SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                           ---------------------------

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 2000
                           Commission File No. 1-11775

                             AVIATION SALES COMPANY
                             ----------------------
             (Exact name of registrant as specified in its charter)

                DELAWARE                                 65-0665658
   (State or other jurisdiction of          (I.R.S. Employer Identification No.)
    incorporation or organization)

    3601 FLAMINGO ROAD, MIRAMAR, FL                        33027
(Address of principal executive offices)                 (Zip Code)

                                 (954) 538-8900
                         (Registrant's telephone number)

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

                                                   NAME OF EACH EXCHANGE
         TITLE OF EACH CLASS                        ON WHICH REGISTERED
         -------------------                        -------------------
Common Stock, par value $.001 per share           New York Stock Exchange

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

         Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter periods 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. [ ]

         As of April 11, 2001, 15,015,317 shares of common stock were
outstanding and the aggregate market value (based on the closing price on the
New York Stock Exchange on April 12, 2001 which was $3.12 per share) of the
common stock held by non-affiliates was approximately $24.9 million.

<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Registrant's definitive Proxy Statement for its 2001
Annual Meeting of Stockholders (which Proxy Statement will be filed on or before
120 days after the end of the Registrant's fiscal year ended December 31, 2000)
are incorporated by reference into Part III hereof. Certain exhibits listed in
Part IV of this Annual Report on Form 10-K are incorporated by reference from
prior filings made by the Registrant under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended.


                                TABLE OF CONTENTS

                                     PART I

                                                                            PAGE

Item 1.   Business.......................................................... 1

Item 2.   Properties........................................................ 9

Item 3.   Legal Proceedings................................................. 10

Item 4.   Submission of Matters to a Vote of Security Holders............... 11

                                     PART II

Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters............................................... 12

Item 6.   Selected Financial Data........................................... 13

Item 7.   Management's Discussion and Analysis of Financial Condition

          and Results of Operations......................................... 14

Item 7A.  Quantitative and Qualitative Disclosures about Market Risks....... 25

Item 8.   Financial Statements and Supplementary Data....................... 25

Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure.......................................... 25

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant................ 26

Item 11.  Executive Compensation............................................ 26

Item 12.  Security Ownership of Certain Beneficial Owners and Management.... 26

Item 13.  Certain Relationships and Related Transactions.................... 26

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K... 27

<PAGE>

                                     PART I

ITEM 1.  BUSINESS.

         UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO "AVIATION SALES,"
"WE," "OUR" AND "US" IN THIS ANNUAL REPORT ON FORM 10-K INCLUDES AVIATION SALES
COMPANY AND ITS SUBSIDIARIES. THIS ANNUAL REPORT ON FORM 10-K CONTAINS OR MAY
CONTAIN FORWARD-LOOKING STATEMENTS, SUCH AS STATEMENTS REGARDING OUR STRATEGY
AND ANTICIPATED TRENDS IN THE INDUSTRY IN WHICH WE OPERATE. THESE
FORWARD-LOOKING STATEMENTS ARE BASED ON OUR CURRENT EXPECTATIONS AND ARE SUBJECT
TO A NUMBER OF RISKS, UNCERTAINTIES AND ASSUMPTIONS RELATING TO OUR OPERATIONS
AND RESULTS OF OPERATIONS, COMPETITIVE FACTORS, SHIFTS IN MARKET DEMAND, AND
OTHER RISKS AND UNCERTAINTIES, INCLUDING, IN ADDITION TO THOSE DESCRIBED BELOW
AND ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K, OUR ABILITY TO CONTINUE TO
GENERATE SUFFICIENT WORKING CAPITAL TO MEET OUR OPERATING REQUIREMENTS, OUR
MAINTAINING GOOD WORKING RELATIONSHIPS WITH OUR VENDORS AND CUSTOMERS,
COMPETITIVE PRICING FOR OUR PRODUCTS AND SERVICES, OUR ABILITY TO ACHIEVE GROSS
PROFIT MARGINS AT WHICH WE CAN BE PROFITABLE, INCLUDING MARGINS ON SERVICES WE
PERFORM ON A FIXED PRICE BASIS, COMPETITION IN THE AIRCRAFT MAINTENANCE, REPAIR
AND OVERHAUL MARKET, OUR ABILITY TO ATTRACT AND RETAIN QUALIFIED PERSONNEL IN
OUR BUSINESSES, UTILIZATION RATES FOR OUR MR&O FACILITIES, OUR ABILITY TO
EFFECTIVELY INTEGRATE FUTURE ACQUISITIONS, OUR ABILITY TO EFFECTIVELY MANAGE OUR
BUSINESS, ECONOMIC FACTORS WHICH AFFECT THE AIRLINE INDUSTRY AND CHANGES IN
GOVERNMENT REGULATIONS. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES
MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL
RESULTS MAY DIFFER SIGNIFICANTLY FROM RESULTS EXPRESSED OR IMPLIED IN ANY
FORWARD-LOOKING STATEMENTS MADE BY US IN THIS ANNUAL REPORT ON FORM 10-K. WE DO
NOT UNDERTAKE ANY OBLIGATION TO REVISE THESE FORWARD-LOOKING STATEMENTS TO
REFLECT FUTURE EVENTS OR CIRCUMSTANCES.

GENERAL

         Aviation Sales is a leading provider of aviation maintenance, repair
and overhaul ("MR&O") services. We believe that we are the largest independent
provider of heavy maintenance services for aircraft in North America. We sell
and provide aircraft maintenance, repair and overhaul services to commercial
passenger airlines and air cargo carriers throughout the world.

         We offer maintenance and repair services through our nine repair
stations licensed by the Federal Aviation Authority (FAA). These services
include maintenance, repair and modification services for aircraft, and repair
and overhaul services on a wide range of aircraft components, flight control
surfaces, aircraft interiors and Pratt & Whitney JT8D engines. In addition, we
also provide modification services for the conversion of passenger aircraft to
freighter configuration as well as aircraft engineering services.

         Our strategy is to be the vendor of choice to our customers, providing
total aircraft maintenance solutions to meet our customers' maintenance, repair
and overhaul requirements. The services we offer allow our customers to reduce
their costs by outsourcing some or all of their maintenance, repair and overhaul
functions.

RECENT DEVELOPMENTS IN OUR CONTINUING OPERATIONS

         During 2000, competition in the market for airframe maintenance and
repair services increased as certain competitors expanded capacity. Additionally
during 2000, some airlines, in response to rising costs primarily related to
fuel prices, reduced or deferred their levels of maintenance, resulting in some
cases in less outsourcing of aircraft maintenance. In addition, during 2000
concern existed with some of our customers and potential customers regarding the
status of our credit facility and regarding our financial stability. While we
were able to retain all of our significant customers during this period, we
believe that these factors adversely affected the amount and timing of work that
we received from our customers. Additionally, because of our financial situation
and the competition in our industry, our facilities (and the facilities of most
other third-party maintenance service providers) had excess capacity during
2000. During 2000, in an attempt to fill our excess capacity and to meet
competitive pressures, we offered pricing discounts and performed services for a
greater volume of single aircraft customers, which had a significant negative
impact on our overall efficiency.

         In March 2001, in an effort to reduce our operating expenses, we
temporarily closed our Oscoda, Michigan heavy airframe maintenance facility and
reduced headcount at certain of our other MR&O facilities. We also consolidated
our Aircraft Interior Design operation into a single facility in Dallas, Texas
and entered into a three-year agreement with a customer to dedicate our Macon,
Georgia heavy airframe maintenance facility to servicing that customer's
airframe maintenance requirements. These initiatives, which reduced our total
headcount by approximately 400, are expected to reduce our operating expenses by
approximately $12.0 million on an annual basis.

         As of March 2001, our customer base is primarily comprised of a small
number of large commercial airlines and cargo carriers and other smaller
airlines, cargo carriers and leasing companies for whom we provide a lesser
volume of services. During 2000, our four largest continuing customers in the
aggregate represented approximately 31.7% of our total revenues and our largest
customer represented 14.0% of our total revenues. We consider our relationship
with each of these customers to be good and, although there can be no assurance,
we expect that these customers will continue to represent a significant portion
of our total revenues in the future. However, the loss of one or more of our
large customers would likely have a material adverse effect on our future
results of operations.

         We are currently meeting our working capital requirements from the
funds available under our senior revolving credit facility and from operations.
While we expect to have sufficient working capital from our existing sources for
the operation of our business through December 31, 2001, there can be no
assurance that this will occur. We are actively considering selling one or more
additional operations in order to obtain additional working capital to support
our core airframe maintenance operations and to continue to reduce our debt. No
agreements have been reached in that regard. We may also consider selling
additional securities for the same purposes, although no agreements have been
reached in that regard.

RECENT SALES OF BUSINESSES TO REDUCE SENIOR DEBT AND TO FOCUS OUR CONTINUING
OPERATIONS ON OUR MR&O BUSINESSES

         During 2000, we engaged in a restructuring of our business and
operations intended to focus our business on our maintenance, repair and
overhaul operations and to reduce our senior debt.

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<PAGE>

         In September 2000, our board of directors made the decision to dispose
of our Dixie Aerospace Bearings new parts distribution operation. On December
26, 2000, we completed the sale of our Dixie Aerospace new parts distribution
operation to Wencor West, Inc. for $17.7 million, including debt assumed by
Wencor West. We used the net cash proceeds of the sale, which approximated $13.5
million, to repay senior debt. In addition, we retained certain accounts
receivable and inventory of Dixie's new parts distribution operation which are
being liquidated pursuant to collection and consignment agreements executed with
the purchaser. We believe we will receive additional cash consideration as these
receivables are collected and inventory is sold.

         On December 1, 2000, we completed the sale of substantially all of the
assets and business of our redistribution operation in a series of transactions
which were intended to constitute a single transaction (the "Transaction"). The
Transaction was entered into with Kellstrom Industries, Inc. ("Kellstrom") and
KAV Inventory, LLC ("KAV"). KAV is a 50/50 limited liability company organized
by us and Kellstrom. The aggregate purchase price received by us in the
Transaction was $156.4 million, approximately $127.0 million of which was paid
in cash ($122.0 million after payment of transaction expenses). The net proceeds
of the Transaction were used by us to repay senior debt.

         The first component of the Transaction consisted of KAV's acquisition
of substantially all of the aircraft and engine spare parts inventory and the
engine inventory of our redistribution operation, as well as certain rotable
parts inventories from two of our MR&O operations. The purchase price paid for
this inventory was 89% of the closing date adjusted book value of such inventory
($148.6 million), subject to post-closing adjustment as set forth in the
agreement relating to the inventory sale. As part of the Transaction, KAV
consigned the inventory to Kellstrom.

