 9.2%, while selling, general
and administrative expenses decreased $1.5 million, or 11.5%, for the year.


                                          14
<PAGE>

Air transportation costs increased due, in part, to the addition of air and
ground personnel required to service a larger fleet of aircraft and the
increased volume of activity.  In addition, depreciation expense increased $1.1
million, or 15.1%,  due to the increased size of the Company's fleet, which grew
from 78 aircraft at September 30, 1995 to 94 at September 30, 1996.  The
increase in depreciation expense was offset by a reduction in lease expense as a
result of the Company's strategy to acquire rather than lease aircraft.  A rise
in fuel prices coupled with increased flight hours contributed to a $0.7
million, or 9.8%, increase in aircraft fuel expense.

Selling, general and administrative expenses decreased primarily due to the
restructuring of executive compensation plans (which resulted in a $0.5 million
decrease), the termination of stock purchase agreements (which resulted in a
$0.5 million decrease) and the termination of a covenant not to compete (which
resulted in a $1.4 million decrease).  All were effective in conjunction with
the Offering in May 1996.  These decreases were offset by an increase in
consulting fees incurred with the reconstruction of executive compensation and
employee stock option plans and increased wages related to the hiring of
additional personnel.

Interest costs decreased $0.4 million as a result of the repayment of all
outstanding debt in June 1996 with proceeds from the Offering.

The Company incurred $13.7 million of non-cash, non-recurring expenses in
connection with its Offering.  These expenses included (i) $14.8 million of
compensation expense related to the portion of accumulated adjustment accounts,
or AAA, distributions to certain executive officers not previously recorded as
expense in connection with the termination of the Company's S Corporation
Status, plus the difference between the net offering price and the net book
value per Common Share held by the executives under certain stock purchase
agreements, which predated the Offering and (ii) $2.6 million related to the
write-off of a covenant not to compete with former WIE shareholders.  These
expenses were offset with a $1.7 million elimination of a deferred compensation
liability associated with the stock purchase agreements and a $2.0 million
elimination of a liability related to deferred compensation agreements with
certain executive officers.

The Company operated as an S Corporation under the Code from 1988 until it
elected to terminate its S Corporation status on May 30, 1996. In connection
with the termination of the S Corporation status, the Company recorded a net tax
liability of $2.4 million as a result of the cumulative effect of deferred
income taxes attributable to its change in status.  In addition, the Company
recorded net deferred tax expense of $1.8 million for fiscal 1996 related to the
income tax expense on operating income since May 30, 1996, offset by the
favorable tax effect of the write-off of the covenant not to compete with former
WIE shareholders.

Pro forma information reflects the effects of certain Offering-related
transactions on the statements of operations as if they occurred at the
beginning of the periods presented. See Note 3 to the Selected Financial Data
table included in Item 6 of this Annual Report on Form 10-K.

THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1995

Revenues were a record $20.8 million in the three months ended December 31,
1996, an increase of $2.4 million, or 13.0%, over the three months ended
December 31, 1995.  Of the increase, $0.6 million is attributable to price
increases effective January 1, 1996.  Revenues from check delivery increased
$1.9 million, or 12.9%, primarily due to increased business activity and
increases in total weight shipped, while small package delivery revenues
increased $0.4 million, or 10.9%, due primarily to increased activity from both
new and existing customers.

Total costs and expenses were $16.6 million in the three months ended December
31, 1996, an increase of $0.4 million, or 2.5%, over same 1995 period, resulting
in income from operations of $4.2 million in the 1996 period, compared to $2.2
million in the 1995 period.  Air transportation expenses were up $1.5 million,
or 12.0%, while selling, general and administrative expenses decreased $1.2
million, or 39.1%,


                                          15
<PAGE>

for the comparable periods.  Air transportation costs increased due, in part, to
the addition of air and ground personnel required to service a larger fleet of
aircraft and the increased volume of activity. A rise in fuel prices coupled
with increased flight hours contributed to a $0.4 million, or 20.7%, increase in
aircraft fuel expense.  Selling, general and administrative expenses decreased
primarily due to the restructuring of executive compensation plans  and the
termination of stock purchase agreements (which resulted in a $0.7 million
decrease) and the termination of a covenant not to compete (which resulted in a
$0.4 million decrease).  All were effective in conjunction with the Offering in
May 1996.  Interest costs decreased $0.4 million as a result of the repayment of
all outstanding debt in June 1996 with proceeds from the Offering.

The Company operated as an S Corporation under the Code from 1988 until it
elected to terminate its S Corporation status in conjunction with the Offering.
Under its Subchapter S election, the Company was not subject to federal and
certain state income taxes at the corporate level for fiscal 1996, except for
the portion of business that related to the ECC acquisition, which was taxed as
a C Corporation, and the period subsequent to the Offering in May 1996.  The
Company recorded tax expense of $1.7 million for the three months ended December
31, 1996.


LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW FROM OPERATING ACTIVITIES.   Net cash flow from operating activities
was $22.0 million for the year ended December 31, 1997, compared to $18.3
million for the year ended September 30, 1996.

CURRENT CREDIT ARRANGEMENTS. The Company maintains a credit agreement with a
bank that provides a $50.0 million, five year, unsecured revolving credit
facility. The credit agreement limits the availability of funds to certain
specified percentages of accounts receivable, inventory and the wholesale value
of aircraft and equipment.  In addition, the credit agreement requires the
maintenance of certain minimum net worth and cash flow levels, imposes certain
limitations on payments of dividends, restricts the amount of additional debt
and requires prior bank approval for certain acquisitions.  As of December 31,
1997, the Company had drawn $9.5 million on the line.

INVESTING ACTIVITIES.  Capital expenditures totaled $30.1 million for the year
ended December 31, 1997 compared to $14.3 million for the year ended September
30, 1996.  Approximately $11.8 million was incurred in connection with the
purchase of 23 new aircraft, ten of which were previously leased by the Company.
The remainder was incurred primarily for flight equipment and delivery vehicles.
The Company anticipates it will spend approximately $20.0 million on capital
items in 1998, excluding any acquisitions of new businesses.  The Company
anticipates it will continue to acquire aircraft and flight equipment as
necessary to maintain growth and continue offering quality service to its
customers.

In October 1997, the Company purchased its current headquarters in Columbus,
Ohio from Gerald G. Mercer, the Company's President and Chief Executive Officer,
for $4.1 million in cash, which represented fair market value as determined by
an independent appraisal.  The Company is currently in discussions with the Port
Authority to construct a new headquarters facility at the Columbus International
Airport.  Upon the completion of the new facility, the Company intends to sell
its current headquarters to the Port Authority in exchange for credits to be
applied to a land lease for the new facility.  No definitive agreements had been
reached.  The Company leases additional space at 4700 East Fifth Avenue, also
located on Columbus International Airport grounds. Upon completion of the
Company's new headquarters, this lease is expected to be terminated and the
Company is expected to purchase the 4700 East Fifth Avenue facility from the
Port Authority.

During 1997, the Company completed three acquisitions of companies for an
aggregate $4.4 million in cash and 0.1 million Common Shares. See Note 3 to the
Consolidated Financial Statements included herein.  On February 10, 1998, the
Company announced its intention to acquire Q International Courier, Inc. ("Q
International"), an international overnight delivery company, for approximately
3.4 million Common Shares.  This transaction is expected to be accounted for as
a pooling-of-interests and is subject to certain consents, opinions and
approvals, including approval of both companies' shareholders.


                                          16
<PAGE>

In August, 1997, the Company implemented a  stock repurchase program.  During
1997, the Company repurchased 0.3 million of the 0.6 million Common Shares that
were authorized for repurchase, for an aggregate of $5.8 million.  The Common
Shares were purchased at what management believes were reasonable prices.  The
repurchase program was implemented primarily to provide Common Shares to fund
currently outstanding stock options and the AirNet Systems, Inc. Associate Stock
Purchase Program, without dilution.  In March 1998, the Company terminated the
repurchase program in anticipation of signing a definitive agreement to acquire
Q International.

The Company anticipates that operating cash and capital expenditure requirements
will continue to be funded by cash flow from operations, cash on hand and bank
borrowings.

SEASONALITY AND VARIABILITY IN QUARTERLY RESULTS

The Company's operations historically have been somewhat seasonal and somewhat
dependent on the number of banking holidays falling during the week.  Because
financial institutions are currently the Company's principal customers, the
Company's air system is scheduled around the needs of financial institution
customers.  When financial institutions are closed, there is no need for the
Company to operate a full system.  The Company's fiscal quarter ending December
31 is often the most impacted by bank holidays (including Thanksgiving and
Christmas).  When these holidays fall on Monday through Thursday, the Company's
revenues and net income are adversely affected. The Company's annual results
fluctuate as well.

Operating results are also affected by the weather.  The Company generally
experiences higher maintenance costs during its fiscal quarter ending March 31.
Winter weather requires additional costs for de-icing, hangar rental and other
aircraft services.


                                          17
<PAGE>

SELECTED QUARTERLY DATA

The following is a summary of the unaudited quarterly results of operations,
restated for the ECC pooling, for the quarterly periods ended (in thousands,
except per share data):

<TABLE>
<CAPTION>


                                                          Quarters Ended,
                                          ----------------------------------------------------
                                          March 31     June 30     September 30    December 31
                                          --------     -------     ------------    -----------
<S>                                       <C>          <C>         <C>             <C>
               1997
Net revenues                             $22,235      $23,062          $26,247        $26,218
Income from operations                     5,153        5,808            6,022          5,096
Net income                                 3,093        3,504            3,598          3,008
Net income per share (Note 3)               $.25         $.28             $.29           $.24
Net income per share - assuming dilution
     (Note 3)                                .24          .28              .28            .24

               1996
Net revenues                             $19,208      $20,992          $21,355        $20,791
Income from operations                     2,240        3,798            5,017          4,183
Historical net income (loss)               1,868      (12,239)           2,823          2,485
Pro forma net income (loss)                2,081       (9,780)           2,823          2,485
Pro forma net income (loss) per share -
     basic and assuming dilution (Note 3)   $.36       $(1.22)            $.23           $.20
Adjusted pro forma net income (Note 1)     2,081        2,901            2,823          2,485
Adjusted pro forma net income per share
     (Notes 2 and 3) - basic and
     assuming dilution                       .17          .23              .23            .20

</TABLE>



---------------
(Note 1) - Excludes the effects of the Offering-related non-cash, non-recurring
     expenses.
(Note 2) - Assumes all Common Shares issued during the Offering were outstanding
           for the entire period.
(Note 3) - The net income (loss) per share amounts have been restated as
     required to comply with Statement of Financial Accounting Standards No.
     128, Earnings Per Share.  For further discussion of earnings per share and
     the impact of Statement No. 128, see Notes to the Consolidated Financial
     Statements, included herein.

INFLATION

Historically, inflation has not been a significant factor to the Company.
Although the value of the Company's service to its primary customers is enhanced
by higher interest rates, the volume of business has not changed historically
with fluctuating interest rates.   The Company has attempted to minimize the
effects of inflation on its operating results through rate increases and cost
controls, including its fuel rebate/surcharge program.


RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, The Financial Accounting Standards Board ("FASB") issued Statement
No. 130, "Reporting Comprehensive Income", and Statement No. 131, "Disclosures
About Segments of an Enterprise and Related Information".  Both Statements are
effective for the Company in 1998.  Statement No. 130 requires separate
reporting of certain items affecting shareholders' equity outside of those
included in arriving at net income.  These items are already disclosed by the
Company.  Statement No. 131 establishes requirements for reporting information
about operating segments in annual and interim statements.  This statement may
require a change in the Company's financial reporting, however, the extent of
this change, if any, has not been determined.


                                          18
<PAGE>

YEAR 2000 IMPACT ON INFORMATION SYSTEMS

A small portion of the Company's computer programs was written using two digits
rather than four to define the applicable year.  As a result, those computer
programs have time-sensitive software that recognize a date using "00" as the
year 1900 rather than the year 2000.  This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process certain transactions, send invoices or
engage in similar normal business activities.

The Company has completed an assessment of its computer systems and will have to
modify or replace small portions of its software so that all of its computer
systems will function properly with respect to dates in the year 2000 and
thereafter.  The project is expected to be completed by December 31, 1998.
However, the completion date is dependent on the availability and receipt of
certain software from a vendor in early 1998 and the satisfactory integration of
such software into the Company's systems. Management does not expect costs
related to the year 2000 modifications and replacements to be material to the
Company's overall operations.