         The cash portion of the purchase price paid for the inventory ($105.5
million) was obtained by KAV from a syndicate of financial institutions led by
Bank of America, N.A., with the balance paid in the form of three subordinated
promissory notes. The KAV institutional financing is secured by a lien on all of
the assets of KAV. The first two subordinated notes, each in the principal
amount of $13.7 million, are five-year senior subordinated notes bearing
interest at the rate of 14% per annum (see below for a description of
Kellstrom's purchase of one of these notes). The first two notes are
subordinated in all respects to the KAV institutional financing. The third
subordinated note is a five-year junior subordinated note in the principal
amount of $15.7 million bearing interest at the rate of 14% per annum. The
junior subordinated note is subordinated in all respects to both the KAV
institutional financing and to repayment of the two senior subordinated notes.
These amounts will be paid with funds available after repayment of the KAV
institutional financing and before repayment of the $13.7 million senior
subordinated notes.

         We have agreed with Kellstrom to equally share the operational expenses
of KAV beyond amounts permitted under the loan agreement relating to KAV's
institutional financing. Additionally, we posted an $8.5 million letter of
credit and Kellstrom posted a $6.5 million letter of credit with Bank of America
to secure (in part) KAV's institutional financing. The letters of credit will
only be drawn upon a default by KAV of its loan obligations and if drawn, such
amounts will be treated as loans to KAV and will be repaid prior to repayment of
the senior subordinated notes. Additionally, we and Kellstrom will each be
repaid the approximately $2.3 million which we each advanced to KAV for use in
paying bank fees and expenses relating to obtaining their institutional
financing. We and Kellstrom will be repaid these amounts prior to repayment of
the senior subordinated notes.

         The second component of the Transaction consisted of a sale to
Kellstrom of certain non-inventory assets of our redistribution operation and
the assumption by Kellstrom of a portion of the redistribution operation's
accounts payable. Kellstrom also acquired one of the $13.7 million senior
subordinated notes described above. The net purchase price for these assets
(including the $13.7 million senior subordinated note), after adjustment for
assumed debt, was $21.5 million, all of which was paid in cash. The purchase
price of the non-inventory assets purchased by Kellstrom is subject to
post-closing adjustment as set forth in the agreement relating to the asset
sale.

         Additionally, as part of the Transaction:

         (1)      Kellstrom leased certain furniture, fixtures and equipment
                  (the "FF&E") used in the redistribution operation and the
                  redistribution operation's warehouse facility in Pearland,
                  Texas for a one-year term;

                                       2
<PAGE>

         (2)      Kellstrom leased the redistribution operation's 545,000 square
                  foot headquarters and warehouse facility located in Miramar,
                  Florida. Pursuant to a sublease agreement, Kellstrom will pay
                  us the lesser of $384,000 or the actual lease payment due
                  under our lease for this facility for each year during the
                  initial five year lease term. We also granted Kellstrom the
                  right to renew the sublease for five consecutive five year
                  periods, at a fair market rental rate;

         (3)      Kellstrom has an option to acquire the FF&E and/or the
                  Pearland, Texas property during the term of the
                  above-described leases, and for a period of 60 days
                  thereafter, for a purchase price equal to the net book value
                  of such assets (approximately $9.4 million in the aggregate).
                  We have an option after one year to require Kellstrom to
                  purchase the FF&E and/or the Pearland, Texas property for the
                  same purchase prices; provided, however, that if we exercise
                  either or both of our options, Kellstrom may defer its
                  purchases of and continue to lease the FF&E and/or the
                  Pearland, Texas property for up to an additional six months
                  under certain circumstances;

         (4)      We entered into a cooperation agreement under which we agreed
                  to provide repair services for the KAV parts inventory as well
                  as repair services to Kellstrom with respect to Kellstrom's
                  parts inventory, and Kellstrom agreed to supply parts to our
                  MR&O operations, on an ongoing basis;

         (5)      We entered into a non-competition agreement with Kellstrom
                  whereby we are restricted for a period of up to five years
                  from engaging in the redistribution business; and

         (6)      We granted Kellstrom a limited license to use the name
                  "Aviation Sales" (if combined with the Kellstrom name) in
                  connection with Kellstrom's redistribution business.

         On September 7, 2000, we completed the sale to Barnes Group Inc. of
substantially all of the assets of our Kratz-Wilde Machine Company and Apex
Manufacturing manufacturing operations for $41.0 million, excluding transaction
expenses and possible post-closing adjustments as set forth in the agreement
relating to the sale. The net proceeds of the sale were used to repay senior
debt. In addition, as part of the sale, Barnes assumed the closing date ordinary
course liabilities of these businesses.

         In July 2000, we executed agreements to sell three of the A-300
aircraft which we owned for $12.0 million each. The sales closed on August 15,
2000 (with respect to the first aircraft), September 15, 2000 (with respect to
the second aircraft) and September 30, 2000 (with respect to the third
aircraft). The net proceeds of this sale were used by us to repay senior debt.

         These transactions, along with cash flow generated from other asset
sales in the ordinary course of our business, allowed us to reduce our senior
debt from $269.6 million as of December 31, 1999 to $51.5 million as of December
31, 2000.

                                       3
<PAGE>

INDUSTRY OVERVIEW

         We believe that the total worldwide market for maintenance and repair
services is approximately $27.0 billion annually and that $5.3 billion of that
amount represents maintenance, repair and modification services being provided
in North America. We believe airlines perform approximately 75% of the North
American services, outsourcing the balance to independent providers like
Aviation Sales.

         Due to the trends currently affecting our industry, we believe that in
the long-term the demand for maintenance and repair services from large
independent service providers such as Aviation Sales will continue to increase.
Some of the trends currently affecting our industry include:

Growth in the Market for Aircraft Maintenance and Repair Services

         The Boeing 2000 Current Market Outlook report projects that:

         o        the worldwide fleet of commercial aircrafts will more than
                  double by 2019;

         o        the number of cargo jet aircraft will in the long-term
                  increase significantly between 2000 and 2019; and

         o        the aircraft fleet will continue to age.

         We believe that a combination of these factors will in the long term
increase the demand for maintenance and repair services.

Increased Outsourcing of Maintenance and Repair Requirements

         Airlines incur substantial expenditures in connection with fuel, labor
and aircraft ownership. Airlines have come under increasing pressure during the
last decade to reduce the costs associated with providing air transportation
services. While several of the expenditures required to operate an airline are
beyond the direct control of airline operators, such as the price of fuel and
labor costs, we believe that outsourcing maintenance and repair functions are
areas in which airlines can reduce their operating costs. Outsourcing of
maintenance and repair functions by airlines allows an integrated service
provider such as Aviation Sales to achieve economies of scale unavailable to
individual airlines and to handle these functions less expensively and more
efficiently on its customers' behalf.

                                       4
<PAGE>

Diversified Services and Competitive Strengths

         We believe that the breadth of our services, including a wide range of
aircraft maintenance and repair services, allows us to be a vendor of choice to
our customers in a highly fragmented industry. In addition to our heavy airframe
maintenance and modification services, by providing engineering services, repair
and overhaul services on flight surfaces, aircraft components and interiors, we
believe that we maintain a competitive advantage in the MR&O market through our
ability to ensure that each of the individual parts that need repair or overhaul
are completed on a timely basis and to our quality standards. Aviation Sales'
customers include commercial passenger airlines, air cargo carriers, aircraft
leasing companies and maintenance and repair facilities.

Emphasis on Quality

         All of our MR&O facilities are licensed by the FAA. We emphasize
quality and on-time delivery to our customers. We are focused on meeting and
exceeding FAA requirements. As industry, regulatory and public awareness have
focused on safety, our ability to meet and exceed these requirements on a
consistent basis has become important to customers.

Airline Consolidation

         During 2000, the trend toward consolidation in the airline industry
continued, as many of the major commercial airlines and cargo carriers moved
toward execution of mergers, acquisitions and enhancement of affiliations with
other carriers. We believe that these events could have a positive impact on the
maintenance and repair market as additional maintenance services related to
integration of fleet types may be outsourced to third parties such as Aviation
Sales. We also believe that fleet integration will likely create opportunities
for aircraft modification and engineering services.

OPERATIONS

         Our core business is the providing of maintenance, repair and overhaul
services for aircraft and aircraft components.

         Since our customers consist of airlines, aircraft leasing companies,
and maintenance and repair facilities that service airlines and redistributors
of aircraft parts, economic factors affecting the airline industry tend to
impact our business. When economic factors adversely affect the airline
industry, they tend to reduce the overall demand for aircraft maintenance and
repair services, causing downward pressure on pricing and increasing the credit
risks associated with doing business within the industry. Additionally, the
price of fuel affects the aircraft maintenance and repair markets, since older
aircraft, which consume more fuel and which account for most of our aircraft
maintenance and repair business, become less viable as the price of fuel
increases. We cannot assure you that economic and other factors which have
affected the airline market in the past and may affect the airline industry in
the future will not adversely impact our business, financial condition or
results of operations.

         During 2000, the market for maintenance and repair services was
impacted by rising fuel cost, increased capacity of competitors, changes in
fleet mix by some airlines, interest rates and other factors. These factors
caused certain airlines and other carriers to reduce the volume of services to
be outsourced to third party providers such as Aviation Sales. This has resulted
in excess capacity among many of the maintenance and repair service providers,
which has caused pricing pressures to maintain market share. The Company has
been able to substantially maintain its relative market share by continuing to
focus on quality service, turn time and by expanding its array of services
including increased opportunities in aircraft modification and engineering
services and by, where necessary, offering price concessions and fixed prices
for certain services.

                                       5
<PAGE>

         Aircraft Heavy Maintenance

         We perform maintenance, repair and modification services on aircraft at
TIMCO's five repair stations in Greensboro, North Carolina, Lake City, Florida,
Winston Salem, North Carolina, Macon, Georgia, and Oscoda, Michigan (the Oscoda,
Michigan airframe facility was temporarily closed in March 2001). The services
we offer principally consist of "C" and "D" level maintenance checks and the
modification of passenger aircrafts to freighter configurations. "C" and "D"
checks each involve a different degree of inspection, and the services performed
at each level vary depending upon the individual aircraft operator's
FAA-approved maintenance program. "C" and "D" level checks are comprehensive
checks and usually take a minimum of several weeks to complete, depending upon
the scope of the work to be performed.

         The "C" level check is an intermediate level service inspection that
typically includes testing and servicing of the aircraft's operational systems,
external and internal cleaning and refurbishing, and servicing of the interior.
Trained mechanics visually inspect the external and internal structure of the
aircraft, repair defects and remove corrosion found, all in a manner as required
by the manufacturer's maintenance and structural repair manuals. The "D" level
check includes all of the work accomplished in the "C" level check, but places a
more detailed emphasis on the integrity of the structure. In the "D" level
check, the aircraft is disassembled to the point where the entire structure can
be inspected and evaluated. Once the inspection, evaluation and repairs have
been completed, the aircraft is reassembled and its systems reinstalled to the
detailed tolerances demanded in each system's specifications. Depending upon the
type of aircraft and the FAA-certified maintenance program being followed,
intervals between "C" level checks can range from 12 to 18 months and 1,000 to
5,000 flight hours and intervals between "D" level checks can range from four to
eight years and 10,000 to 25,000 flight hours. Structural inspections performed
during "C" level and "D" level checks provide personnel with detailed
information about the condition of the aircraft and the need to perform
additional work or repairs not provided for in the original work scope. Project
coordinators and customer support personnel work closely with the aircraft's
customer service representative in evaluating the scope of any additional work
required and in the preparation of a detailed cost estimate for the labor and
materials required to complete the job.

         Each aircraft certified by the FAA is constructed under a "Type
Certificate." Anything which is done subsequently to modify the aircraft from
its original type design requires the review and approval of the FAA. These
modifications are authorized by the issuance of a Supplemental Type Certificate
(STC) or an engineering order issued by the airline's engineering department.
Typical modification services include reconfiguring of passenger interiors,
installing passenger amenities such as telephones and installing crew rest
areas.

         We also convert passenger aircraft to freighter configuration. When we
convert a passenger plane to freighter configuration we:

         o        completely strip the interior;

         o        strengthen the load-bearing capacity of the flooring;

         o        install the bulkhead or cargo net;

         o        cut into the fuselage for the installation of a cargo door;

         o        reinforce the surrounding door structures;

         o        replace windows with metal plugs;

         o        fabricate and install the cargo doors; and

         o        install fire detection and suppression systems.

                                       6
<PAGE>

         We also need to line the aircraft interior to protect the fuselage
structure from pallet damage and modify the air conditioning system. Conversion
contracts also typically require "C" or "D" level maintenance checks as these
conversion aircraft have usually been out of service for some time and
maintenance is required for the aircraft to comply with current FAA standards.
Additional modification services performed may include cockpit reconfiguration
to upgrade the avionic systems to current technology and the integration of
traffic control and avoidance systems, windshear detection systems and
navigational aids.

         Component Repair and Overhaul Services

         We provide repair and overhaul services at our three FAA-licensed
repair stations. Aerocell specializes in the maintenance, repair and overhaul of
airframe components, including flight surfaces, doors, fairing panels, nacelle
systems and exhaust systems. Caribe Aviation specializes in the maintenance,
repair and overhaul of hydraulic, pneumatic, electrical and electromagnetic
aircraft components, as well as avionics and instruments on Airbus and Boeing
aircraft. Aircraft Interior Design refurbishes aircraft interior components,
including passenger and crew seats. Timco Engine Center refurbishes JT8D
engines.

         Engineering Services

         Our engineering services group provides integrated aircraft
engineering, including aircraft certification, design and approval of
modifications to aircraft systems and structures, for customers of our heavy
aircraft maintenance operations, and for airlines, leasing companies and
aerospace original equipment manufacturers.

         Joint Venture to Convert 727 Aircraft

         We own a 50% interest in a joint venture which has an STC for
conversion of Boeing 727 aircraft which is fully compliant with FAA regulations
and requirements for aftermarket aircraft cargo conversions. We manufacture the
kits required to complete conversions of the aircraft based upon the STC, and we
operate one of the aircraft maintenance facilities which has been licensed by
the joint venture to install the kits on passenger aircraft being converted to
cargo configuration.

MANAGEMENT INFORMATION SYSTEMS

         During 1999, we implemented new management information systems in
several of our maintenance, repair and overhaul operations. These systems
provide access to and improved timeliness of information which can be used in
the management of these operations. Currently, we operate our business using two
decentralized, network based systems. Each system is fully integrated in regards
to the respective business unit. One system is utilized in the operation of our
heavy airframe maintenance and modification business. The other system is used
at each of our component MR&O businesses. Due to the investments which were made
in 1999 in developing and maintaining these systems, we do not currently
anticipate that any significant systems related capital expenditures will be
required during 2001.

COMPETITION

         The airline industry and the markets for our products and services are
extremely competitive, and we face competition from a number of sources. Our
competitors include airline and aircraft service companies, and other companies
providing maintenance, repair and overhaul services. Some of our competitors
have substantially greater financial and other resources than us. We cannot
assure you that competitive pressures will not materially adversely affect our
business, financial condition or results of operations. In the maintenance and
repair market, our major competitors are B.F. Goodrich, Dee Howard Company and
ST Mobile Aerospace Engineering, Inc.

                                       7
<PAGE>

GOVERNMENT REGULATION

         The aviation industry is highly regulated by the FAA in the United
States and by similar agencies in other countries. We must be certified by the
FAA, and in some cases authorized by the original equipment manufacturers, in
order to repair aircraft components and to perform maintenance and repair
services on aircraft.

         The FAA regulates the manufacture, repair and operation of all aircraft
and aircraft equipment operated in the United States. Its regulations are
designed to ensure that all aircraft and aircraft equipment are continuously
maintained in proper condition to ensure safe operation of the aircraft. Similar
rules apply in other countries. All aircraft must be maintained under a
continuous condition monitoring program and must periodically undergo thorough
inspection and maintenance. The inspection, maintenance and repair procedures
for the various types of aircraft and aircraft equipment are prescribed by
regulatory authorities and can be performed only by certified repair facilities
utilizing certified technicians. Certification and conformance is required prior
to installation of a part on an aircraft. We closely monitor the FAA and
industry trade groups in an attempt to understand how possible future
regulations might impact us.

         We cannot assure you that new and more stringent government regulations
will not be adopted in the future or that any such new regulations, if enacted,
will not materially adversely affect our business, financial condition or
results of operations.

         Further, our operations are also subject to a variety of worker and
community safety laws. In the United States, the Occupational Safety and Health
Act mandates general requirements for safe workplaces for all employees.
Specific safety standards have been promulgated for workplaces engaged in the
treatment, disposal or storage of hazardous waste. We believe that our
operations are in material compliance with health and safety requirements under
the Occupational Safety and Health Act.

PRODUCT LIABILITY

         Our business exposes us to possible claims for personal injury or death
which may result from the failure of an aircraft or aircraft part repaired or
maintained by us or from our negligence in the repair or maintenance of an
aircraft or an aircraft part. While we maintain what we believe to be adequate
liability insurance to protect us from claims of this type, based on our review
of the insurance coverages maintained by similar companies in our industry, we
cannot assure you that claims will not arise in the future or that our insurance
coverage will be adequate. Additionally, there can be no assurance that
insurance coverages can be maintained in the future at an acceptable cost. Any
liability of this type not covered by insurance could materially adversely
affect our business financial condition or results of operations.

EMPLOYEES

         As of December 31, 2000, we employed approximately 3,800 persons. None
of our employees are covered by collective bargaining agreements. We believe
that our relations with our employees are good.

                                       8
<PAGE>

ITEM 2.  PROPERTIES

         Our executive offices are located in Miramar, Florida. Our interest in
both our owned and leased facilities are pledged to our senior lenders as
collateral for amounts borrowed. See Note 11 to Consolidated Financial
Statements. The following table identifies, as of December 31, 2000, our
principal properties:

<TABLE>
<CAPTION>
------------------------------------- -------------------------------- ------------------------- --------------------
FACILITY DESCRIPTION                  LOCATION                         SQUARE FOOTAGE            OWNED OR
                                                                                                 LEASED
------------------------------------- -------------------------------- ------------------------- --------------------
<S>                                   <C>                               <C>                       <C>
Office and Warehouse                  Miramar, FL                       545,000                   Leased (1)
------------------------------------- -------------------------------- ------------------------- --------------------
Office and Maintenance                Miramar, FL                        85,000                   Leased  (2)
------------------------------------- -------------------------------- ------------------------- --------------------
Office and Aircraft Maintenance       Greensboro, NC                    910,000                   Leased
------------------------------------- -------------------------------- ------------------------- --------------------
Office and Aircraft Maintenance       Lake City, FL                     650,000                   Leased
------------------------------------- -------------------------------- ------------------------- --------------------
Office and Aircraft Maintenance       Oscoda, MI                        396,000                   Leased (4)
------------------------------------- -------------------------------- ------------------------- --------------------
Office and Maintenance                Hot Springs, AK                   260,000                   Owned
------------------------------------- -------------------------------- ------------------------- --------------------
Office and Aircraft Maintenance       Winston-Salem, NC                 250,000                   Leased
------------------------------------- -------------------------------- ------------------------- --------------------
Office and Aircraft Maintenance       Macon, GA                         140,000                   Leased
------------------------------------- -------------------------------- ------------------------- --------------------
Office and Maintenance                Dallas, TX                         80,000                   Owned
------------------------------------- -------------------------------- ------------------------- --------------------
Office and Maintenance                Miami, FL                          55,000                   Leased (5)(6)
------------------------------------- -------------------------------- ------------------------- --------------------
Office and Maintenance                Minneapolis, MN                    34,000                   Leased (5)
------------------------------------- -------------------------------- ------------------------- --------------------
Office and Maintenance                Miami, FL                          30,000                   Leased (5)(6)
------------------------------------- -------------------------------- ------------------------- --------------------
Warehouse                             Pearland, TX                      100,000                   Owned (1)
------------------------------------- -------------------------------- ------------------------- --------------------
Warehouse                             Covington, KY                      38,200                   Owned (3)
------------------------------------- -------------------------------- ------------------------- --------------------
<FN>
(1)      Currently subleased to Kellstrom Industries, Inc.
(2)      Our corporate headquarters is currently located at this facility.
(3)      Leased to Barnes Group Inc. through April 30, 2001.
(4)      Airframe maintenance facility has been closed on a temporary basis; engine repair facility is currently
         operating.
(5)      These facilities have either been closed or are in the process of being closed.
(6)      These facilities are leased from a related party. See Note 8 to Consolidated Financial Statements.
</FN>
</TABLE>

                                       9
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

PENDING LAWSUITS AND INVESTIGATIONS

         Several lawsuits have been filed against us and certain of our current
and former officers and directors, and our auditors, in the United States
District Court for the Southern District of Florida. These suits have now been
consolidated into a single lawsuit. The amended consolidated complaint, which
was filed in September 2000, alleges violations of Sections 11 and 15 of the
Securities Act of 1933 in connection with our June 1999 public offering, and
alleges violations of Sections 10(b) and 20(a) of, and Rule 10b-5 under, the
Securities Exchange Act of 1934. Among other matters, the amended complaint
alleges that our reported financial results were materially misleading and
violated generally accepted accounting principles. The amended complaint seeks
damages and certification of two classes, one consisting of purchasers of our
common stock in the June 1999 public offering and one consisting of purchasers
of our common stock during the period between March 26, 1998 and January 28,
2000.