The Company has also performed a review of its aircraft to ensure operational
compliance with year 2000 date-sensitive components.  The Company believes its
aircraft and related components are in compliance with such measures. However,
the Company is aware that the Federal Aviation Administration ("FAA") has
announced that it is currently encountering difficulties in modifying its
operating systems for compliance with year 2000 issues.  If the FAA is not able
to correct its year 2000 problems in the appropriate time frame, it could result
in a material adverse affect on the Company's ability to schedule and execute
aircraft arrivals and departures.


FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information so long as these statements are identified as
forward-looking and are accompanied by meaningful cautionary statements
identifying factors that could cause actual results to differ materially from
those discussed in the statement.  The Company desires to take advantage of the
"safe harbor" provisions of the Act.  Certain information, particularly
information regarding future economic performance and finances and plans and
objectives of management, contained, or incorporated by reference, in this Form
10-K is  forward-looking.  When used in this document, the words "anticipate",
"estimate", "expect", "may", "plan", "project" and similar expressions are
intended to be among statements that identify forward looking statements. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual outcomes may vary materially from those
indicated.  The Company undertakes no responsibility to update for changes
related to these or any other factors that may hereafter occur.  The following
factors, in addition to other possible factors not listed, could affect the
Company's actual results and cause such results to differ materially from those
expressed in forward-looking statements:


COMPETITION

The market for scheduled air and ground delivery service is highly competitive.
The Company's bank services division competes primarily against the Federal
Reserve's Interdistrict Transportation System, which has significantly greater
financial and other resources than the Company. The Federal Reserve is regulated
by the Monetary Control Act of 1980 (the "Monetary Control Act"), which in
general requires that the Federal Reserve price its services on a cost basis
plus a set percentage private market adjustment. Failure by the Federal Reserve
to comply with the Monetary Control Act could have an adverse competitive impact
on the Company. In addition, there can be no assurance that the Monetary


                                          19
<PAGE>

Control Act will not be amended, modified or repealed, or that new legislation
affecting the Company's business will not be enacted. Although major
participants in the next-day and second-day air delivery market (such as UPS and
FedEx) have also entered the business of same-day and early morning delivery,
they have not had a material adverse effect on the Company's business to date,
however, here can be no assurance that these competitors will not have such an
effect in the future.


TECHNOLOGY

Some analysts have predicted that the increased use of electronic funds
transfers will lead to a "checkless society," which could adversely affect the
demand for the Company's check delivery services to the financial services
industry. In addition, some banking industry analysts have predicted the
development of various forms of imaging technology that could reduce or
eliminate the need for prompt delivery of canceled  checks. Similarly,
technological advances in the nature of "electronic mail" and "telefax" have
affected the demand for on-call delivery services by small package delivery
customers. While none of these technological advances have had a significant
adverse impact on the Company's business to date, there can be no assurances
that these or similar technologies, or other regulatory or technological changes
in the check clearance and national payment systems, will not have an adverse
affect on the Company's business in the future.


RISKS RELATED TO GROWTH THROUGH ACQUISITIONS

One of the Company's business strategies is to increase its revenues, earnings
and market share through the acquisition of companies that will complement its
existing operations or provide it with an entry into markets it does not
currently serve. Growth through acquisition involves substantial risks,
including the risk of improper valuation of the acquired business and the risk
of inadequate integration. There can be no assurances that the suitable
acquisition candidates will be available, that the Company will be able to
acquire or profitably manage such additional companies or that future
acquisitions will produce returns that justify the investment. In addition, the
Company may compete for acquisitions and expansion opportunities with companies
that have significantly greater resources than the Company.

The Company may finance future acquisitions by using Common Shares for all or a
portion of the consideration to be paid, which may result in substantial
dilution to the current holders of the Common Shares. In the event the Common
Shares do not maintain a sufficient valuation, or potential acquisition
candidates are unwilling to accept the Common Shares as part of the
consideration for the sale of their businesses, the Company may be required to
utilize more of its cash resources, if available, in order to pursue its
acquisition strategy. If the Company does not have sufficient cash resources
through working capital or its current credit facility, its growth potential
could be limited and its existing operations could be impaired unless its is
able to obtain additional capital through future debt or equity financing. There
can be no assurance that the Company will be able to obtain such financing or
that, if available, such financing will be on terms acceptable to the Company.


DEPENDENCE ON KEY PERSONNEL

The Company's operations are dependent on the continued efforts of its executive
officers and on its senior management, particularly Gerald G. Mercer, the
Company's President and Chief Executive Officer, and Eric P. Roy, the Company's
Executive Vice President, Treasurer and Chief Financial Officer. If the
executive officers of the Company become unable or decide not to continue in
their present positions, or if a material number of such senior management fail
to continue with the Company and the Company is unable to attract and retain
other skilled associates, the Company's business could be adversely affected.
The Company does not have an employment agreement with any of its executive
officers.


                                          20
<PAGE>

PERMITS AND LICENSING; REGULATION

The Company's delivery operations are subject to various federal, state and
local regulations that in many instances require permits and licenses. Failure
by the Company to maintain required permits or licenses, or to comply with the
applicable regulations, could result in substantial fines or possible revocation
of the Company's authority to conduct certain of its operations. Furthermore,
acquisitions by the Company could be impeded by delays in obtaining approvals
for the transfer of permits or licenses, or failure to obtain such approvals

The Company's flight operations are regulated by the Federal Aviation
Administration (the "FAA") under Part 135 of the Federal Aviation Regulations.
Among other things, these regulations govern permissible flight and duty time
for aviation flight crews. The FAA is currently contemplating certain changes in
flight and duty time guidelines, which, if adopted, could increase the Company's
operating costs. These changes, if adopted, could also require the Company and
other operators regulated by the FAA to hire additional flight crew personnel.
In addition, Congress, from time to time, has considered various means,
including excise taxes, to raise revenues directly from the airline industry to
pay for air traffic control facilities and personnel. There can be no assurances
that Congress will not change the current federal excise tax rate or enact new
excise taxes, which could adversely affect the Company's business.


ITEM 7A  -  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Not applicable.


ITEM 8  -  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                     Index to Consolidated Financial Statements

Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . Page 31

Consolidated Balance Sheets as of December 31, 1997 and 1996 . . . . . Page 32

Consolidated Statements of Operations for the years ended
December 31, 1997, September 30, 1996 and 1995 and the three
months ended December 31, 1996 . . . . . . . . . . . . . . . . . . . . Page 33

Consolidated Statements of Cash Flows for the years ended
December 31, 1997, September 30, 1996 and 1995 and the three
months ended December 31, 1996 . . . . . . . . . . . . . . . . . . . . Page 34

Consolidated Statements of Changes in Shareholders' Equity for
the years ended December 31, 1997, September 30, 1996 and 1995
and the three months ended December 31, 1996 . . . . . . . . . . . . . Page 35

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . Page 36


Quarterly Results of Operations are included in ITEM 7 - MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS under the caption
"Selected Quarterly Data".

ITEM 9 -  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.


                                          21
<PAGE>

                                      PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

BOARD OF DIRECTORS

Pursuant to the Code of Regulations of the Company, the Board of Directors has
set the authorized number of directors at six. Each director holds office for a
term expiring at the next Annual Meeting.  The following information, as of
December 31, 1997, with respect to the principal occupation or employment, other
affiliations and business experience of each director during the last five years
has been furnished to the Company  by each director.  Except where indicated,
each director has had the same principal occupation for the last five years.

GERALD G. MERCER
Gerald G. Mercer has served as Chairman of the Board, President and Chief
Executive Officer of the Company since founding the Company in 1974.  He won
Ohio's "Entrepreneur of the Year" Award in 1996 and has been a member of the
Young Presidents' Organization since 1986.  Mr. Mercer has been a guest speaker
at several major universities throughout the country.

ERIC P. ROY
Eric P. Roy has been a Director of the Company since 1994 and has served as
Chief Financial Officer of the Company since 1986.  Mr. Roy was named Executive
Vice President and Treasurer in 1991.

ROGER D. BLACKWELL
Dr. Blackwell, 57, has been a Director of the Company since December 1996. Dr.
Blackwell has been a Professor of Marketing at The Ohio State University for
more than five years and is also President and Chief Executive Officer of Roger
D. Blackwell Associates, Inc., a marketing consulting firm in Columbus, Ohio.
Dr. Blackwell is also a director of Intimate Brands, Inc., Worthington Foods,
Inc., Checkpoint Systems, Inc., Abercrombie and Fitch, Inc., Max & Erma's
Restaurants, Inc. and The Flex-Funds.

TONY C. CANONIE, JR.
Mr. Canonie, 51, has been a Director of the Company since June 1996.  
Since 1990, Mr. Canonie has served as Chief Executive Officer of Canonie 
Ventures Inc., an advisory services and venture capital firm. He was an 
18 year member and former Chapter Chairman of the Young Presidents' 
Organization and is a member of the Chief Executives Organization 
and World Presidents' Organization.

RUSSELL M. GERTMENIAN
Mr. Gertmenian, 50, has been a Director of the Company since June 1996. Mr.
Gertmenian has been a partner of Vorys, Sater, Seymour and Pease LLP since 1979
and currently serves as a member of such firm's Executive Committee. Mr.
Gertmenian is a director of Liqui-Box Corporation.

J.F. KEELER, JR.
Mr. Keeler, 57, has been a Director of the Company since June 1996.  Mr. Keeler
is President, Chief Executive Officer and Chairman of the Board of The Fishel
Company, a national utilities construction firm, which he first joined in 1967.
Mr. Keeler is a director of Bank One, N.A. and Metatec Corporation and serves 
on the Board of Directors of the Columbus Chamber of Commerce.


EXECUTIVE OFFICERS

The information concerning the Company's executive officers required by Item 401
of Regulation S-K is included in Part I hereof under the caption "Executive
Officers of the Registrant".


                                          22
<PAGE>

ITEM 11 -  EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table shows, for the years ended December 31, 1997, September 30,
1996 and 1995 and the three months ended December 31, 1996, compensation awarded
or paid to, or earned by, the Company's Chief Executive Officer during 1997 and
the six other most highly compensated executive officers of the Company (the
"Named Executive Officers").

                              SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>


                                                           Annual                      Long-Term
                                                        Compensation                 Compensation
                                                  -------------------------     ---------------------------
                                                                                Securities
                                                                                Underlying
Name and Principal                                                               Options/       All Other
Position                          Period              Salary       Bonus         SARs (1)      Compensation
---------------------------   ---------------     ----------     ----------     ----------     ------------
<S>                           <C>                 <C>            <C>            <C>            <C>
Gerald G. Mercer              12 mos 12/31/97     $  410,776             --      20,000        $  4,750 (2)
Chairman of the Board,        12 mos 9/30/96         706,667     $  593,424      40,000           4,499
  President and Chief         12 mos 9/30/95         826,376      1,161,333          --           6,022
  Executive Officer            3 mos 12/31/96        100,000             --          --              --

Eric P. Roy                   12 mos 12/31/97        282,408             --      12,000           4,750 (2)
Executive Vice President,     12 mos 9/30/96         181,333        157,630      20,000          56,615
  and Chief Financial         12 mos 9/30/95         129,332        167,646          --          59,363
  Officer                      3 mos 12/31/96         68,750             --          --              --

Donald D. Strench (3)         12 mos 12/31/97        197,885         80,000       8,000           4,750 (2)
  Vice President,             12 mos 9/30/96          78,750         43,750      10,000              --
  Corporate Development       12 mos 9/30/95              --             --          --              --
                               3 mos 12/31/96         43,750          8,750          --              --

Glenn M. Miller               12 mos 12/31/97        205,385             --       8,000           4,750 (2)
  Vice President,             12 mos 9/30/96         156,333        168,823      15,000         145,107
  Operations                  12 mos 9/30/95         129,332        235,681          --         146,787
                               3 mos 12/31/96         50,000             --          --              --

Guy S. King                   12 mos 12/31/97        205,385             --       8,000           4,750 (2)
  Vice President, Sales       12 mos 9/30/96         156,333        133,114      15,000          27,895
                              12 mos 9/30/95         129,332        144,857          --          31,380
                               3 mos 12/31/96         50,000             --          --              --

William R. Sumser             12 mos 12/31/97        205,385             --       8,000           4,750 (2)
  Vice President, Finance,    12 mos 9/30/96         120,000         86,738      15,000          10,719
  Controller, Secretary       12 mos 9/30/95          75,962         72,232          --          13,385
                               3 mos 12/31/96         50,000             --          --              --

Kendall W. Wright             12 mos 12/31/97        205,385             --       8,000           4,750 (2)
  Vice President, Sales       12 mos 9/30/96         156,333        135,474      15,000          24,421
                              12 mos 9/30/95         129,332        148,918          --          26,763
                               3 mos 12/31/96         50,000             --          --             142

</TABLE>


---------------
(1)  These numbers represent options for Common Shares granted pursuant to the
     Company's 1996 Incentive Stock Plan.  See the table under "OPTION GRANTS
     BETWEEN OCTOBER 1, 1996 AND DECEMBER 31, 1997" for more detailed
     information on such options.