         We have filed a motion to dismiss the claims in the consolidated
lawsuit. We believe that the allegations contained in the complaint are without
merit and we intend to vigorously defend this and any related actions.
Nevertheless, unfavorable resolution of this lawsuit could have a material
adverse effect on us.

         The U.S. Securities and Exchange Commission is conducting an inquiry
into our accounting for certain transactions. We are cooperating with the SEC in
its inquiry.

         On January 8, 1999, Paine Webber Incorporated filed in the Supreme
Court of the State of New York a complaint against us and our subsidiary,
Whitehall Corporation, alleging breach of contract claims and related claims
against us and Whitehall and a tortious interference with a contract claim
against us. In December 2000, we settled this lawsuit for a non-material
amount.

         On June 24, 1998, Zantop International Airlines, Inc. filed an action
against Aero Corp.-Macon, Inc. (which is now part of TIMCO) in the Superior
Court of Bibb County, Georgia. The suit sought an unspecified amount of damages
and certain equitable relief arising out of the July 1997 sale to Aero
Corp.-Macon, Inc. (then a subsidiary of Whitehall) of certain assets used in
connection with the operation of Aero Corp.-Macon, Inc. The nature of the action
involved a contractual dispute relative to certain purchase price adjustments
and inventory purchases. During 2000, we settled this matter for a non-material
amount.

         We are also involved in various lawsuits and other contingencies
arising out of operations in the normal course of business. In the opinion of
management, the ultimate resolution of these claims and lawsuits will not have a
material adverse effect upon our business financial position or results of
operations.

ENVIRONMENTAL MATTERS

         We are taking remedial action pursuant to Environmental Protection
Agency and Florida Department of Environmental Protection ("FDEP") regulations
at TIMCO-Lake City. Ongoing testing is being performed and new information is
being gathered to continually assess the impact upon us and the magnitude of
required remediation efforts. Based upon the most recent cost estimates provided
by environmental consultants, we believe that the total remaining testing,
remediation and compliance costs for this facility will be approximately $1.4
million. Testing and evaluation for all known sites on TIMCO-Lake City's
property is substantially complete and we have commenced a remediation program
at several sites. We are currently monitoring the remediation, which will extend
into the future. Based on current testing, technology, environmental law and
clean-up experience to date, we believe that we have established an accrual for
our best estimate of the probable liabilities associated with our current
remediation strategies. To comply with the financial assurances required by the
FDEP, we have issued a $1.4 million standby letter of credit in favor of the
FDEP.

         Additionally, there are other areas adjacent to TIMCO-Lake City's
facility that could also require remediation. We do not believe that we are
responsible for these areas; however, it may be asserted that TIMCO and other
parties are jointly and severally liable and are responsible for the remediation
of these properties. No estimate of any such costs is available at this time.

                                       10
<PAGE>

         We own a parcel of real estate on which Whitehall previously operated
an electronics business. We are currently assessing environmental issues with
respect to this property. When we acquired Whitehall, our environmental
consultants estimated that remediation costs relating to this property could be
up to $1.0 million.

         Accrued expenses in our financial statements at December 31, 2000
include $1.7 million relating to obligations to remediate all of the
environmental matters described above.

         Future information and developments will require us to continually
reassess the expected impact of the environmental matters discussed above.
Actual costs to be incurred in future periods may vary from the estimates, given
the inherent uncertainties in evaluating environmental exposures. These
uncertainties include the extent of required remediation based on future testing
and evaluation and the varying costs and effectiveness of remediation methods.

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

         We did not hold a meeting of stockholders in 2000. We intend to hold a
joint 2000-2001 annual meeting of stockholders in 2001.

                                       11
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The following information relates to our common stock, par value $.001
per share (the "Common Stock"), which currently is listed on the New York Stock
Exchange under the symbol "AVS." At March 30, 2001, there were approximately 500
stockholders of record of our Common Stock. The foregoing number does not
include beneficial holders of our common stock. The high and low last sales
prices of our Common Stock for each quarter during our two most recent fiscal
years and the current fiscal year through a recent date, as reported by the New
York Stock Exchange, are set forth below:

                                                  HIGH              LOW
                                                  ----              ---
         1999
         ----
         First Quarter                           $47.31            $37.00
         Second Quarter                           46.13             35.94
         Third Quarter                            43.94             18.25
         Fourth Quarter                           18.56             13.69

         2000
         ----
         First Quarter                           $ 6.94            $ 6.31
         Second Quarter                            6.19              5.69
         Third Quarter                             5.25              5.12
         Fourth Quarter                            2.56              2.31

         2001
         ----
         First Quarter                           $ 4.75            $ 2.63
         Second Quarter (to 4/12/01)               4.07              3.12

         We did not declare any cash dividends during the year ended December
31, 2000. See Note 7 to Consolidated Financial Statements for information
concerning restrictions contained in our credit agreements regarding the payment
of dividends and Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES.

         On November 2, 1999 we adopted a Stockholders' Rights Plan and declared
a dividend distribution of one preferred share purchase right on each
outstanding share of our Common Stock. Each preferred share purchase right will
entitle stockholders to buy one one-thousandth of a share of our newly created
Series A Junior Participating Preferred Stock at an initial exercise price of
$90.00. In general, the preferred share purchase rights become exercisable if a
person or group hereafter acquires 15% or more of our Common Stock or announces
a tender offer for 15% or more of our Common Stock. Our Board of Directors will
in general be entitled to redeem the preferred share purchase rights at one cent
per preferred share purchase right at any time before any such person hereafter
acquires 15% or more of our outstanding Common Stock.

         In March 2000, we entered into a standstill agreement with LJH
Corporation, a stockholder in our company currently owning approximately 27% of
our outstanding common stock, which is wholly owned by Lacy Harber, and with Mr.
Harber, that limits for a period of five years the number of shares of our
common stock that Mr. Harber and LJH (together) are authorized to acquire. We
amended our agreement with LJH and Mr. Harber in November 2000. The agreement,
as amended, permits Mr. Harber and LJH (together) to acquire beneficial
ownership of up to 30% of our outstanding shares. The agreement, as amended,
also permits Mr. Harber and LJH (together) to nominate one candidate for
election to our Board of Directors for so long as Mr. Harber and LJH (together)
own at least 8% of our outstanding shares. Mr. Harber and LJH have also agreed
not to engage in certain activities without approval of a majority of the
disinterested members of our Board of Directors. We have amended the
Stockholders' Rights Plan so that it is consistent with our agreement, as
amended, with Mr. Harber and LJH.

                                       12
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA.

         The following table represents our selected consolidated financial
information. The selected financial data set forth below should be read in
conjunction with the Consolidated Financial Statements and notes thereto and
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS which contains a description of the factors that materially affect
the comparability from period to period of the information presented herein.
Operating results from continuing operations reflect the results of operations
from our MR & O and leasing operations, including the preacquisition operations
for all periods presented of Whitehall Corporation and the pre-acquisition
operations of Aerocell Structures for 1997.

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                              -------------------------------------------------------
                                                1996       1997       1998        1999         2000
                                              --------   --------   --------   ---------    ---------
                                                      (in thousands, except per share data)
<S>                                           <C>        <C>        <C>        <C>          <C>
STATEMENT OF INCOME DATA:
Operating revenues                            $ 76,047   $ 98,327   $184,448   $ 371,753    $ 338,077
Cost of sales                                   60,215     79,572    141,569     307,944      353,331
                                              --------   --------   --------   ---------    ---------
  Gross profit (loss)                           15,832     18,755     42,879      63,809      (15,254)
Operating expenses                               6,052     20,179     17,721      41,774       74,580
                                              --------   --------   --------   ---------    ---------
  Income (loss) from operations                  9,780     (1,424)    25,158      22,035      (89,834)

Interest expense and other                        (400)     5,623     13,699      17,322       21,272
                                              --------   --------   --------   ---------    ---------
  Income (loss) before income taxes, equity
    income of affiliate and discontinued
    operations                                  10,180     (7,047)    11,459       4,713     (111,106)
Income tax expense                               3,817     (4,179)     4,281       3,004        4,810
                                              --------   --------   --------   ---------    ---------
  Income (loss) before equity income of
    affiliate and discontinued operations        6,363     (2,868)     7,178       1,709     (115,916)
Equity income of affiliate                         255        139      1,356       1,289           43
                                              --------   --------   --------   ---------    ---------
  Income (loss) from continuing operations       6,618     (3,007)     8,534       2,998     (115,873)

Discontinued operations, net of income
    taxes                                        6,166      7,850     16,959     (24,721)     (95,757)
                                              --------   --------   --------   ---------    ---------
  Net income (loss)                           $ 12,784   $  4,843   $ 25,493   $ (21,723)   $(211,630)
                                              ========   ========   ========   =========    =========
Basic Earnings (Loss) Per Share:
  Income (loss) from continuing operations    $   0.62   $  (0.25)  $   0.70   $    0.22    $   (7.72)
  Income (loss) from discontinued operations      0.58       0.64       1.38       (1.78)       (6.37)
                                              --------   --------   --------   ---------    ---------
  Net income (loss)                           $   1.20   $   0.39   $   2.08   $   (1.56)   $  (14.09)
                                              ========   ========   ========   =========    =========
Diluted Earnings (Loss) Per Share:
  Income (loss) from continuing operations    $   0.61   $  (0.25)  $   0.68   $    0.21    $   (7.72)
  Income (loss) from discontinued operations      0.57       0.64       1.34       (1.77)       (6.37)
                                              --------   --------   --------   ---------    ---------
  Net income (loss)                           $   1.18   $   0.39   $   2.02   $   (1.56)   $  (14.09)
                                              ========   ========   ========   =========    =========
<CAPTION>
                                                                   AS OF DECEMBER 31,
                                              -------------------------------------------------------
BALANCE SHEET DATA                              1996       1997       1998        1999         2000
                                              --------   --------   --------   ---------    ---------
<S>                                           <C>        <C>        <C>        <C>          <C>
Accounts receivable                           $ 18,461   $ 20,672   $ 50,027   $  91,926    $  67,558
Inventories                                      6,440      9,101     61,462      90,145       53,115
Working capital                                 18,822    (78,531)   (82,465)    (72,846)      24,673
Total assets                                   118,502    303,110    560,331     710,875      300,611
Total debt                                      34,651    165,802    366,176     442,964      220,861
Stockholders' equity                           115,896    121,280    154,298     218,522        6,892
</TABLE>

                                       13
<PAGE>

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

RECENT DEVELOPMENTS

         At the present time, we are actively considering selling one or more of
our operations in order to obtain additional working capital to support our core
airframe maintenance operations and to continue to reduce our debt. We may also
sell securities for the same purpose. No agreements have been reached in regard
to any sales of assets or securities.

         We believe that we will meet our working capital requirements during
2001 from funds available under our revolving credit agreement, from our
operations and from sales of one or more of our operations, individual assets or
our securities. However, there can be no assurance of this fact. Because of our
current financial situation, our auditors have included a going concern
qualification in their audit report regarding our 2000 financial statements.

         In December 2000, we completed the sale of our Dixie Aerospace Bearings
new parts distribution operation. In the transaction, we received net aggregate
consideration of $17.7 million inclusive of debt assumed by the purchaser. The
net cash proceeds from the sale, which approximated $13.5 million, were used to
reduce our outstanding senior debt. Also, as part of the transaction, we
retained certain accounts receivable and inventories. Such retained assets are
being sold and collected pursuant to consignment and collection agreements
executed with the purchaser. We anticipate that the liquidation of these assets
will provide additional consideration as these receivables are collected and
inventory is sold. During the year ended December 31, 2000, we recorded a charge
of $5.8 million to reduce the carrying value of our investment in our new parts
distribution operations to its estimated net realizable value.

         In December 2000, we completed the sale of substantially all of the
assets and business of our redistribution operation in a series of transactions
with Kellstrom Industries, Inc. intended to constitute a single transaction (the
"Transaction"). The aggregate purchase price received in the Transaction was
$156.4 million, approximately $127.0 million of which was paid in cash ($122.0
million after payment of transaction expenses). The net proceeds of the
Transaction were used to repay senior debt. As part of the Transaction, we
acquired a 50% interest in a limited liability company, KAV Inventory, LLC
("KAV") organized by the purchaser and us. Substantially all of the aircraft and
engine spare parts inventory and the engine inventory of our redistribution
operation, as well as certain rotable parts inventories from two of our MR&O
operations, were sold to KAV for 89% of the closing date book value of such
inventory ($148.6 million, subject to post-closing adjustments). Compensation
for the sale of inventory was comprised of cash of approximately $105.5 million
and two subordinated notes, each in the principal amount of $13.7 million (see
below for a description of the purchase of one of these notes) and one
subordinated note in the principal amount of $15.7 million. The notes bear
interest at 14% per annum and are subordinated in all respects to the KAV
institutional financing. In addition, we posted an $8.5 million letter of credit
to secure, in part, KAV's institutional financing. Further, we and the purchaser
each paid $2.3 million of KAV's fees and expenses relating to its institutional
financing. We will receive reimbursement of these amounts after KAV has repaid
its institutional financing.

         KAV's sole business is the liquidation of the inventory it acquired
from us. KAV entered into an agreement to consign all of its inventories to
purchaser. The Transaction agreement specifies that all of the proceeds from
sales of the inventory, less a consignment commission to the purchaser of 20%,
will be used to pay interest and principal on KAV's institutional debt. After
the institutional debt is paid in full, proceeds from the sale of inventory will
be used to reimburse certain advances we and the purchaser made to KAV to allow
it to pay fees and costs relating to its institutional financing and thereafter
to pay interest and principal on the two $13.7 million notes. Interest and
principal on the $15.7 million note will be paid from the remaining proceeds
from the sale of inventory, less a 35% consignment commission to the purchaser.
Management believes the total amount of the notes of $29.4 million will be fully
realized. Interest income on the notes will be deferred and recognized as
collected following collection of all outstanding principal amounts. The
projections of cash distributions to us are highly dependent upon the timing of
the sales and the sale prices obtained by the purchaser for KAV's inventory.

         The second component of the Transaction consisted of a sale of certain
non-inventory assets of the redistribution operation including one of the $13.7
million subordinated notes described above, net of certain payables assumed by
the purchaser, for approximately $21.5 million. Under the terms of the
Transaction, the purchaser has the right after one year from the date of the
Transaction to require us to repurchase receivables sold in accordance with the
Transaction to the extent they remain uncollected. As of February 28, 2001, $9.7
million of receivables sold pursuant to the Transaction had not been collected
by the purchaser. In addition, the purchase price for the sale of inventory and
non-inventory assets is subject to post-closing adjustments as set forth in the
agreements. The purchaser has indicated that post-closing adjustments would
result in a reduction in the aggregate consideration received pursuant to the
Transaction of approximately $4.5 million. We have notified the purchaser of our
intention to dispute their calculation of post-closing adjustments and the
proposed reduction in consideration. While there can be no assurance, we do not
believe that the resolution of this dispute will have a material impact on our
financial position or future results of operations. During the year ended
December 31, 2000, we recorded a charge of $56.7 million, including $20.4
million in the quarter ended December 31, 2000, to reduce the carrying value of
our investment in the redistribution operation to its estimated net realizable
value.

         In addition, as part of the sale of the redistribution operation, the
purchaser leased a facility and certain furniture, fixtures and equipment used
in the redistribution operations for a one-year period. The purchaser has an
option to acquire these assets during the term of the lease and

                                       14
<PAGE>

after one year we have an option to require the purchaser to acquire the assets,
which can be extended by the purchaser for six months under certain
circumstances. We also entered into a sublease agreement relating to the
redistribution operation's warehouse and corporate headquarters facility for a
five-year period with the right to renew for five consecutive five-year periods
at a market rental rate. We also entered into a non-competition agreement
whereby we are restricted from engaging in the redistribution business for a
period of up to five years. In addition, we entered into a cooperation agreement
under which we agreed to provide repair services for the KAV parts inventory and
the purchaser's parts inventory and the purchaser agreed to supply parts to our
MR&O operations.

         In September 2000, we completed the sale of substantially all of the
assets of our manufacturing operations for $41.0 million, excluding transaction
expenses and possible post-closing adjustments. The proceeds of the sale were
used to repay senior debt. During the year ended December 31, 2000, we recorded
a charge of $9.8 million to reduce the carrying value of our investment in the
manufacturing operations to its estimated net realizable value.

         In July 2000, we executed agreements to sell three of the A-300
aircraft which we owned for $12.0 million each. The sales closed on August 15,
2000 (with respect to the first aircraft), September 15, 2000 (with respect to
the second aircraft) and September 30, 2000 (with respect to the third
aircraft). During the year ended December 31, 2000, we recorded a charge to cost
of sales of $6.6 million in connection with the sale of these aircraft.

         Effective May 31, 2000, our Credit Facility was amended and we made
further modifications effective June 25, 2000, September 30, 2000, November 28,
2000, February 14, 2001 and April 17, 2001. In conjunction with the amendments
and modifications of the Credit Facility during 2000, we paid total bank fees of
$10.6 million. As of April 17, 2001, we effectively have a $75.0 million
revolving loan and letter of credit facility which expires in July 2002. The
Credit Facility bears interest, at our option, at the prime rate plus 3.0% or
LIBOR plus 4.5%. At March 31, 2001, $36.1 million was outstanding under the
credit facility, $30.1 million of letters of credit were outstanding under the
credit facility and $2.2 million was available for borrowings based on
applicable borrowing base formulas. We also had outstanding $25.5 million of
senior term loan debt due in 2002.

         In April 2000, one of our MR&O customers that represents a significant
portion of the operations at one of our MR&O facilities filed bankruptcy.
Although the customer has continued to make payments for post-petition services,
we have recorded a charge of $9.5 million during the year ended December 31,
2000 to provide a reserve for the estimated recovery of accounts receivable
balances. This charge is reflected in operating expenses in the accompanying
consolidated statement of income for the year ended December 31, 2000.

         As a result, in part, of the anticipated reduced volume of services to
be provided to the customer which filed for bankruptcy as referred to above and
in an effort to reduce operating expenses, in March 2001 we temporarily closed
our Oscoda, Michigan heavy airframe maintenance facility and reduced headcount
at certain of our other MR&O facilities. We also consolidated our Aircraft
Interior Design operation into a single facility in Dallas, Texas. These
initiatives, which reduced our total headcount by approximately 400, are
expected to reduce our operating expenses by approximately $12.0 million on an
annual basis. As a result of the temporary closing of the Oscoda, Michigan
facility, we recorded a charge of $7.8 million in operating expenses relating to
the write-off of goodwill and contract costs associated with the acquisition of
this facility.

RESULTS OF OPERATIONS

         Operating revenues consist primarily of service revenues and sales of
materials consumed while providing services, net of allowances for returns. Cost
of sales and services consists primarily of labor, materials, freight charges
and commissions to outside sales representatives.

         Our operating results have fluctuated in the past and may fluctuate
significantly in the future. Many factors affect our operating results,
including:

         o        decisions made regarding sales of our assets to reduce our
                  debt,

         o        timing of repair orders and payments from large customers,

         o        competition from other third party MR&O service providers,

                                       15
<PAGE>

         o        the number of airline customers seeking repair services at any
                  time,

         o        the impact of fixed pricing on gross margins and our ability
                  to accurately project our costs in a dynamic environment,

         o        our ability to fully utilize our hangar space dedicated to
                  maintenance and repair services,

         o        the volume and timing for 727 cargo conversions and the impact
                  during future periods on airline use of both the 727 fleet
                  type and JT8D engines (both of which are older models) as a
                  result of increased fuel costs and interest rates,

         o        our ability to attract and retain a sufficient number of
                  mechanics to perform the maintenance, overhaul and repair
                  services requested by our customers, and

         o        the timeliness of customer aircraft arriving for scheduled
                  maintenance.

         Large portions of our operating expenses are relatively fixed. Since we
typically do not obtain long-term commitments from our customers, we must
anticipate the future volume of orders based upon the historic patterns of our
customers and upon discussions with our customers as to their future
requirements. Cancellations, reductions or delays in orders by a customer or
group of customers could have a material adverse effect on our business,
financial condition and results of operations.

         In connection with our preparation of our 1999 financial statements, we
identified several transactions in our redistribution operation (which was sold
in December 2000 and is part of our discontinued operations), that, after
review, should not have been recorded as revenues in our books and records.
Based upon these findings, in early February 2000, our Board of Directors
organized a special committee to review certain matters relating to our sales
and accounting practices. This process resulted in actions being taken to ensure
that these matters do not reoccur in the future.