                                          23
<PAGE>

(2)  "All Other Compensation" for the Named Executive Officers consists of
     amounts contributed by the Company to the accounts of the Named Executive
     Officers under the AirNet Systems, Inc. Retirement Savings Plan.

(3)  Mr. Strench joined the Company in April, 1996.

SECTION 401(k) SAVINGS PLAN

The Company maintains a defined contribution savings plan which is intended to
qualify under Section 401(k) of the Code (the "Savings Plan"). Under the terms
of the Savings Plan, all associates who have worked a minimum of six months for
the Company may contribute up to 15% of their annual earnings to the Savings
Plan. The Company may elect, in its discretion, to make a matching contribution
to the Savings Plan. Currently, the Company's annual matching contributions
under the Savings Plan do not exceed 3% of total compensation. In addition, the
Company may elect, in its discretion, to make profit-sharing contributions on
behalf of eligible associates.

GRANTS OF OPTIONS

The following table sets forth information concerning individual grants of
options made from October 1, 1996 through December 31, 1997 to each of the Named
Executive Officers. The Company has never granted stock appreciation rights.

             OPTION GRANTS BETWEEN OCTOBER 1, 1996 AND DECEMBER 31, 1997

<TABLE>
<CAPTION>

                                                                                       Potential Realizable
                                            % of                                          Value at Assumed
                         Number of         Total                                       Annual Rates of Stock
                        Securities         Options                                     Price Appreciation
                        Underlying        Granted to      Exercise                      for Option Term (2)
                         Options        Associates in      Price      Expiration     -----------------------
Name                    Granted(#) (1)   Fiscal Year     ($/Share)       Date           5%($)       10%($)
----                    --------------  -------------    ---------   --------------  ---------    ----------
<S>                     <C>              <C>             <C>         <C>             <C>          <C>
Gerald G. Mercer            13,400          4.7%          $14.25     April 10, 2007  $ 120,087    $ 304,325
                             6,600          2.3            15.68     April 10, 2007     49,710      140,453
Eric P. Roy                 12,000          4.3            14.25     April 10, 2007    107,541      272,530
Donald D. Strench            8,000          2.8            14.25     April 10, 2007     71,694      181,687
Glenn M. Miller              8,000          2.8            14.25     April 10, 2007     71,694      181,687
Guy S. King                  8,000          2.8            14.25     April 10, 2007     71,694      181,687
William R. Sumser            8,000          2.8            14.25     April 10, 2007     71,694      181,687
Kendall W. Wright            8,000          2.8            14.25     April 10, 2007     71,694      181,687


</TABLE>


---------------
(1)  These options were granted under the Company's 1996 Incentive Stock Plan.
     All of such options are fully vested. At the discretion of the Compensation
     Committee, such options may have stock-for-stock exercise and tax
     withholding features, which allow the holders, in lieu of paying cash for
     the exercise price and any tax withholding, to have the Company
     commensurably reduce the number of Common Shares to which the holders would
     otherwise be entitled upon exercise of such options.

(2)  The amounts reflected in this table represent certain assumed rates of
     appreciation only. Actual realized values, if any, on option exercises will
     be dependent on the actual appreciation of the Common Shares of the Company
     over the term of the options. There can be no assurances that the Potential
     Realizable Values reflected in this table will be achieved.


                                          24
<PAGE>

OPTION EXERCISES AND HOLDINGS

The following table sets forth information with respect to options exercised
between October 1, 1996 and December 31, 1997 and unexercised options held as of
December 31, 1997 by each of the Named Executive Officers.

               AGGREGATED OPTION EXERCISES BETWEEN OCTOBER 1, 1996 AND
                 DECEMBER 31, 1997 AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>


                            Number of                           Number of Securities            Value of Unexercised
                           Securities                           Underlying Options              In-the-Money Options
                           Underlying                           At Fiscal Year End (#)          At Fiscal Year End ($) (1)
                             Options          Value         ----------------------------       ----------------------------
Name                       Exercised (#)    Realized ($)    Exercisable    Unexercisable       Exercisable    Unexercisable
----                      --------------    ------------    -----------    -------------       -----------    -------------
<S>                       <C>              <C>              <C>            <C>                 <C>            <C>
Gerald G. Mercer                 --               --          60,000               --            $406,427             --
Eric P. Roy                      --               --          32,000               --             227,000             --
Donald D. Strench                --               --          18,000               --             128,000             --
Glenn M. Miller                  --               --          23,000               --             163,000             --
Guy S. King                      --               --          23,000               --             163,000             --
William R. Sumser                --               --          23,000               --             163,000             --
Kendall W. Wright            23,000         $140,000              --               --                  --             --

</TABLE>


---------------
(1)  "Value of Unexercised In-the-Money Options at Fiscal Year End" is based
     upon the fair market value of the Company's Common Shares on December 31,
     1997 ($21.50) less the exercise price of in-the-money options at December
     31, 1997.

COMPENSATION OF DIRECTORS

Directors who are officers or associates of the Company receive no additional
compensation for their services as members of the Board of Directors or as
members of Board committees.  Directors who are not officers or associates of
the Company are paid a quarterly fee of $1,500, as well as additional fees of
$1,000 for each meeting of the Board or of a Board committee attended by such
Director. The Company's Directors are reimbursed for their out-of-pocket
expenses incurred in connection with their service as directors, including
travel expenses. In addition, pursuant to the Company's 1996 Incentive Stock
Plan, each Director receives an annual option to purchase 2,000 Common Shares at
an exercise price equal to the fair market value of the Company's common Shares
on the date of grant.  The options have terms of ten years.


ITEM 12  -  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the number and percentage of outstanding Common
Shares beneficially owned by (i) each director of the Company; (ii) each
executive officer of the Company included in the Summary Compensation Table;
(iii) all directors and executive officers of the Company as a group; and (iv)
each person known by the Company to own beneficially more than five percent of
any class of the Company's voting securities, in each case, as of February 27,
1998. The Company believes that each individual or entity named has sole
investment and voting power with respect to Common Shares indicated as
beneficially owned by such individual or entity, except as otherwise noted.  The
address of each of the executive officers and directors is c/o AirNet Systems,
Inc., 3939 International Gateway, Columbus, Ohio 43219.


                                          25
<PAGE>

                    AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (1)

<TABLE>
<CAPTION>




                                                                    Common Shares
                                                                    Which Can Be
                                                                    Acquired Upon
                                                                 Exercise of Options
                                                 Common              or Warrants
         Name of                                 Shares              Exercisable                      Percent of
     Beneficial Owner                        Presently Held        Within 60 Days         Total        Class (2)
     ----------------                        --------------        --------------         -----       ----------
<S>                                          <C>                 <C>                    <C>           <C>
Gerald G. Mercer (3)(4)                        4,349,041               60,000           4,409,041           35.1%
Eric P. Roy (3) (5)                              189,975               32,000             221,975            1.8
Donald D. Strench (3)                              3,000               18,000              21,000            (6)
Glenn M. Miller (3)                              360,117               23,000             383,117            3.1
Guy S. King (3)                                   91,087               23,000             114,087            (6)
William R. Sumser (3)                             61,719               23,000              84,719            (6)
Kendall W. Wright (3) (7)                         27,381                   --              27,381            (6)
Roger D. Blackwell (3)                             7,700                2,000               9,700            (6)
Tony C. Canonie, Jr.                              10,000                2,000              12,000            (6)
Russell M. Gertmenian (8)                          5,000                2,000               7,000            (6)
J.F. Keeler, Jr. (9)                              10,185                2,000              12,185            (6)
All directors and executive
  officers as a group (12 persons)             5,115,205              193,000           5,308,205           42.3
Wellington Management Company LLP (10)
   75 State Street
   Boston, MA  02109                             728,400                   --             728,400            5.8
AMVESCAP PLC (11)
  11 Devonshire Square
   London EC2M 4YR
   England                                       738,500                   --             738,500            5.9

</TABLE>


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

(1)  Unless otherwise indicated, the beneficial owner has sole voting and
     dispositive power as to all Common Shares reflected in the table.

(2)  The percent of class is based upon the sum of (i) 12,558,913 Common Shares
     outstanding on February 27, 1998 and (ii) the number of Common Shares as to
     which the named person has the right to acquire beneficial ownership upon
     the exercise of options exercisable within 60 days of February 28, 1998.

(3)  Individual named in the Summary Compensation Table.

(4)  Of such 4,349,041 Common Shares, 1,010,000 Common Shares are held of record
     by Mr. Mercer's wife, and 524,992 Common Shares are held in the Gerald G.
     Mercer 5/30/96 Grantor Annuity Trust, of which Mr. Mercer is the sole
     trustee. Mr. Mercer possesses sole voting and dispositive power with
     respect to the Common Shares held in the Trust.

(5)  Of such 189,975 Common Shares, 1,000 Common Shares are held of record by
     each of Mr. Roy's two minor children, 80,000 Common Shares are held in the
     Revocable Trust Created by Eric P. Roy and 80,000 Common Shares are held in
     the Revocable Trust Created by Carol P. Roy, Mr. Roy's wife. Mr. Roy are
     his wife are co-trustees of each of the trusts and share voting and
     dispositive power with respect to the Common Shares held in such trusts.

(6)  Represents ownership of less than 1% of the outstanding Common Shares of
     the Company.

(7)  Of such 27,381 Common Shares, 4,829 Common Shares are held by Mr. Wright's
     wife, of which Mr. Wright possesses sole voting and dispositive power
     with respect to the Common shares.


                                          26
<PAGE>

(8)  Of such 5,000 Common Shares, 2,100 Common Shares are held of record by Mr.
     Gertmenian's wife.

(9)  Of such 10,185 Common Shares, 7,500 Common Shares are held by the J.F.
     Keeler, Jr. Limited Partnership, of which Mr. Keeler is the sole general
     partner. Mr. Keeler possesses sole voting and investment power with respect
     to the Common Shares held by the limited partnership.

(10) Based on information contained in filings with the SEC (the latest of which
     is dated January 12, 1998), Wellington Management Corporation LLP is deemed
     to have beneficial ownership of 728,400 Common Shares as of December 31,
     1997. The filing also indicates that the reporting person is deemed to 
     have shared voting power over 422,400 of such Common Shares and shared 
     dispositive power over 728,400 Common Shares.

(11) Based on information contained in filings with the SEC (the latest of which
     is dated February 9, 1998), AMVESCAP PLC  is deemed to have beneficial
     ownership of 738,500 Common Shares as of December 31, 1997, all of which
     Common Shares it is deemed to share voting and investment power with AVZ, 
     Inc., AIM Management Group, Inc., AMVESCAP Group Services, Inc., INVESCO, 
     Inc. INVESCO North America Holdings, Inc. INVESCO Capital Management, 
     Inc., INVESCO Funds Group, Inc, INVESCO Management and Research, Inc., and 
     INVESCO REALTY, INC. Those filings with the SEC also indicate that the 
     reporting persons disclaim beneficial ownership of such Common Shares.

ITEM 13  -  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PURCHASE OF COMPANY HEADQUARTERS

In October 1997, the Company purchased its corporate and operational
headquarters at 3939 International Gateway in Columbus, Ohio for $4.1 million
from Mr. Mercer, which represented fair market value as determined by an
independent appraisal performed by Kohr Royer Griffith, Inc.   In addition to
the building, the Company assumed Mr. Mercer's 25-year land lease with The Port
Authority of Columbus ("Port Authority"), which expires on December 31, 2009.
The complex has 80,000 square feet, of which the Company utilizes 77,000 square
feet.  The remainder is subleased to unrelated third parties. The Company's
headquarters is currently used for operations, aircraft maintenance, vehicle
maintenance, general and administrative functions, and training.  Prior to the
purchase, the Company leased the facility from Mr. Mercer and paid a base rent
of $75,000 per month and made payments, on behalf of Mr. Mercer, to the Port
Authority of approximately $9,500 per month for use of the land upon which the
facility is located. The Company paid rent of approximately $864,000 for the
year ended December 31, 1997 and approximately $254,000 for the three months
ended December 31, 1996 to Mr. Mercer. The Company believes that the terms of
the sublease were no less favorable to the Company than those reasonably
available from unrelated third parties for comparable space.

FLOAT CONTROL, INC./CHEXS PARTNERSHIP

On October 24, 1996, the Company acquired Float Control, Inc., which was a
company owned by certain executive officers of the Company and other 
individuals and which owned an interest in The Check Exchange
System Company (the "CHEXS Partnership"), in a merger transaction.  As the
result of such merger transaction, the Company currently owns 19% of the CHEXS
Partnership; Littlewood, Shain and Company, an unaffiliated third party, owns
15%; and affiliates of The Huntington National Bank own the remaining interests.
The CHEXS Partnership operates a national net settlement switch utilized by
members of the National Clearing House Association (the "NCHA"), which the CHEXS
Partnership helped to found. The national net settlement switch operates as a
clearinghouse for NCHA member banks, pursuant to which such banks are able to
settle transactions with other NCHA members by utilizing the switch rather than
having to maintain a separate account with each such member.  Canceled bank
checks which are settled through the NCHA typically are routed through the
Company's air transportation system.


                                          27
<PAGE>

Pursuant to the merger transaction, Messrs. Mercer, Roy, Miller, King, Wright
and Sumser, all of whom are executive officers of the Company, received Common
Shares of the Company having a fair market value at the time of the merger
transaction of $1,424,994, $74,089, $176,690, $42,743, $42,743 and $19,949,
respectively, in exchange for their shares of Float Control, Inc. In determining
the value of the shares of Float Control, Inc., the Company utilized an
evaluation of the value of the CHEXS Partnership prepared by an unaffiliated
third party evaluation firm. The Company believes that the terms of the merger
transaction were fair to the Company and were no less favorable to the Company
than those reasonably available from unrelated third parties.

INDEMNIFICATION AGREEMENTS

In connection with the Company's initial public offering in 1996, the Company's
pre-existing shareholders, including each of the Named Executive Officers,
except Mr. Strench, and certain other executive officers of the Company, agreed
to indemnify the Company for any corporate level federal income taxes which
might be imposed upon the Company for any period prior to the termination of the
Company's S Corporation status at the time of the closing of the initial public
offering in June 1996. As an S Corporation, the Company was not subject to
federal income taxes at the corporate level, and the Company has no reason to
believe that any such corporate level federal taxes will be imposed for any such
period.

In addition, Mr. Mercer has agreed to indemnify the Company with respect to
certain environmental liabilities with respect to underground storage tanks on a
Michigan property formerly owned by Mr. Mercer and leased to the Company. The
Company ceased its operations at this property in 1988, at which time Mr. Mercer
sold the property to an unaffiliated third party.  The aggregate amount of any
such liabilities is estimated by the Company to be less than $100,000.


                                      PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  Documents Filed as Part of this Report

     1.   The response to this portion of Item 14 is submitted as a separate
          section of this Annual Report on Form 10-K.  See Item 8 above.

     2.   Schedule II - Valuation and Qualifying Accounts. . . . . . .  page 49

          Schedules not listed above have been omitted because they are not
          required or the information required to be set forth therein is
          included in the Consolidated Financial Statements or Notes thereto.

     3.   Exhibits

          Exhibits filed with this Annual Report on Form 10-K are attached
          hereto.  For a list of such exhibits, see "Index to Exhibits" at page
          50.  The following table provides certain information concerning
          executive compensation plans and arrangements required to be filed as
          exhibits to this Annual Report on Form 10-K.


                                          28
<PAGE>

                   EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
<TABLE>
<CAPTION>
     Exhibit No.          Description                   Location
     -----------          -----------                   --------
     <S>            <C>                           <C>
       10.1         AirNet Systems, Inc. 1996     Incorporated herein by
                    Incentive Stock Plan          reference to Exhibit 10 to the
                    (reflects amendments          Company's March 31, 1997 Form
                    through March 31, 1997)       10-Q.
</TABLE>

(b)  Reports on Form 8-K:

     No reports on Form 8-K were filed during the quarter ended December 31,
     1997.

(c)  Exhibits

     See Item 14(a) (3) above.

(d)  Financial Statement Schedules

     The response to this portion of Item 14 is submitted as a separate section
     of this Report.


                                          29
<PAGE>

                                      SIGNATURES

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

                                        AIRNET SYSTEMS, INC.


Dated: March 27, 1998                   By: /s/ Gerald G. Mercer
                                           -----------------------------------
                                             Gerald G. Mercer, Chairman of the
                                             Board, President and Chief
                                             Executive Officer


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

      Signature                      Title                       Date
      ---------                      -----                       ----
 /s/ Gerald G. Mercer         Chairman of the Board,        March 27, 1998
-------------------------     President, Chief Executive
Gerald G. Mercer              Officer and Director
                              (Principal Executive
                              Officer)

 /s/ Eric P. Roy              Director, Executive Vice      March 27, 1998
-------------------------     President, Chief Financial
Eric P. Roy                   Officer and Treasurer
                              (Principal Financial and
                              Accounting Officer)

*Roger D. Blackwell           Director                      March 27, 1998
-------------------------
Roger D. Blackwell

*Tony C. Canonie, Jr.         Director                      March 27, 1998
-------------------------
Tony C. Canonie, Jr.

*Russell M. Gertmenian        Director                      March 27, 1998
-------------------------
Russell M. Gertmenian

*J. F. Keeler, Jr.            Director                      March 27, 1998
-------------------------
J. F. Keeler, Jr.

*By   /s/ Gerald G. Mercer
     ---------------------
     Gerald G. Mercer
     Attorney-in-Fact


                                          30
<PAGE>

                           REPORT OF INDEPENDENT AUDITORS

Shareholders and Board of Directors
AirNet Systems, Inc.

We have audited the accompanying consolidated balance sheets of AirNet Systems,
Inc. as of December 31, 1997 and 1996 and the related consolidated statements of
operations, shareholders' equity and cash flows for the years ended December 31,
1997, September 30, 1996 and 1995 and for the three months ended December 31,
1996.  Our audits also included the financial statement schedule listed in the
Index at Item 14(a).  These financial statements and schedule are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and the significant estimates made by
the management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of AirNet
Systems, Inc.  and its subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1997, September 30, 1996 and 1995 and for the three months
ended December 31, 1996, in conformity with generally accepted accounting
principles.  Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects, the information set forth therein.





/s/ Ernst & Young LLP
---------------------
Columbus, Ohio
February 18, 1998

                                      31
<PAGE>

                              AIRNET SYSTEMS, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>


                                                                          DECEMBER 31,
                                                               1997                         1996
                                                           ------------                 ------------
                                                                                        (Restated for 
                                                                                         ECC Pooling)
<S>                                                        <C>                          <C>
                  ASSETS
Current assets:
  Cash and  cash equivalents                                $  2,125,137                 $ 9,631,663
  Accounts receivable:
    Trade, less allowances of $123,000 and $23,000 at         10,966,790                   6,440,545
      December 31, 1997 and 1996, respectively
    Shareholders, affiliates, and associates                      85,714                     207,571
  Spare parts and supplies                                     6,053,488                   5,012,284
  Deposits and prepaids                                        5,847,774                   3,737,008
                                                             -----------                 -----------
Total current assets                                          25,078,903                  25,029,071

Net property and equipment                                    67,578,533                  45,658,488

Other assets:
  Intangibles, net of accumulated amortization of              5,425,938                   1,673,861
    $1,671,000 and $1,334,000 at December 31, 1997                                               
    and 1996, respectively
  Investment in partnerships and other                         5,902,664                   3,018,621
  Deferred tax asset                                                  --                   4,115,057
                                                             -----------                 -----------
Total assets                                                $103,986,038                 $79,495,098
                                                             -----------                 -----------
                                                             -----------                 -----------

     LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                          $  4,033,036                 $ 2,938,730 
  Salaries and related liabilities                             1,606,006                   1,677,563
  Accrued expenses                                             1,311,366                     443,453
  Taxes payable                                                2,386,256
  Deferred taxes                                                 229,288                     208,995
  Current portion of notes payable                                23,923                          --
                                                             -----------                 -----------
Total current liabilities                                      9,589,875                   5,268,741

Notes payable, less current portion                            9,705,645                     110,787
Deferred tax liability                                         4,430,538                   3,397,062

Shareholders' equity:
  Preferred shares, $.01 par value; 10,000,000 shares
    authorized; and no shares issued and outstanding                  --                          --
  Common shares, $.01 par value; 40,000,000 shares
    authorized; and 12,753,400 and 12,621,081 shares 
    issued at December 31, 1997 and 1996                         127,534                     126,211
  Additional paid-in-capital                                  79,778,803                  78,008,030
  Retained earnings                                            5,787,017                  (7,415,733)
  Treasury shares; 263,570 shares held at cost                (5,433,374)                         --
                                                             -----------                 -----------
Total shareholders' equity                                    80,259,980                  70,718,508
                                                             -----------                 -----------

Total liabilities and shareholders' equity                  $103,986,038                 $79,495,098
                                                             -----------                 -----------
                                                             -----------                 -----------

</TABLE>

See notes to consolidated financial statements

                                      32
<PAGE>
                              AIRNET SYSTEMS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                   
                                                                        YEARS ENDED                   THREE MONTHS
                                                        --------------------------------------------      ENDED
                                                        DECEMBER 31,   SEPTEMBER 30,   SEPTEMBER 30,   DECEMBER 31,
                                                            1997           1996            1995           1996
                                                        ------------   -------------   -------------   ------------
                                                                                (Restated for ECC Pooling)
                                                                       --------------------------------------------
<S>                                                     <C>            <C>             <C>           <C>
NET REVENUES
  Air transportation, net of excise tax of 
  $2,113,000, $716,000 and $1,810,000 for the years
  ended December 31, 1997, September 30, 1996 and 
  1995 and $407,000 for the three months ended 
  December 31, 1996:
    Check delivery                                       $80,707,349    $65,024,522    $58,263,706    $16,811,390
    Small package delivery                                15,660,080     13,863,772     12,424,306      3,613,636
  Fixed base operations                                    1,394,827      1,063,583      1,006,529        366,432
                                                         -----------    -----------    -----------    -----------
Total net revenues                                        97,762,256     79,951,877     71,694,541     20,791,458

COSTS AND EXPENSES
  Air transportation
    Wages and benefits                                    11,252,976      9,862,436      9,195,208      2,551,549
    Aircraft fuel                                         10,176,283      8,177,970      7,444,878      2,310,809
    Aircraft maintenance                                   7,489,323      6,551,792      6,033,739      1,810,075
    Ground couriers and other outside services            14,817,610     12,369,737     11,399,012      3,192,743
    Depreciation and amortization                          8,363,196      8,510,214      7,391,127      2,274,088
    Other                                                 13,933,358      8,324,198      7,782,042      2,243,936
  Fixed base operations                                    1,100,741      1,033,068        955,792        309,352
  Selling, general and administrative                      8,550,125     11,875,089     13,418,129      1,915,960
                                                         -----------    -----------    -----------    -----------
Total costs and expenses                                  75,683,612     66,704,504     63,619,927     16,608,512
                                                         -----------    -----------    -----------    -----------
Income from operations                                    22,078,644     13,247,373      8,074,614      4,182,946
Interest expense                                             108,894      1,072,390      1,468,964          9,623
Offering-related non-recurring expenses                           --     13,704,398             --             --
                                                         -----------    -----------    -----------    -----------
Income (loss) before income taxes                         21,969,750     (1,529,415)     6,605,650      4,173,323
Provision for (benefit from) income taxes                  8,767,000      1,764,000        (13,150)     1,688,000
Tax provision due to change in tax status                         --      2,435,771             --             --
                                                         -----------    -----------    -----------    -----------
Net income (loss)                                        $13,202,750   ($ 5,729,186)   $ 6,618,800    $ 2,485,323
                                                         -----------    -----------    -----------    -----------
                                                         -----------    -----------    -----------    -----------

Net income per common share                                    $1.05                                        $0.20
                                                         -----------                                  -----------
                                                         -----------                                  -----------
Net Income per share - assuming dilution                       $1.04                                        $0.20
                                                         -----------                                  -----------
                                                         -----------                                  -----------

Pro forma information:
  Historical income (loss) before income taxes                         ($ 1,529,415)   $ 6,605,650
  Pro forma adjustments other than income taxes                           4,429,470      7,367,337
                                                                        -----------    -----------
  Pro forma income before taxes                                           2,900,055     13,972,987
  Pro forma taxes on income                                               5,618,437      5,589,195
                                                                        -----------    -----------
  Pro forma net income (loss)                                          ($ 2,718,382)   $ 8,383,792
                                                                        -----------    -----------
                                                                        -----------    -----------

  Pro forma net income (loss) per common 
    share - basic and assuming dilution                                      ($0.34)         $1.43
                                                                        -----------    -----------
                                                                        -----------    -----------

</TABLE>

See notes to consolidated financial statements

                                      33
<PAGE>

                             AIRNET SYSTEMS, INC.
  