         In connection with the completion of our 1999 financial statements, we
concluded that seven 1999 transactions and one 1998 transaction arising in our
redistribution operation should have been accounted for as exchange transactions
rather than as sales. We also concluded that an additional seven 1999
transactions arising in our redistribution operation should not have been
recorded as sales due to certain contingencies associated with the transactions
which had not been resolved at the date of the sales. The 1999 transactions
aggregated $32.7 million in revenue and $7.3 million in gross profit (4.8% and
6.5% of 1999 revenues and gross profit). The 1998 transaction aggregated $12.8
million in sales and $3.1 million of gross profit (2.6% and 2.5% of 1998 revenue
and gross profit). Our 1999 results of operations as reported included the
impact of these transactions. We have determined that the 1998 transaction was
not material to our previously reported 1998 results.

                                       16
<PAGE>

Year Ended December 31, 1999 Compared to Year Ended December 31, 2000
---------------------------------------------------------------------

The following tables set forth certain information relating to our operations
for the periods indicated:

<TABLE>
<CAPTION>
                                                                  1999                           2000
                                                        -------------------------      -----------------------
                                                            $               %              $              %
                                                        ---------      ----------      ---------        ------
                                                                          (Dollars in Thousands)
<S>                                                     <C>                <C>         <C>              <C>
Operating revenues:
  Sales, net                                            $ 359,956           96.8%      $ 333,289         98.6%
  Other                                                    11,797            3.2%          4,788          1.4%
                                                        ---------      ----------      ---------        ------
    Total operating revenues                              371,753          100.0%        338,077        100.0%
Cost of sales and services                                307,944           82.8%        353,331        104.5%
                                                        ---------      ----------      ---------        ------
  Gross profit (loss)                                      63,809           17.2%        (15,254)        (4.5%)
Operating expenses                                         41,774           11.2%         74,580         22.1%
                                                        ---------      ----------      ---------        ------
  Income (loss) from operations                            22,035            6.0%        (89,834)       (26.6%)
Interest expense and other                                 17,322            4.7%         21,272          6.3%
                                                        ---------      ----------      ---------        ------
 Income (loss) before income taxes, equity
    income of affiliates and discontinued operations        4,713            1.3%       (111,106)       (32.9%)
Income tax expense                                          3,004            0.8%          4,810          1.4%
                                                        ---------      ----------      ---------        ------
  Income (loss) before equity income of
    affiliates and discontinued operations                  1,709            0.5%       (115,916)       (34.3%)
Equity income of affiliates                                 1,289            0.3%             43           --
                                                        ---------      ----------      ---------        ------
  Income (loss) from continuing operations                  2,998            0.8%       (115,873)       (34.3%)
Discontinued operations, net of income
    taxes                                                 (24,721)          (6.6%)       (95,757)       (28.3%)
                                                        ---------      ----------      ---------        ------
  Net loss                                              $ (21,723)          (5.8%)     $(211,630)       (62.6%)
                                                        =========      ==========      =========        ======
</TABLE>

         Operating results from continuing operations reflect the results of
operations of our MR&O and leasing operations. Operating revenues for the year
ended December 31, 2000, decreased $33.7 million, or 9.1%, to $338.1 million,
from $371.8 million for the same period in 1999. As discussed herein, operating
revenues in 2000 were negatively impacted by a reduced volume of orders received
from existing customers due to concerns over the status of our credit facility
and our financial stability, and a reduction in market opportunities caused by
several airline customers delaying or deferring maintenance in an effort to
reduce costs. Revenues were also affected by increased competition that spread
outsourced aircraft maintenance among a larger group of providers, which caused
us to give various price concessions and fixed pricing in order to retain
customers. In addition, revenues from our leasing operation decreased $13.0
million from period to period, due to a significant reduction in leased assets
and sales of leased assets in 1999, which did not recur in 2000.

         Gross profit decreased $79.1 million, or 123.9%, to a loss of $15.3
million for the year ended December 31, 2000, compared with a profit of $63.8
million for the year ended December 31, 1999. As discussed below, gross profit
for the year ended December 31, 1999 included charges related to the carrying
value of our inventory and aircraft that we owned totaling $12.7 million. Gross
profit for the year ended December 31, 2000 was negatively impacted by a charge
recorded in the second quarter of 2000 of $6.6 million relating to the
disposition of the three A-300 aircraft which were sold during August and
September 2000. Additionally, due to our continuing efforts to reduce our debt
through sales of our assets, we recorded a charge of $4.9 million in the year
ended December 31, 2000 to reduce the carrying value of certain equipment on
lease and inventory (including the A-300 aircraft we continue to own) to an
amount estimated to be recoverable through the sale of such assets. We further
recorded a charge of $3.0 million relating to inventory which was scrapped in
connection with the move of one of our MR&O operations, Aircraft Interior
Design, from Florida to Texas. We also experienced a decrease in gross profit
from our leasing operations, due to a reduction in our investment in leased
assets and sales of leased assets in 1999, which did not recur in 2000.

                                       17
<PAGE>

         Gross profit as a percentage of operating revenues decreased to (4.5)%
for the year ended December 31, 2000, from 17.2% for the year ended December 31,
1999. In addition to the items discussed above, gross profit for the year ended
December 31, 2000 was also negatively impacted by inefficiencies and reductions
in gross profits realized as a result of delays in the timing of orders being
placed into service, a reduced volume of orders received from existing and
potential customers due to concerns which existed over the status of our credit
facility and our financial stability, and a reduction in market opportunities
caused by several airline customers' decision to defer aircraft or aircraft
component maintenance in an effort to reduce costs due to higher fuel prices and
interest rates. Also, due to our primarily fixed cost structure, excess capacity
in our airframe maintenance facilities resulted in reduced realization and gross
profit. Lastly, gross profit was negatively impacted by the effects of price
concessions and fixed pricing in the dynamic competitive environment that we
experienced in 2000. Our operating results for the year ended December 31, 2000
were significantly adversely affected by these factors. While there can be no
assurances, we believe these concerns have been reduced as a result of the
execution of an amended credit facility, the closing of our Oscoda, Michigan
heavy airframe maintenance facility, our recent headcount reductions and the
previously announced transactions involving sales of our assets to reduce our
debt, all as described above.

         Operating expenses increased $32.8 million or 78.5% to $74.6 million
for the year ended December 31, 2000, compared with $41.8 million for the year
ended December 31, 1999. Operating expenses as a percentage of operating
revenues were 22.1% for the year ended December 31, 2000, compared to 11.2% for
the year ended December 31, 1999. As discussed below, operating expenses for the
year ended December 31, 1999 included non-recurring charges of $5.3 million.
Operating expenses in 2000 were affected by increased costs associated with the
operation of new facilities opened during 1999. They were also affected by a
$2.0 million increase in professional fees during 2000 compared to 1999,
relating primarily to the completion of our 1999 audit and the refinancing and
amendments to our credit facility, and a charge of $22.3 million relating to bad
debt reserves recorded against certain major customers, including accounts
receivable relating to a customer which filed for bankruptcy protection in 2000
and maintenance performed on an aircraft for a customer that recently ceased
operation. In addition, during 2000 we recorded a non-cash charge of $7.8
million relating to the write-off of goodwill and contract costs associated with
the temporary closure of one of our MR&O facilities, as described above.
Operating expenses were also negatively impacted by costs associated with the
move to new facilities during the third quarter of 2000 of two of our MR&O
operations, Caribe Aviation and Aircraft Interior Design.

         Interest expense and other from continuing operations for the year
ended December 31, 2000 increased by $4.0 million or 22.8% to $21.3 million,
from $17.3 million for the year ended December 31, 1999. The increase was due,
in part, to our recording a loss of $0.9 million in connection with the
disposition of the AvAero joint venture. Additionally, we paid bank fees of
$10.6 million during the year ended December 31, 2000. Total amortization of
bank fees, including bank fees attributable to discontinued operations, for the
year ended December 31, 2000 was $13.7 million. Interest expense relating to
continuing operations for the year ended December 31, 2000 was $20.3 million,
compared to $18.6 million for the year ended December 31, 1999. Cash interest
due in 2001 includes an aggregate of $13.4 million in interest due on our
outstanding senior subordinated notes, and annualized current interest on
amounts due under our senior credit facilities of approximately $5.5 million.

         In addition, we were not in compliance with the financial covenants
under our credit facility as of December 31, 1999 and March 31, 2000. As a
result, during the first quarter of 2000, we entered into a standstill agreement
with our lenders under which they agreed to forbear in regards to these covenant
violations and other matters. Under the terms of the standstill agreements, our
interest rate was increased by 2%. We were also required to pay substantial
financing fees ($1.5 million) that were expensed over the term of the original
standstill agreement, which expired on March 31, 2000 and an additional $1.5
million that related to a further extension of the standstill agreement through
May 31, 2000 which were expensed during the second quarter of 2000. In
connection with the May 31, 2000 amendment of the credit facility, we paid
additional bank fees of $3.8 million, which are being amortized over the term of
the facility which expires in July 2002, and we committed to pay an additional
$2.0 million in fees in 2001 if the credit agreement has not been refinanced by
that date. In connection with the amendment to the credit facility which became
effective June 25, 2000, we paid fees of $2.2 million, which are being amortized
between July 1, 2000 and June 30, 2002.

                                       18
<PAGE>

         As a result of the above factors, income (loss) before income taxes,
equity income of affiliate and discontinued operations for the year ended
December 31, 2000 was a loss of $111.1 million, compared to income of $4.7
million for the year ended December 31, 1999.

         Income tax expense increased $1.8 million to $4.8 million for the year
ended December 31, 2000, from $3.0 million for the year ended December 31, 1999.
Income tax expense for the year ended December 31, 2000 is primarily comprised
of state income tax accruals and a provision for a full valuation allowance on
our deferred tax assets. These charges are primarily non-cash charges.

         Equity income of affiliate, net of income taxes, decreased $1.2 million
for the year ended December 31, 2000 to $0.1 million, from $1.3 million for the
same period in 1999. The decrease was attributable to the winding down in the
operations of the AvAero joint venture. During the second quarter of 2000, our
remaining investment in the joint venture was liquidated resulting in a $0.9
million charge, which is included in interest expense and other.

         For the reasons set forth above, income (loss) from continuing
operations for the year ended December 31, 2000 was a loss of $115.9 million
($7.72 per diluted share), compared to income of $3.0 million ($0.21 per diluted
share) for the year ended December 31, 1999. Weighted average common and common
equivalent shares outstanding (diluted) were 15.0 million during the year ended
December 31, 2000, compared to 14.2 million for the year ended December 31,
1999.

         Discontinued operations include the results of operations of our
redistribution operation, new parts distribution operation and manufacturing
operations, all of which were sold during 2000.