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                        YEARS ENDED                   THREE MONTHS
                                                        --------------------------------------------      ENDED
                                                        DECEMBER 31,   SEPTEMBER 30,   SEPTEMBER 30,   DECEMBER 31,
                                                            1997           1996            1995           1996
                                                        ------------   -------------   -------------   ------------
                                                                                (Restated for ECC Pooling)
                                                                       --------------------------------------------
<S>                                                     <C>            <C>             <C>           <C>
Operating activities
Net income (loss)                                      $ 13,202,750    ($ 5,729,186)   $ 6,618,800    $ 2,485,323
Adjustments to reconcile net income (loss) to net 
cash provided by operating activities:
  Offering related non-recurring, non-cash expenses              --      13,704,398             --             --
  Depreciation                                            8,431,420       8,584,888      7,475,979      2,289,798
  Amortization of intangibles                               352,902         351,327        435,902         67,230
  Deferred taxes                                          5,168,826       4,202,002             --      1,688,000
  Provision for losses on accounts receivable                83,656          12,170         12,100          9,000
  Deferred compensation                                          --         445,147        275,464             --
  Loss (gain) on disposition of assets                      615,979          81,931         73,472       (187,685)
  Cash provided by (used in) operating assets 
    and liabilities:
    Accounts receivable                                  (2,588,765)       (419,331)       428,617        996,052
    Spare parts and supplies                             (1,004,911)       (892,318)      (441,864)       183,633
    Prepaid expenses                                     (2,004,152)       (679,264)      (749,713)      (697,759)
    Accounts payable                                       (149,394)       (698,536)       650,877     (1,224,659)
    Accrued expenses                                        857,276        (254,819)       180,554       (109,906)
    Taxes payable                                         2,386,256              --             --             --
    Salaries and related liabilities                       (546,168)       (409,126)       258,789        413,225
    Other, net                                           (2,829,822)         22,801         45,538       (100,478)
                                                        -----------     -----------    -----------     ----------
Net cash provided by operating activities                21,975,853      18,322,084     15,264,515      5,811,774
  
Investing activities
Acquisition of Pacific Air Charter, Inc.,
  net of cash acquired                                     (240,323)             --             --             --
Acquisition of Data Air Courier, Inc.,
  net of cash acquired                                   (4,122,922)             --             --             --
Acquisition of Midway Aviation, Inc.,
  net of cash acquired                                      (52,576)     (2,810,416)            --             --
Acquisition of Float Control, Inc.,
  net of cash acquired                                           --              --             --       (719,519)
Purchases of property and equipment                     (30,061,866)    (14,341,182)   (14,587,658)    (9,168,991)
Payments for ECC covenants not  to compete                 (105,000)             --             --             --
Proceeds from sales of property and equipment               592,223              --        321,059      2,230,000
                                                        -----------     -----------    -----------     ----------
Net cash used in investing activities                   (33,990,464)    (17,151,598)   (14,266,599)    (7,658,510)
  
Financing activities
Proceeds from the issuance of Common Shares - net                --      82,697,107             --             --
Exercise of stock options                                 2,100,710              --             --             --
Purchase of Donald Wright Warrant                                --     (29,901,785)            --             --
Proceeds from shareholder notes receivable                       --         323,096         41,287             --
Net borrowings under the revolving credit facility        9,500,000              --      1,350,000             --
Repayment of long-term debt                              (1,560,205)    (21,994,710)   (10,328,874)       (85,792)
Proceeds from the issuance of long-term debt                229,568       2,760,000     11,983,775             --
Purchase of treasury stock                               (5,761,988)             --             --             --
Distributions to shareholders                                    --     (23,807,806)    (4,125,946)            --
                                                        -----------     -----------    -----------     ----------
Net cash provided by (used in) financing activities       4,508,085      10,075,902     (1,079,758)       (85,792)
                                                        -----------     -----------    -----------     ----------
  
Net increase (decrease) in cash                          (7,506,526)     11,246,388        (81,842)    (1,932,528)
Cash and cash equivalents at beginning of period          9,631,663         317,803        399,645     11,564,191
                                                        -----------     -----------    -----------     ----------
  
Cash and cash equivalents at end of period             $  2,125,137     $11,564,191    $   317,803    $ 9,631,663
                                                        -----------     -----------    -----------     ----------
                                                        -----------     -----------    -----------     ----------

</TABLE>

See notes to consolidated financial statements

                                      34
<PAGE>

                              AIRNET SYSTEMS, INC.  

                       CONSOLIDATED STATEMENTS OF EQUITY

<TABLE>
<CAPTION>

                                                                                                                        

                                                                      Common Shares
                                                               -------------------------     Additional 
                                                                Number of                      Paid-in      Retained   
                                                                 Shares          Amount        Capital      Earnings   
                                                               ----------       --------     ----------    -----------
<S>                                                            <C>              <C>          <C>           <C>
Balance October 1, 1994 - restated for ECC Pooling              5,856,561        $58,566       $482,709    $18,164,186  

Net income                                                             --             --             --      6,618,800  
Repayment of notes                                                     --             --             --             --  
Shareholder distributions                                              --             --             --     (4,125,946) 
                                                               ----------       --------     ----------    -----------
Balance September 30, 1995                                      5,856,561         58,566        482,709     20,657,040  
        
Net loss                                                               --             --             --     (5,729,186) 
Repayment of notes                                                     --             --             --             --
Shareholder distributions                                              --             --             --     (2,807,806) 
Issuance of Common Shares, net of Offering-related                                                                      
  expenses                                                      6,440,000         64,400     82,632,507             --  
AAA distributions related to S Corp shareholders                       --             --             --    (21,000,000)
Purchase of Donald Wright Warrant                                      --             --    (29,901,785)            --
Exercise of Jeffrey Wright Warrant                                167,227          1,672         (1,472)            --
Reclassification of undistributed S Corp retained earnings             --             --      1,021,104     (1,021,104)
Tax benefit related to cancellation of Donald Wright Warrant           --             --      7,000,000             --
Compensation expense related to stock purchase                        
  agreements                                                           --             --     14,830,039             --  
                                                               ----------        -------     ----------    -----------
Balance September 30, 1996                                     12,463,788        124,638     76,063,102     (9,901,056) 
        
  Net income                                                           --             --             --      2,485,323  
  Issuance of Common Shares - acquisition of Float Control        157,293          1,573      1,944,928             --  
                                                               ----------       --------     ----------    -----------
Balance December 31, 1996                                      12,621,081        126,211     78,008,030     (7,415,733) 
        
  Net income                                                           --             --             --     13,202,750  
  ECC cash for fractional shares                                       --             --            (29)            --
  Exercise stock options                                          128,525          1,285      1,821,536             --   
  Exercise stock options with treasury shares                          --             --       (103,483)            --  
  Issue shares for Associate Stock Purchase Program                 3,794             38         52,749             --  
  Purchase treasury shares                                             --             --             --             --  
                                                               ----------       --------     ----------    -----------
Balance December 31, 1997                                      12,753,400       $127,534    $79,778,803     $5,787,017  
                                                               ----------       --------     ----------    -----------
                                                               ----------       --------     ----------    -----------

</TABLE>

<TABLE>
<CAPTION>

                                                                                    Notes
                                                                                  Receivable
                                                                Treasury             From 
                                                                 Shares          Shareholders         Total 
                                                             --------------      ------------      ------------
<S>                                                          <C>                 <C>               <C>
Balance October 1, 1994 - restated for ECC Pooling            $       --          ($364,383)        $18,341,078
                                                                                                  
Net income                                                            --                 --           6,618,800 
Repayment of notes                                                    --             41,287              41,287 
Shareholder distributions                                             --                 --          (4,125,946)
                                                             -----------          ---------         -----------
Balance September 30, 1995                                            --           (323,096)         20,875,219 
                                                                                                              
Net loss                                                              --                 --          (5,729,186)
Repayment of notes                                                    --            323,096             323,096 
Shareholder distributions                                             --                 --          (2,807,806)
Issuance of Common Shares, net of Offering-related                                                            
  expenses                                                            --                 --          82,696,907
AAA distributions related to S Corp shareholders                      --                 --         (21,000,000)
Purchase of Donald Wright Warrant                                     --                 --         (29,901,785) 
Exercise of Jeffrey Wright Warrant                                    --                 --                 200 
Reclassification of undistributed S Corp retained earnings            --                 --                  --  
Tax benefit related to cancellation of Donald Wright Warrant          --                 --           7,000,000 
Compensation expense related to stock purchase                                                                  
  agreements                                                          --                 --          14,830,039  
                                                             -----------          ---------         -----------
Balance September 30, 1996                                            --                 --          66,286,684  
                                                                                                               
  Net income                                                          --                 --           2,485,323  
  Issuance of Common Shares - acquisition of Float Control            --                 --           1,946,501  
                                                             -----------          ---------         -----------
Balance December 31, 1996                                             --                 --          70,718,508  
                                                                                                               
  Net income                                                          --                 --          13,202,750  
  ECC cash for fractional shares                                      --                 --                 (29)
  Exercise stock options                                              --                 --           1,822,821
  Exercise stock options with treasury shares                    328,614                 --             225,131
  Issue shares for Associate Stock Purchase Program                   --                 --              52,787  
  Purchase treasury shares                                    (5,761,988)                --          (5,761,988) 
                                                             -----------          ---------         -----------
Balance December 31, 1997                                    ($5,433,374)                --         $80,259,980  
                                                             -----------          ---------         -----------
                                                             -----------          ---------         -----------

</TABLE>

See notes to consolidated financial statements 

                                      35

<PAGE>

                              AIRNET SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

1.   SIGNIFICANT ACCOUNTING POLICIES

AirNet Systems, Inc. and its subsidiaries (the "Company") operate a fully
integrated national air transportation network which provides delivery service
for time-critical shipments for customers in the U.S. banking industry and other
industries requiring late night pickup with early morning delivery of small
packages.  The Company also offers retail aviation fuel sales and related ground
services for customers at its Columbus, Ohio facility.

BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries.  All significant intercompany
accounts and transactions have been eliminated. On May 14, 1997, the Board of
Directors of the Company approved a change in the fiscal year end of the Company
from September 30 to December 31.

The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes.  Actual results could differ from those
estimates.

REVENUE RECOGNITION
Revenue on air transportation services is recognized when the packages are
picked up for delivery to their destination.  Revenue on fixed based operations
is recognized when the maintenance services are complete or fuel is delivered.

CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of highly liquid investments which are
unrestricted as to withdrawal or use, and which have an original maturity of
three months or less.  Cash equivalents are stated at cost, which approximates
market value.

ACCOUNTS RECEIVABLE
For 1997, approximately 83% and 63% of the Company's revenues and related
receivables, respectively, were generated from customers within the banking
industry.  The Company performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral.  The Company
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risks of specific customers, historical trends and other information.

SPARE PARTS AND SUPPLIES
Spare parts and supplies are valued at the lower of cost (weighted average
method) or market.

PROPERTY AND EQUIPMENT
Property and equipment are stated at cost.  Engine, overhauls and major
inspections, which have been capitalized and included in flight equipment, are
depreciated and amortized on the basis of hours flown.  Airframes, other flight
equipment and other property and equipment (primarily furniture and equipment,
leasehold improvements and vehicles) are depreciated using the straight-line
method over estimated useful lives of the assets, as summarized below:

     Airframes                               15 years
     Buildings                               30 years
     Other flight equipment               2 - 5 years
     Other property and equipment        3 - 10 years

During 1997, the Company made certain changes in its estimated useful lives and
the salvage values of its aircraft.  The changes increased 1997 net income by  
 $1,050,000, or $.08 per share.  These changes were made to better reflect how
the aircraft are expected to be used over time and the continued industry trend
of increased market values associated with the types and models of aircraft the
Company owns and operates.


                                      36

<PAGE>

                              AIRNET SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

PREPAID EXPENSES
The Company prepays certain engine repair and overhaul services under
manufacturer service plans.  Such prepaid balances were $2,299,477 and
$1,543,832 at December 31, 1997 and 1996, respectively, and are included with
prepaid expenses on the balance sheet.

START-UP COSTS The Company capitalizes  costs related to the start-up 
activities associated with new business initiatives, such as introduction of 
new services.  Costs associated with these initiatives, such as personnel 
costs, outside services and administrative support services are capitalized 
as start-up costs.  Upon completion of the start-up phase, these costs will 
be amortized over sixty months.  At December 31, 1997, the Company had 
$2,522,338 of start-up costs recorded on its balance sheet included in other 
assets.

INCOME TAXES
Prior to the Offering, the Company's income was taxed under the provisions of 
Subchapter S of the Internal Revenue Code of 1986, which provides that in 
lieu of corporate income taxes, the shareholders of the S Corporation are 
taxed on their proportionate share of the Company's taxable income.  Upon 
completion of the Company's initial public offering ("the "Offering") in May 
1996, the Company ceased to qualify as an S Corporation and was subject to 
corporate income taxes. Under the liability method of accounting for income 
taxes, deferred tax liabilities and assets are determined based on the 
differences between the financial reporting and tax bases of assets and 
liabilities using enacted tax rates and laws that will be in effect when the 
differences are expected to reverse.

INTANGIBLES
Intangibles include non-competition agreements with former competitors and 
goodwill generated through the acquisition of companies.  The balances are 
being amortized on the straight-line method over periods ranging from one to 
25 years. The carrying value of goodwill is reviewed if the facts and 
circumstances suggest that it may be impaired.  If this review indicates that 
goodwill will not be recoverable, as determined based on the undiscounted 
cash flows of the entity  acquired over the remaining amortization period, 
the Company's carrying value of the goodwill will be reduced by the estimated 
shortfall of cash flows.

STATEMENT OF CASH FLOWS
Cash paid for interest was $108,894, $1,239,871 and $1,264,522 for the years
ended December 31, 1997, September 30, 1996 and 1995, respectively.  No interest
was paid in the three months ended December 31, 1996.  Cash paid for taxes was
$1,311,785 for the year ended December 31, 1997 and $236,681 for the three
months ended December 31, 1996.

RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, The Financial Accounting Standards Board ("FASB") issued Statement
No. 130, "Reporting Comprehensive Income", and Statement No. 131, "Disclosures
About Segments of an Enterprise and Related Information". Both Statements are
effective for the Company in 1998.  Statement No. 130 requires separate
reporting of certain items affecting shareholders' equity outside of those
included in arriving at net income.  These items are already disclosed by the
Company.  Statement No. 131 establishes requirements for reporting information
about operating segments in annual and interim statements.  This statement may
require a change in the Company's financial reporting; however, the extent of
this change, if any, has not been determined.  
 

                                      37

<PAGE>

                              AIRNET SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

2.   INITIAL PUBLIC OFFERING

On May 29, 1996, the registration statement related to the Company's initial
public offering was declared effective by the SEC and its stock began trading on
May 31, 1996.  Pursuant to the terms of the Offering, the Company issued
6,440,000 shares of common stock, including 840,000 shares issued through the
underwriters' full exercise of their over-allotment option on June 11, 1996, at
$14.00 per share.  Net proceeds of the offering totaled $83,848,800 before
deducting expenses of $1,151,893. The following is a summary of transactions
related to the Company's public offering:

AAA DISTRIBUTIONS
Prior to the Offering, the Company made $21,000,000 in distributions to the S
Corporation shareholders for the undistributed earnings associated with the
Company's S Corporation status (referred to as "AAA distributions").  These
distributions were made through the Company's issuance of promissory notes to
such shareholders.  The notes were subsequently repaid with the Offering
proceeds.

TERMINATION OF STOCK PURCHASE AGREEMENTS
On April 1, 1994, the Company entered into stock purchase agreements with seven
executive officers, in which these officers purchased an aggregate of 1,484,908
shares of common stock for an aggregate purchase price of $364,000, paid through
the delivery of promissory notes.  Upon completion of the Offering, the stock
purchase agreements were terminated and the seven officers repaid the balances
due on the notes totaling $283,856.  The transaction resulted in a decrease in
notes receivable from shareholders and a corresponding increase in cash for the
year ended September 30, 1996.  

In addition, as a result of the termination of the stock purchase agreements,
the Company incurred a non-recurring, non-cash charge of  $14,830,039, which
increased paid-in capital.  The charge is not tax deductible and represents a
portion of the $21,000,000 of AAA distributions to the seven executive officers
not previously recorded as compensation expense, plus the difference between the
net offering price and the net book value of the 1,484,908 shares of common
stock held by the officers at the termination date of the agreements.  This
distribution of undistributed earnings to the former S Corporation shareholders
also eliminated a $1,654,328 deferred compensation liability related to the
stock purchase agreements and resulted in a non-recurring, non-cash reduction of
expense in the statement of operations for the year ended September 30, 1996.


TERMINATION OF DEFERRED COMPENSATION AGREEMENTS
Prior to the Offering, the Company entered into deferred compensation agreements
with certain executive officers, pursuant to which the Company was obligated to
pay these officers deferred compensation equal to a percentage of the increase
on the Company's net book value.  Upon completion of the Offering, the officers
agreed to terminate the agreements and forgive the remaining balances totaling
$2,029,675 due to them.  This transaction resulted in a decrease of the deferred
compensation liability and a non-recurring, non-cash reduction of expense in the
statement of operations for the year ended September 30, 1996.


TERMINATION OF THE WRIGHT AGREEMENT AND PURCHASE OF WARRANTS
In 1988, the Company purchased certain assets of Wright International Express,
Inc. (WIE).  In consideration for the agreement of WIE and for Donald Wright not
to compete with the Company, the Company entered into the Wright Agreement.  The
Wright Agreement, as amended, required annual payments tied to the cash flows
and the debt to equity ratio of the Company, to Donald Wright and certain
designees.  In addition, the Company issued a warrant to Donald Wright to
purchase 2,483,537 shares of common stock and a warrant to Jeffrey Wright
(Donald Wright's son) to purchase 167,227 shares of common stock.  Both warrants
were exercisable upon the closing of 


                                      38

<PAGE>

                              AIRNET SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

a public offering.  Upon the closing of the Offering, the Company purchased 
the Donald Wright Warrant for $29,901,785 and canceled the warrant.  Gerald 
G. Mercer, the Company's Chairman and Chief Executive Officer purchased the 
Jeffrey Wright Warrant for $2,013,413 and exercised it subsequent to the 
completion of the Offering.

In connection with the repurchase and cancellation of the Donald Wright Warrant
and the corresponding tax treatment, the Company has recognized a related tax
benefit estimated to be approximately $7,000,000.  The benefit was realized as
cash savings by offsetting subsequent tax liabilities.  The tax benefit will
have no effect on the Company's current or future statements of operations.  The
benefit has been reflected as additional paid-in capital on the balance sheet.
     
Upon cancellation of the Donald Wright Warrant, the Wright Agreement was also
terminated in its entirety and no further payments will be made.  In addition,
the remaining net book value of a covenant not to compete totaling $2,558,362,
which was recorded at the inception of the Wright Agreement, was also written
off, resulting in a non-recurring, non-cash expense for the year ended September
30, 1996.

STATEMENT OF OPERATIONS IMPACT OF OFFERING TRANSACTIONS 
The following is a summary of the Offering-related transactions and their effect
on the statement of operations for the year ended September 30, 1996:

<TABLE>
<CAPTION>

                                                                         Increase /
                                                                       (Decrease) to
                                                                          Income 
                                                                        -------------
<S>                                                                     <C>
Compensation expense related to the stock purchase agreements           $(14,830,039)
Write-off of Wright Agreement covenant not to compete                     (2,558,362)
Elimination of deferred compensation liability related to the 
  stock purchase agreements                                                1,654,328
Elimination of the liability for the deferred compensation agreements      2,029,675
                                                                        -------------
                                                                        $(13,704,398)
                                                                        -------------
                                                                        -------------

</TABLE>

3.   ACQUISITIONS

Effective July 31, 1997, the Company acquired all of the outstanding common 
shares of Data Air Courier, Inc. ("Data Air"), whose primary business 
involves the nationwide transportation of canceled checks between clearing 
banks through the use of company-owned ground vehicles, independent agents 
and commercial airlines.  The Company accounted for the acquisition under the 
purchase method of accounting.  The purchase price of the acquisition totaled 
approximately $4,120,000 and resulted in goodwill of approximately 
$3,684,000, which will be amortized over 25 years.  The Company also entered 
into a five-year covenant not to compete for $50,000. The acquired assets and 
assumed liabilities, including goodwill, have been recorded at their 
estimated fair values as of July 31, 1997. The Company's consolidated 
financial statements include the results of operations of Data Air since the 
purchase date.  The following are pro forma results of operations for AirNet 
and Data Air as though they were combined as of the beginning of the periods 
presented:


                                      39

<PAGE>

                              AIRNET SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

<TABLE>
<CAPTION>

                                                                                                      Three Months
                                                                             Years Ended                 Ended
                                                                     December 31,    September 30,    December 31,
                                                                         1997            1996             1996
                                                                     ------------    ------------     -----------
<S>                                                                  <C>             <C>              <C>
Net revenues                                                         $106,787,351     $95,381,318     $24,534,388
Net income (loss)                                                      12,878,577      (4,778,345)      2,442,171
Net income (loss) per share                                                 $1.02              --            $.19
Net income (loss) per share - assuming dilution                             $1.01              --            $.19
Pro forma net income (loss) - unaudited                                        --     $(1,767,541)             --
Pro  forma net income (loss ) per share - basic and assuming
dilution - unaudited                                                           --           $(.22)             --

</TABLE>

Effective June 6, 1997, the Company acquired all of the outstanding shares of
Pacific Air Charter, Inc. ("PAC") for approximately $450,000 in cash.  PAC
operates a fleet of eight aircraft, primarily transporting canceled checks
between clearing banks along the West Coast. The Company accounted for the
acquisition under the purchase method of accounting.  The purchase resulted in
goodwill of approximately $171,445, which will be amortized over 25 years.  The
Company also entered into a five year covenant not to compete for $40,000. The
acquired assets and assumed liabilities, including goodwill, have been recorded
at their estimated fair values as of June 6, 1997.  The results of PAC's
operations since the effective date of the purchase have been included in the
Company's accompanying financial statements.

Effective January 30, 1997, the Company acquired Express Convenience Center,
Inc. d/b/a ECC Worldwide Services ("ECC") in a business combination accounted
for as a pooling-of-interests. ECC's primary services include small package
delivery services within the United States and certain other countries.  All of
the stock of ECC was exchanged for 145,953 Common Shares of the Company. The
Company also entered into three covenant not to compete agreements for a total
of $205,000, which will be amortized over three- and five-year periods.  The
financial statements of the Company have been restated to include ECC for all
periods presented.

Effective October 24, 1996, the Company acquired Float Control, Inc. for 
157,293 Common Shares and approximately $720,000 in cash.  Float Control was 
previously partially owned by certain executive officers of the Company, 
among others, and owns a 19% interest in the Check Exchange System Co., an 
industry leader in payment initiatives.  Float Control accounts for its 
investment in the Check Exchange System under the equity method of 
accounting.  At December 31, 1997, Float Control's recorded investment in the 
Check Exchange System was $2,940,000.