         Income (loss) from discontinued operations for the year ended December
31, 2000 was a loss of $23.4 million, or $1.55 per diluted share, compared to a
loss of $24.7 million, or $1.77 per diluted share, for the year ended December
31, 1999. Revenues and gross margin in our redistribution operations decreased
during 2000 as a result of our decision to limit purchases of spare aircraft
parts commencing at the end of the first quarter of 2000 and our initiative to
reduce inventory in our redistribution operations (and use the proceeds from
such inventory reductions to repay senior debt). Operating revenues were also
negatively impacted during 2000 by customer concerns regarding the status of our
credit agreement and financial stability. Operating expenses relating to our
redistribution operations also increased as a result of our strategy during 1999
and the beginning of 2000 to continue to grow these operations. During the
latter portion of the first quarter of 2000, we restructured our redistribution
operations and reduced headcount in that business. Additionally, our
redistribution operation experienced an increase in interest expense primarily
attributable to the increased debt required to support its operations.

         Results from discontinued operations also include losses on the
disposal of the discontinued operations of $72.3 million (or $4.82 per diluted
share) for the year ended December 31, 2000. See "Recent Developments" above.

                                       19
<PAGE>

Year Ended December 31, 1998 Compared to Year Ended December 31, 1999
----------------------------------------------------------------------

The following tables set forth certain information relating to our operations
for the periods indicated:

<TABLE>
<CAPTION>
                                                        1998                       1999
                                                ---------------------     -----------------------
                                                   $            %             $             %
                                                --------    ---------     ---------     ---------
                                                             (Dollars in Thousands)
<S>                                             <C>             <C>       <C>               <C>
Operating revenues:
  Sales, net                                    $177,279         96.1%    $ 359,956          96.8%
  Other                                            7,169          3.9%       11,797           3.2%
                                                --------    ---------     ---------     ---------
    Total operating revenues                     184,448        100.0%      371,753         100.0%
Cost of sales and services                       141,569         76.8%      307,944          82.8%
                                                --------    ---------     ---------     ---------
  Gross profit                                    42,879         23.2%       63,809          17.2%
Operating expenses                                17,721          9.6%       41,774          11.2%
                                                --------    ---------     ---------     ---------
  Income from operations                          25,158         13.6%       22,035           6.0%
Interest expense and other                        13,699          7.5%       17,322           4.7%
                                                --------    ---------     ---------     ---------
  Income before income taxes, equity
    income of affiliates and discontinued
    operations                                    11,459          6.1%        4,713           1.3%
Income tax expense                                 4,281          2.2%        3,004           0.8%
                                                --------    ---------     ---------     ---------
  Income before equity income of
    affiliates and discontinued operations         7,178          3.9%        1,709           0.5%
Equity income of affiliates                        1,356          0.7%        1,289           0.3%
                                                --------    ---------     ---------     ---------
  Income from continuing operations                8,534          4.6%        2,998           0.8%
Discontinued operations, net of income taxes      16,959          9.2%      (24,721)         (6.6%)
                                                --------    ---------     ---------     ---------
  Net income (loss)                             $ 25,493         13.8%    $ (21,723)         (5.8%)
                                                ========    =========     =========     =========
</TABLE>

         Revenues for the year ended December 31, 1999 increased $187.4 million
or 101.5% to $371.8 million, from $184.4 million for the year ended December 31,
1998. This increase is due primarily to the acquisition of TIMCO in September
1998 which has been accounted for under the purchase method of accounting and
therefore is only included in the results of operations from the date of
acquisition.

         Gross profit increased $20.9 million or 48.8%, from $42.9 million for
the year ended December 31, 1998 to $63.8 million for the year ended December
31, 1999 primarily due to the TIMCO acquisition. Gross profit margin for the
year ended December 31, 1999 was 17.2%, a decrease of 6.0% from a gross profit
margin of 23.2% for the year ended December 31, 1998. During the fourth quarter
of 1999, we recorded a non-recurring reduction in the carrying value of our
inventory at December 31, 1999 including a reduction in the carrying value of
the four A-300 aircraft which we owned, totaling $12.7 million. Excluding these
charges, the gross profit margin for 1999 was 21.5%, compared to 23.2% for 1998.
The gross profit margin for our MR&O operations decreased slightly in 1999 due
to an increase in labor expenses coupled with increased competition and pressure
to maintain level pricing for services. In addition, MR&O gross profit margin
decreased slightly due to the increased relative significance of TIMCO, which
realizes lower gross profit margins than our other MR&O operations, to our total
MR&O operations.

         Operating expenses increased $24.1 million to $41.8 million for the
year ended December 31, 1999, compared with $17.7 million for the year ended
December 31, 1998. Operating expenses as a percentage of operating revenues were
11.2% for the 1999 fiscal year, compared to 9.6% for 1998. During the fourth
quarter of 1999, we recorded a non-recurring primarily non-cash charge of $5.3
million related to an addition to the allowance for doubtful accounts receivable
and the write-off of miscellaneous deposits and other assets which have been
determined to not be collectible. The remaining increase was primarily
attributable to

                                       20
<PAGE>

professional fees aggregating approximately $2.0 million relating to several
large transactions that were not completed and start up costs associated with
the opening of five new facilities during the fiscal year.

         As a result of all of these factors, income from operations was $22.0
million for 1999, compared to $25.2 million for 1998.

         Interest expense and other from continuing operations for the year
ended December 31, 1999 increased $3.6 million compared to interest expense for
1998. The increase in interest expense was due to increased interest rates on
variable rate debt, coupled with increased net borrowings during 1999 to finance
the growth in our MR&O operations, including the acquisition of the assets of
Kitty Hawk, Inc.'s maintenance operations and additional substantial investments
in facilities, equipment and computer systems to support our operations. During
1999, we opened four new MR&O facilities in addition to the MR&O facilities that
we acquired from Kitty Hawk, Inc. We also installed new computer systems in our
MR&O operations. Interest expense and other includes a profit of $1.4 million
realized in 1999 relating to the sale of real estate.

         Discontinued operations incurred a loss of $24.7 million for the year
ended December 31, 1999 compared to a profit of $17.0 million for the year ended
December 31, 1998. The variance is primarily attributable to adjustments
recorded as of December 31, 1999 to the carrying value of certain assets and
other charges totaling approximately $44.4 million. These charges were comprised
primarily of an adjustment to the carrying value of redistribution inventory and
a write-down of capitalized costs previously expended relating to the
development of a new software system which has not been implemented and will not
be completed.

         The net loss for the year ended December 31, 1999 was $21.7 million
($1.56 per diluted share), compared to net income of $25.5 million ($2.02 per
diluted share) for the year ended December 31, 1998. Weighted average common and
common equivalent shares outstanding (diluted) were 14.2 million for the year
ended December 31, 1999, compared to 12.6 million for the year ended December
31, 1998. This increase is primarily the result of the public offering of
additional common shares that we completed in June 1999 and which resulted in
the issuance of 2.3 million additional shares of our common stock.

LIQUIDITY AND CAPITAL RESOURCES

         Liquidity

         As noted above, during the third quarter of 2000 we executed agreements
and closed on the sale of our manufacturing operations and three of the A-300
aircraft which we owned. The net proceeds from these sales of $74.5 million were
used to reduce our senior debt. During the fourth quarter of 2000, we closed on
the sale of the redistribution and new parts distribution operations. The net
proceeds from these sales of $135.5 million were used to reduce our senior debt.

         As of December 31, 2000, we had outstanding indebtedness of
approximately $220.9 million (excluding letters of credit), of which $51.5
million was senior debt and $169.4 million was other indebtedness. As of
December 31, 1999, we had $443.0 million of outstanding indebtedness. Our
ability to make payments of principal and interest will depend upon our future
operating performance, which will be subject to economic, financial, competitive
and other factors beyond our control. The level of our indebtedness is also
important due to:

         o        our vulnerability to adverse general economic and industry
                  conditions,

         o        our ability to obtain additional financing for future working
                  capital expenditures, general corporate and other purposes,
                  and

         o        the dedication of a substantial portion of our future cash
                  flow from operations to the payment of principal and interest
                  on indebtedness, thereby reducing the funds available for
                  operations and future business opportunities.

         In prior years, we relied primarily upon significant borrowings under
our credit facility, and sales of our securities, including our senior
subordinated notes, to satisfy our funding requirements relating to our

                                       21
<PAGE>

acquisitions of several businesses and to finance the growth of our business.
During 2000 and 2001 to date, we have relied upon borrowings under our credit
facility and the proceeds of term loans obtained, along with the proceeds from
our asset sales, to meet our working capital requirements. We cannot assure you
that financing alternatives will be available to us in the future to support our
existing operations' working capital requirements. We are actively considering
selling one or more additional operations or additional securities to meet
working capital requirements and to continue to reduce our debt.

         Cash

         Cash and cash equivalents decreased from $21.4 million as of December
31, 1999 to zero as of December 31, 2000. Net cash used in operating activities
during the year ended December 31, 2000 and 1999 was $2.7 million and $99.0
million, respectively. The reduction in cash used in operating activities was
primarily the result of a reduction in inventory which, as discussed above,
relates to our initiative to reduce inventory including the sales of the A-300
aircraft. Inventory decreased $35.5 million during the year ended December 31,
2000, compared to an increase in inventory of $38.0 million during the year
ended December 31, 1999. Also contributing to the reduction in cash used in
operating activities were reductions in accounts receivables and other current
assets due to our efforts to manage our working capital. Cash provided by (used
in) investing activities during the year ended December 31, 2000 and 1999 was
$163.3 million and $(49.3) million, respectively. Cash provided by investing
activities for the year ended December 31, 2000 resulted primarily from the sale
of the discontinued operations discussed above and was partially offset by cash
used in investing activities primarily related to capital expenditures
associated with tooling investments, equipment purchases and leasehold
improvements relating to the moves into new facilities of Caribe Aviation and
Aircraft Interior Design. Cash provided by (used in) financing activities for
the year ended December 31, 2000 $(232.7) million and $174.8 million,
respectively. Cash used in financing activities for the year ended December 31,
2000 is primarily comprised of repayments of outstanding notes payable and
outstanding indebtedness and deferred financing fees under our credit facility,
net of the proceeds of a $15.5 million term loan executed in February 2000.

         Senior Credit Facilities

         Prior to May 31, 2000, we had a revolving loan and letter of credit
facility (the "Credit Facility") of $300.0 million with a group of financial
institutions. Effective May 31, 2000, the Credit Facility was amended and the
commitment was reduced to $285.0 million. Following the liquidation of the
AvAero joint venture, and the sales of the A-300 aircraft, manufacturing
operations and redistribution operations described above, the commitment was
reduced to $88.0 million. We currently have effectively a $75.0 million
revolving credit commitment. The Credit Facility expires in July 2002. The
Credit Facility was amended on June 25, 2000, September 30, 2000, November 28,
2000, February 14, 2001 and April 17, 2001.