Effective September 26, 1996, the Company acquired all of the outstanding shares
of common stock of Midway Aviation, Inc. (Midway), a regional air courier
located in Dallas, Texas.  The Company accounted for the acquisition under the
purchase method of accounting.  The purchase price of the acquisition totaled
approximately $3,100,000 in cash and resulted in goodwill of $1,201,080, which
will be amortized over 25 years, and covenants not to compete totaling $84,000,
which will be amortized over the terms of the agreements ranging from one to
five years. The acquired assets and assumed liabilities, including goodwill,
have been recorded at their estimated fair values as of the purchase date.  The
Company's consolidated financial statements include the results of operations of
Midway since the purchase date.  


                                      40

<PAGE>

                              AIRNET SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

4.   PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                        December 31,
                                               1997                       1996
                                           ------------                -----------
<S>                                        <C>                         <C>
Flight equipment                           $100,141,574                $82,014,487
Other property and equipment                 14,812,777                  6,817,332
                                           ------------                -----------
                                            114,954,351                 88,831,819
Less accumulated depreciation                47,375,818                 43,173,331
                                           ------------                -----------
                                            $67,578,533                $45,658,488
                                           ------------                -----------
                                           ------------                -----------

</TABLE>

5.   NOTES PAYABLE

The Company had borrowings as follows:  

<TABLE>
<CAPTION>
                                                         December 31,
                                                   1997                  1996
                                                ----------             --------
<S>                                             <C>                    <C>
Term notes                                      $  229,568             $110,787
Revolving credit facility                        9,500,000                   --
                                                ----------             --------
                                                 9,729,568              110,787
Current portion of notes payable                    23,923                   --
                                                ----------             --------
                                                $9,705,645             $110,787
                                                ----------             --------
                                                ----------             --------

</TABLE>

Simultaneously with the closing of the Offering, the Company entered into a 
new credit agreement to replace the existing agreement.  The new credit 
agreement provides the Company with a $50,000,000 unsecured revolving credit 
facility. The agreement has a five-year term and is scheduled to expire on 
June 5, 2001. The agreement may be extended in one-year increments at any 
point through June 5, 2001.  The agreement bears interest at the Company's 
option of a fixed rate determined by the Eurodollar rate, a negotiated rate 
or a floating rate.  The floating rate is based on the sum of (a) a margin 
plus (b) the greater of (i) the prime rate and (ii) the sum of .5% plus the 
federal funds rate in effect from time to time.  The new agreement limits the 
availability of funds to certain specified percentages of accounts 
receivable, inventory and the wholesale value of aircraft and equipment.  In 
addition, the agreement requires the maintenance of certain minimum net worth 
and cash flow levels, imposes certain limitations on payments of dividends, 
restricts the amount of additional debt and requires prior bank approval of 
acquisitions with consideration of more than $3,000,000.   

In conjunction with purchase of the Company's facility in October, 1997, the 
Company incurred a $263,297 note payable.  The terms of the note require 
monthly principal and interest payments of $4,167 through 2005 and the note 
is collateralized by the facility.

6.   1996 INCENTIVE STOCK PLAN

In May 1996, the Company adopted the AirNet Systems, Inc. 1996 Incentive 
Stock Plan (the "Plan").  The Plan provides for the issuance of incentive and 
non-qualified stock options, restricted stock and performance shares and a 
stock purchase plan (collectively "Awards").  The Plan also provides for each 
outside director to receive 2,000 stock options annually if certain 
requirements are met.  The maximum number of newly issued shares available 
for issuance under the Plan is 1,150,000 through 2006.  The Plan is 
administered by the Compensation Committee of the Board of Directors, which 
determines the terms and conditions applicable to 


                                      41

<PAGE>

                              AIRNET SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

the Awards.  The exercise price of each option equals the market price of the 
Company's stock on the date of grant and an option's maximum term is ten 
years.  Option vesting periods range from no vesting to three years of 
full-time service with the Company.

The Company has elected to follow Accounting Principles Board Opinion No. 25, 
"Accounting for Stock Issued to Employees" ("APB 25") and related 
Interpretations in accounting for its associate stock options because, as 
discussed below, the alternative fair value accounting provided for under 
FASB Statement No. 123, "Accounting for Stock Based Compensation", requires 
use of option valuation models that were not developed for use in valuing 
associate stock options.  Under APB 25, because the exercise price of the 
Company's associate stock options equals the market price of the underlying 
stock on the date of grant, no compensation expense is recognized.

Pro forma information regarding net income and earnings per share is required 
by Statement 123, and has been determined as if the Company had accounted for 
its associate stock options under the fair value method of that Statement.  
The fair value of these options was estimated at the date of grant using a 
Black-Scholes option pricing model with the following weighted average 
assumptions for 1997 and 1996:  risk free interest rates of 6.5%, volatility 
factors of the expected market price of the Company's common shares of 59.1% 
and a weighted average expected life of the options of 7.88 years.  The 
Black-Scholes option valuation model was developed for use in estimating the 
fair value of traded options which have no vesting restrictions and are fully 
transferable.  In addition, option valuation models require the input of 
highly subjective assumptions including the expected stock price volatility.  
Because the Company's associate stock options have characteristics 
significantly different from those of traded options, and because changes in 
the subjective input assumptions can materially affect the fair value 
estimate, in management's opinion, the existing models do not necessarily 
provide a reliable single measure of the fair value of its associate stock 
options.  

For purposes of pro forma disclosures, the estimated fair value of the 
options is amortized to expense over the options vesting period.  The 
Company's pro forma information follows:

<TABLE>
<CAPTION>


                                                    Years Ended               Three Months
                                            ------------    -------------        Ended
                                            December 31,    September 30,     December 31,
                                                1997             1996             1996
                                            ------------    -------------     -------------
<S>                                         <C>             <C>               <C>
Net income (loss), adjusted for FAS 123     $11,586,756      $(8,711,077)       $2,466,746
Net income (loss) per share, adjusted for
FAS 123:
     Basic                                        $ .92          $ (1.08)            $ .20
     Assuming dilution                            $ .91          $ (1.08)            $ .20

</TABLE>


                                      42

<PAGE>

                              AIRNET SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

A summary of the Company's stock option activity and related information 
follows (in thousands, except per share price data):

<TABLE>
<CAPTION>

                                                                                 Three Months
                                                     Years Ended                    Ended
                                        December 31, 1997  September 30, 1996  December 31, 1996
                                        -----------------  ------------------  -----------------
                                                Weighted            Weighted            Weighted 
                                                 Average             Average             Average
                                                Exercise            Exercise            Exercise
                                        Shares   Price     Shares    Price     Shares    Price
                                        ------  --------   ------   ---------  ------   --------
<S>                                     <C>     <C>        <C>      <C>        <C>      <C>
Outstanding at beginning of period       523     $14.18       --        --        --          --
Granted                                  282      14.40      530     $14.18      527      $14.18
Exercised                                145      14.17       --         --       --          --
Canceled                                   9      14.12        3      14.00        4       14.00
                                        ----     ------     ----     ------     ----      ------
Outstanding at end of period             651      14.28      527      14.18      523       14.18

Options exercisable at end of period     587      14.28      500      14.19      495       14.19

Weighted average fair value of options
       granted during the period          --     $ 9.96       --     $ 9.81       --      $ 0.00

</TABLE>

Exercise prices for options outstanding as of December 31, 1997 ranged from 
$14 to $17 per share. The weighted average remaining contractual life of 
those options is 7.88 years.

7.   LEASE OBLIGATIONS

The Company leased certain aircraft under noncancelable operating leases 
which expired in 1997.  Total rental expense under the flight equipment 
operating leases was $104,184, $772,900 and $1,042,653, for the years ended 
December 31, 1997, September 30, 1996 and 1995, respectively and $75,841 for 
the three months ended December 31, 1996.

The Company also leases facility space at various locations throughout the 
United States.  The Company incurred lease expense of $1,149,391, $859,709 
and $784,283 for the years ended December 31, 1997, September 30, 1996 and 
1995, respectively and $227,694 for the three months ended December 31, 1996. 
 As of December 31, 1997, future minimum lease payments by year and in the 
aggregate under noncancelable operating leases with initial or remaining 
terms exceeding one year are as follows: 1998 - $129,455; 1999 - $105,697; 
and  2000 - $23,493.

8.   RELATED PARTY TRANSACTIONS

In October 1997, the Company purchased its corporate and operational 
headquarters for $4.1 million from its President and majority shareholder, 
which represented fair market value as determined by an independent 
appraisal.   In addition to the building, the Company assumed the 
shareholder's land lease with The Port Authority of Columbus which expires on 
December 31, 2009 and contains a 20-year renewal option.  Total rent expense 
incurred under the facility lease prior to the Company's purchase from this 
shareholder was $864,336, $887,053 and $707,305 for the years ended December 
31, 1997 and September 30, 1996 and 1995, respectively,  and $253,584 for the 
three months ended December 31, 1996. The Company believes the terms of this 
lease and purchase were no less favorable than those reasonably available 
from unaffiliated third parties.

During fiscal 1996, the Company made improvements to its corporate and 
operational headquarters, which was leased from its majority shareholder.  
The Company paid approximately $775,000 for the improvements.  The balance 
was repaid, in full, by the majority shareholder in fiscal 1996.


                                      43

<PAGE>

                              AIRNET SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

The Company historically leased certain aircraft from Dwarf Leasing, Inc., a 
corporation owned by certain executive officers of the Company.  Total lease 
expenses were $20,800 and $99,000 for the years ended September 30, 1996 and 
1995.  In fiscal 1995 and 1996, the Company purchased these aircraft for 
$250,000 and $205,000, respectively.  The Company believes the terms of such 
leases and purchases were no less favorable than those reasonably available 
from unaffiliated third parties.

9.   RETIREMENT PLAN

The Company has a 401(k) retirement savings plan.  All associates who have 
completed a minimum of six months of service may contribute up to 15% of 
their eligible annual earnings to the plan.  The Company may elect, at its 
discretion, to make matching and profit-sharing contributions. The Company's 
contribution expense related to the plan totaled approximately $379,000, 
$393,000, and $355,000 for the years ended December 31, 1997, September 30, 
1996 and  1995, respectively and $79,000 for the three months ended December 
31, 1996.

10.  INCOME TAXES

Income taxes are summarized as follows:

<TABLE>
<CAPTION>

                                                                                   Three Months
                                          Years Ended                                  Ended
                       December 31,      September 30,       September 30,          December 31,  
                           1997               1996               1995                   1996
                       ------------      -------------       -------------         -------------
<S>                    <C>               <C>                 <C>                   <C>
Current:
   Federal             $3,058,448           $       --          $       --            $       --
   State and local        539,726                   --                  --                    --
                       ----------           ----------          ----------            ----------
                        3,598,174                   --                  --                    --

Deferred:
   Federal              4,393,502            1,524,000             (13,150)            1,441,694
   State and local        775,324              240,000                  --               246,306
                       ----------           ----------          ----------            ----------
                        5,168,826            1,764,000             (13,150)            1,688,000
                       ----------           ----------          ----------            ----------
                       $8,767,000           $1,764,000          $  (13,150)           $1,688,000
                       ----------           ----------          ----------            ----------
                       ----------           ----------          ----------            ----------  

</TABLE>


                                      44

<PAGE>
                              AIRNET SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

Significant components of the Company's deferred tax liabilities and assets 
are as follows:

<TABLE>
<CAPTION>
                                                             December 31, 
                                                         1997             1996
<S>                                                    <C>              <C>
  Long-term deferred tax assets:
    Tax benefit of net operating loss carry forwards   $       --       $4,115,057
                                                       ----------       ----------
                                                       ----------       ----------

  Long-term deferred tax liabilities:
    Property and equipment                             $4,280,231       $3,397,062
    Other                                                 150,307               --
                                                       ----------       ----------
  Total long-term deferred tax liabilities             $4,430,538       $3,397,062
                                                       ----------       ----------
                                                       ----------       ----------
  Current deferred tax assets:
    Health insurance reserves                          $   72,000       $   72,000
    Other                                                  49,147           44,005
                                                       ----------       ----------
  Total current assets                                    121,147          116,005

  Current deferred tax liabilities:
    Prepaid expenses                                      350,435          233,000
    Trade receivables                                          --           92,000
                                                       ----------       ----------
  Total current liabilities                               350,435          325,000
                                                       ----------       ----------
  Net current deferred tax liabilities                   $229,288         $208,995
                                                       ----------       ----------
                                                       ----------       ----------

</TABLE>

The provision for income taxes consist of federal and state deferred taxes.  
Differences arising between the provision for income taxes and the amount 
computed by applying the statutory federal income tax rate to income (loss) 
before income taxes are as follows:  
 
<TABLE>
<CAPTION>

                                                                                                                     Three Months
                                                                              Years Ended                                Ended
                                                          December 31,        September 30,        September 30,      December 31,
                                                              1997                1996                 1995               1996
                                                          ------------        -------------        -------------     -------------
<S>                                                       <C>                 <C>                  <C>               <C>
Tax expense (benefit) at federal statutory rate
on pretax income (loss)                                    $7,469,715           $(499,000)          $ 2,245,921        $1,418,930
Add (deduct):
     Nondeductible Offering-related expenses                       --            3,790,000                   --                --
     S Corporation status benefit                                  --           (1,925,000)          (2,251,977)               --
     State taxes, net of Federal benefit                    1,260,859              240,000                   --           246,306
     Other                                                     36,426              158,000               (7,094)           22,764
                                                           ----------           ----------          -----------        ----------
Total taxes                                                $8,767,000           $1,764,000          $   (13,150)       $1,688,000
                                                           ----------           ----------          -----------        ----------
                                                           ----------           ----------          -----------        ----------

</TABLE>

Upon the completion of the Offering, the Company ceased to qualify as an S 
Corporation and was subject to corporate income taxes.  The Company recorded 
current tax expense of $1,764,000 related to its operations from May 30, 1996 
to September 30, 1996, which includes the deductibility of the $2,558,362 
write-off of the Wright Agreement covenant not to compete.  In addition, the 
Company recorded an additional net tax liability of approximately $2,436,000 
resulting from the cumulative effect of deferred income taxes attributable to 
its change in tax status (from S Corporation to C Corporation).  


                                      45
<PAGE>

                              AIRNET SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

11.  NET INCOME PER SHARE

In 1997, the Financial Accounting Standards Board issued Statement No. 128, 
Earnings Per Share.  Statement No.128 replaced the previously reported 
primary and fully diluted net income per share with basic and diluted net 
income per share.  Unlike primary net income per share, basic net income per 
share excludes any dilutive effects of options, warrants and convertible 
securities.  Diluted net income per share is very similar to the previously 
reported fully diluted net income per share.  All net income per share 
amounts for all periods have been presented, and where necessary, restated to 
conform to the Statement No. 128 requirements.  The following table sets 
forth the computation of basic and diluted net income per share:  

<TABLE>
<CAPTION>

                                                                                                         Three Months
                                                                 Years Ended                                Ended
                                                December 31,     September 30      September 30,         December 31,
                                                   1997              1996              1995                  1996
                                                ------------     ------------      -------------        -------------
<S>                                             <C>              <C>               <C>                  <C>
Numerator:
   Net income                                   $13,202,750               --                  --           $2,485,323
   Pro forma net income (loss) - unaudited               --      $(2,718,382)         $8,383,792                   --

Denominator:
   Basic - weighted average shares
     outstanding                                 12,577,487        8,055,490           5,856,561           12,580,048

   Diluted 
     Stock options - associates, officers
       and directors                                128,821               --                  --                   --
     Convertible warrants                                --          435,742                  --                   --
     Adjusted weighted average shares
       outstanding                               12,706,308        8,491,232           5,856,561           12,580,048

Net income per share                                  $1.05               --                  --                 $.20

Net income per share - assuming dilution              $1.04               --                  --                 $.20

Pro forma net income (loss) per share -
   basic and assuming dilution - unaudited               --            $(.34)              $1.43                   --
 
</TABLE>

12.  CONTINGENCIES
     
The Company is subject to claims and lawsuits in the ordinary course of its 
business.  In the opinion of management, the outcome of these actions, which 
are not clearly determinable at the present time, are either adequately 
covered by insurance, or if not insured, will not, in the aggregate, have a 
material adverse impact upon the Company's financial position or the results 
of future operations.  


                                      46

<PAGE>
                              AIRNET SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

13.  THREE MONTHS ENDED DECEMBER 31, 1995 DATA (UNAUDITED)

Effective May 14, 1997, the Company elected to change its year end from 
September 30 to December 31.   Therefore, the three months ended December 31, 
1996 has been treated as a transition period.  The following is a summary of 
the financial results for the three months ended December 31, 1995:

<TABLE>
<CAPTION>

<S>                                                                 <C>
Net revenues                                                        $18,397,436
Operating income                                                      2,193,706
Net income                                                            1,819,107

Pro forma net income                                                  1,982,117

Pro  forma  net  income per share (basic and assuming dilution)            $.34
             
Weighted average shares outstanding                                   5,856,561

</TABLE>

14.  PRO FORMA INFORMATION (UNAUDITED)
     
PRO FORMA STATEMENTS OF OPERATIONS ADJUSTMENTS
The pro forma statements of operations information presents the pro forma 
effects on the historical financial information reflecting certain 
transactions as if they had occurred as of the beginning of the periods 
presented.  The following adjustments have been reflected in the pro forma 
statements of operations:
   
<TABLE>
<CAPTION>

                                                Years Ended September 30,
                                                  1996             1995
                                               ---------------------------
<S>                                            <C>            <C>
The elimination of interest expense
  related to the debt repaid                   $1,038,710     $ 1,452,066
The elimination of payments under
  the Wright Agreement                            750,527       2,074,004
The elimination of amortization
  expense related to the covenant 
  not to compete asset write-off                  169,148         253,722
The elimination of deferred compensation
  expense for certain officers                    135,041         307,695
A reduction of compensation expense
  for executive officers based
  on new employment agreements                    346,699         952,387
The elimination of employee stock purchase
  agreement expense for certain officers        1,989,345       2,327,463
                                               ----------      -----------
Total pro forma adjustments other
  than income taxes                            $4,429,470      $7,367,337
                                               ----------      -----------
                                               ----------      -----------

</TABLE>

PRO FORMA NET INCOME (LOSS) PER SHARE
Pro forma net income (loss) per share amounts are based on the weighted 
average number of shares of common stock outstanding during the periods, 
including effect of the 2,483,537 and 167,227 shares related to the Donald 
Wright and Jeffrey Wright Warrants, respectively.

Supplemental pro forma net income (loss) per share would have been ($0.25) 
and $.85 for the years ended September 30, 1996 and 1995, respectively, based 
on the weighted average number of shares of common stock outstanding during 
the periods, plus the number of shares used to repay debt.


                                      47
<PAGE>

15.       SUBSEQUENT EVENTS

Effective February 10, 1998, the Company entered into a letter of intent to 
acquire Q International Courier, Inc., an international overnight delivery 
company, for approximately 3,391,000 common shares.  The transaction is 
subject to satisfactory execution of a definitive agreement and certain 
consents, opinions and approvals, including approval of both companies' 
shareholders.  


                                      48

<PAGE>

              SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

                             AIRNET SYSTEMS, INC.
                              DECEMBER 31, 1997

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
            COL. A                            COL. B                      COL. C                  COL. D         COL. E
---------------------------------------------------------------------------------------------------------------------------
                                                                        Additions
                                                            ----------------------------------
                                            Balance at      Charged to Costs      Charged to                   Balance at
          Description                  Beginning of Period    and Expenses      Other Accounts   Deductions   End of Period
---------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                  <C>                 <C>              <C>          <C>
Year ended December 31, 1997:
  Deducted from asset accounts:
    Allowance for doubtful accounts             23,149              83,656          16,064            0 (1)         122,869

Year ended September 30, 1996:
  Deducted from asset accounts:
    Allowance for doubtful accounts              2,000              35,502               -       23,332 (1)          14,170

Year ended September 30, 1995:
  Deducted from asset accounts:
    Allowance for doubtful accounts             40,384              12,100               -       50,484 (1)          2,000

Three months ended December 31, 1996:
  Deducted from asset accounts:
    Allowance for doubtful accounts             14,170               8,979               -            -             23,149
</TABLE>

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

(1)  Uncollectible accounts written off, net of recoveries

                                      49

<PAGE>

                             INDEX TO EXHIBITS

<TABLE>
<CAPTION>

Exhibit No.                Description                                 Location
-----------                -----------                                 --------
<C>             <S>                                         <C>
  2.1         Plan and Agreement of Reorganization,       Incorporated herein by reference to
              dated September 30, 1996, between AirNet    Exhibit 2(a) to the Company's December 31,
              Systems, Inc. (the "Company") and           1996 Form 10-Q. (File No. 0-28428)
              Float Control, Inc.

  2.2         Plan and Agreement of Merger, dated         Incorporated herein by reference to
              September 30, 1996, among AirNet Systems,   Exhibit 2(b) to the Company's December 31,
              Inc., AirNet Merger Corporation and Float   1996 Form 10-Q. (File No. 0-28428)
              Control, Inc.

  2.3         Stock Purchase Agreement dated July 14,     Incorporated herein by reference to
              1997 among (i) AirNet Systems, Inc., (ii)   Exhibit 2 to the Company's June 30, 1997
              Carole E. Aasen, individually, and (iii)    Form 10-Q. (File No. 0-28428)
              Carole E. Aasen, as sole trustee under
              the Carole E. Aasen Revocable Living
              Trust of October 28, 1996, and Thomas M.
              McQuaid and Judith A. McQuaid, as joint
              tenants with right of survivorship.

  2.4         Leasehold Interest Purchase Agreement       Incorporated herein by reference to
              dated October 31, 1997 by and between       Exhibit 2(a) to the Company's September 30,
              Gerald G. Mercer and AirNet Systems, Inc.   1997 Form 10-Q. (File No. 0-28428)

  2.5         Assignment and Assumption of Leases dated   Incorporated herein by reference to
              October 31, 1997 by and between Gerald G.   Exhibit 2(b) to the Company's September 30,
              Mercer and AirNet Systems, Inc.             1997 Form 10-Q. (File N0. 0-28428)

  3.1         Amended Articles of AirNet Systems, Inc.    Incorporated herein by reference to
                                                          Exhibit 2.1 to the Company's registration
                                                          Statement on Form 8-A (File No. 0-28428)
                                                          filed on May 3, 1996 (the "Form 8-A")

  3.2         Certificate of Amendment to the Amended     Incorporated herein by reference to
              Articles of the Company as filed with the   Exhibit 4(b) to the Company's Registration
              Ohio Secretary of State on May 28, 1996     Statement on Form S-8 (Registration No.
                                                          333-08189) filed on July 16, 1996 (the
                                                          "Form S-8")

  3.3         Amended Articles of AirNet Systems, Inc.    Incorporated herein by reference to
              (as amended through May 28, 1996)           Exhibit 4.3 to the Company's Form S-8
              (for SEC reporting compliance purposes 
              only -- not filed with Ohio Secretary 
              of State)

  3.4         Code of Regulations of the Company          Incorporated herein by reference to
                                                          Exhibit 2.2 to the Company's Form 8-A

                                      50

<PAGE>

Exhibit No.                Description                                 Location
-----------                -----------                                 --------

  4.1         Form of Loan Agreement dated as of May,     Incorporated herein by reference to
              1996 among the Company, the banks listed    Exhibit 10.14 to the Company's Amendment
              therein and NBD Bank, as agent              No. 2 to Form S-1 Registration Statement
                                                          (Registration No. 333-3092) filed on May
                                                          24, 1996 ("Amendment No. 2")

  10.1        AirNet Systems, Inc. 1996 Incentive Stock   Incorporated herein by reference to
              Plan (reflects amends thru March 31,        Exhibit 10 to the Company's March 31, 1997
              1997)                                       Form 10-Q.

  10.2        Indemnification Agreement dated as of May   Incorporated herein by reference to
              15, 1996, among the Company and Messrs.     Exhibit 10.11 to the Company's Amendment
              Miller, Renusch, Roy, King, Rutter,         No. 2
              Sumser and Wright

  10.3        Indemnification Agreement dated as of May   Incorporated herein by reference to
              15, 1996 between Mr. Mercer and the         Exhibit 10.12 to the Company's Amendment
              Company                                     No. 2

  21.1        Subsidiaries of the Company                 Page 52

  23.1        Consent of Ernst & Young LLP                Pages 53 and 54

  24.1        Powers of Attorney                          Pages 55 through 66

  27.1        Financial Data Schedule                     Pages 62 and 65

</TABLE>

                                      51