         Interest under the Credit Facility is, at our option, (a) prime plus
3.0%, or (b) LIBOR plus 4.5%. During the year ended December 31, 2000 and 1999,
the weighted average interest rate on the Credit Facility was 10.94% and 7.21%,
respectively. As of December 31, 2000, and December 31, 1999, the outstanding
balance on the Credit Facility was $36.0 million, and $269.6 million,
respectively. Borrowings under the Credit Facility are secured by a lien on
substantially all of the Company's assets and the borrowing base primarily
consists of certain of our receivables and inventory.

         The Credit Facility contains certain financial covenants regarding our
financial performance and certain other covenants, including limitations on the
amount of annual capital expenditures and the incurrence of additional debt, and
provides for the suspension of the Credit Facility and repayment of all debt in
the event of a material adverse change in the business or a change in control.
In addition, the Credit Facility requires mandatory repayments from the proceeds
of a sale of assets or an issuance of equity or debt securities or as a result
of insufficient collateral to meet the borrowing base requirements thereunder.
To the extent the Credit Facility remains outstanding as of certain dates, we
are committed to pay incremental financing fees as follows: June 30, 2001 - $1.0
million, August 14, 2001 - 2% of outstanding commitment less $1.0 million,
November 14, 2001 - 2% of outstanding commitment and February 14, 2002 - 2% of
outstanding commitment.

         We were not in compliance at December 31, 1999 or March 31, 2000 with
certain of the financial covenants contained in the Credit Facility. Our lenders
agreed to forbear in regards to these covenant violations and other matters
until May 31, 2000 at which point in time the Credit Facility was amended. We

                                       22
<PAGE>

were required to pay substantial fees in relation to the standstill agreement
associated with the period of forbearance and the May 31, 2000 amended Credit
Facility.

         In February 2000, we obtained a $15.5 million senior term loan with the
financial institution that is agent for the Credit Facility. The proceeds from
the term loan were used to repay debt outstanding under the Credit Facility. The
term loan was subsequently amended in February and April 2001. The term loan
bears interest at 12%, contains financial covenants that are consistent with the
Credit Facility and matures in July 2002. Principal payments of $0.5 million per
month are due beginning in January 2002 with a final principal payment of $12.0
million due in July 2002. Under the term loan agreement, we also granted
warrants to the lender to purchase 129,000 shares of our common stock
exercisable for nominal consideration at any time until December 31, 2005. The
warrants entitle the holder to require us, subsequent to July 31, 2000 and
subject to a vesting schedule, to repurchase the warrants or common shares
issued upon prior exercise of the warrants at $8.50 per share.

         In February 2001, we obtained a $10.0 million senior term loan from a
financial institution. The term loan bears interest at LIBOR plus 2% and matures
in August 2002. The proceeds of the term loan were used to pay the semi-annual
interest payment on the senior subordinated notes in February 2001 of $6.7
million and for working capital purposes. In connection with the term loan, we
issued warrants to purchase 250,000 shares of our unissued common stock at an
exercise price of $4.00 per share to each of four individuals. Of these
individuals, one of them is one of our officers and directors, a second is one
of our directors and principal stockholders and a third is one of our principal
stockholders. Each of these four individuals provided credit support to the
financial institution which advanced the term loan proceeds.

         Senior Subordinated Notes

         In February 1998, we sold $165.0 million in senior subordinated notes
(the "Notes") due in 2008 with a coupon rate of 8.125% at a price of 99.395%.
The Notes mature on February 15, 2008. Interest is payable on February 15 and
August 15 of each year. The Notes are general unsecured obligations,
subordinated in right of payment to all existing and future senior debt,
including indebtedness outstanding under the Credit Facility and under
facilities which may replace the Credit Facility in the future. In addition, the
Notes are effectively subordinated to all secured obligations to the extent of
the assets securing such obligations, including the Credit Facility.

         The indenture pursuant to which the Notes have been issued (the
"Indenture") permits us and our subsidiaries to incur substantial additional
indebtedness, including senior debt. Under the Indenture, we may borrow
unlimited additional amounts so long as after incurring such debt we meet a
fixed charge coverage ratio for the most recent four fiscal quarters.
Additionally, the Indenture allows us to borrow and have outstanding additional
amounts of indebtedness (even if we do not meet the required fixed charge
coverage ratios), up to enumerated limits. We did not meet the fixed charge
coverage ratio for the one-year period ended December 31, 2000. Accordingly, our
ability to incur additional debt is currently limited under the Indenture. The
Notes are also effectively subordinated in right of payment to all existing and
future liabilities of any of our subsidiaries that do not guarantee the Notes.

         The Notes are unconditionally guaranteed, on a senior subordinated
basis, by substantially all of our existing subsidiaries and each subsidiary
that we organize in the future, unless such subsidiary is designated as an
unrestricted subsidiary (the "Subsidiary Guarantors"). Subsidiary Guarantees are
joint and several, full and unconditional, general unsecured obligations of the
Subsidiary Guarantors. Subsidiary Guarantees are subordinated in right of
payment to all existing and future senior debt of Subsidiary Guarantors,
including the Credit Facility, and are also effectively subordinated to all
secured obligations of Subsidiary Guarantors to the extent of the assets
securing such obligations, including the Credit Facility. Furthermore, the
Indenture permits Subsidiary Guarantors to incur additional indebtedness,
including senior debt, subject to certain limitations.

         The Notes are redeemable, at our option, in whole or in part, at any
time after February 15, 2003, at the following redemption prices, plus accrued
and unpaid interest and liquidated damages, if any, to the redemption date: (i)
2003--104.063%; (ii) 2004--102.708%; (iii) 2005--101.354%; and (iv) 2006 and
thereafter--100%.

                                       23
<PAGE>

         Upon the occurrence of a change of control, we will be required to make
an offer to repurchase all or any part of holder's Notes at a repurchase price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest
and liquidated damages, if any, thereon to the repurchase date. There can be no
assurance that we will have the financial resources necessary to purchase the
Notes upon a change of control or that such repurchase will be permitted under
the Credit Facility.

         Under the Indenture, if we sell assets (other than inventory in the
ordinary course of business or leases or assets subject to leases in the
ordinary course of business) with a fair market value in excess of $2.0 million
or for net proceeds in excess of $2.0 million, we must comply with certain
requirements. First, the sales price must be at least equal to the fair market
value of the assets and at least 80% of the sales price must be paid in cash.
Second, we must use the proceeds from such asset sales, within 270 days after
completion of the sales, to either permanently repay senior debt or acquire
other businesses or assets (or, if the proceeds are not used for these purposes,
then such proceeds must be used to repurchase senior subordinated notes).
Proceeds from the asset sales described above have been used to permanently
repay senior debt. Further, if the value of the assets sold exceeds $15 million,
our Board of Directors must determine that we are receiving fair market value
for the assets sold.

         The Indenture contains certain other covenants that, among other
things, limits (as described above) our ability and the ability of our
subsidiaries to incur additional indebtedness and issue preferred stock, pay
dividends or make other distributions, make investments, issue capital stock of
subsidiaries, create certain liens securing indebtedness, enter into certain
transactions with affiliates, sell assets or enter into certain mergers and
consolidations or sell all or substantially all of our assets.

         Other Notes

         In connection with the acquisition of Kratz-Wilde Machine Company, one
of our subsidiaries delivered a non-interest-bearing promissory note (guaranteed
by us) to the sellers in the original principal amount of $2.5 million
(discounted to $2.2 million). A payment of $1.2 million was made during January
1999 and the remaining principal balance of $1.3 million was paid in January
2000. Interest on this note has been imputed at 8%.

         In connection with the acquisition of Caribe and AIDI, one of our
subsidiaries delivered to the sellers a promissory note in the original
principal amount of $5.0 million, which was guaranteed by us. The note was
payable over a two-year period with an interest rate of 8% per annum. The first
payment of $2.5 million was made during March 1999 and the final payment was
paid in March 2000.

         Lease for Miramar Facilities

         During 1998, we decided to move our redistribution operation and one of
our MR&O operations to new facilities in Miramar, Florida. On December 17, 1998,
we entered into an operating lease for the new facility with First Security
Bank, National Association, as trustee of a newly created trust, as lessor. The
lease has an initial term of five years and is a triple net lease. The lease
contains financial covenants regarding our financial performance and other
affirmative and negative covenants. Substantially all of our subsidiaries have
guaranteed our obligations under the lease. Additionally, we have an option to
acquire the new facility at the end of the lease and, if we do not purchase the
new facility at the end of the lease, we will be obligated to pay a fee.
Management estimates that the current fair value of the facilities exceeds the
Company's purchase option. Accordingly, no fee has been accrued by the Company.
We moved our corporate headquarters and redistribution operations into one of
the new facilities in April 2000 and one of our MR&O operations, Caribe
Aviation, into another building adjacent to the redistribution operations
facility during October 2000. In conjunction with the sale of our redistribution
operations, we subleased the corporate headquarters and redistribution operation
facility to Kellstrom Industries, Inc. for a period of five years with the right
to renew for five consecutive five-year periods at a market rental rate. We
subsequently moved our corporate headquarters into Caribe's facility.

         The lessor has financed the development of the new facility through a
$43.0 million loan from a financial institution. We and substantially all of our

                                       24
<PAGE>

subsidiaries have guaranteed the repayment of $37.8 million of the lessor's
obligations under its loan agreement. The lessor's obligations under the
agreement are secured by a lien on the real property and on the new facility.
Further, we have posted an irrevocable letter of credit in favor of the lessor
in the amount of $9.0 million to secure both our obligations under the lease and
the lessor's obligations under the loan agreement.

         We were not in compliance at December 31, 1999 or March 31, 2000 with
certain of the financial covenants contained in the lease agreement. The lessor
and its lenders agreed to forbear in regards to these covenant violations and
other matters until May 31, 2000. Effective May 31, 2000, the lease agreement
was amended in conjunction with the amendment of the Credit Facility. It was
subsequently amended effective June 25, 2000, September 30, 2000, November 28,
2000, February 14, 2001 and April 19, 2001. Under the terms of the April 19,
2001 amendment, two shareholders of the Company provided a guarantee in
relation to the proceeds to be received from the sale of one of the leased
buildings in an amount up to $1.0 million. Such guarantee expires January 2,
2002. As part of the amendment, the lessor has agreed to waive non-compliance
with financial covenants, if any, through the period ended December 31, 2001.

         Inflation

         For the years 1998, 1999 and 2000, inflation did not have an impact on
our income from operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

         The table below provides information about our market sensitive
financial instruments and constitutes a "forward-looking statement." Our major
market risk exposure is changing interest rates in the United States and
fluctuations in the London Interbank Offered Rate. Our policy is to manage
interest rates through use of a combination of fixed and floating rate debt. All
items described are non-trading. The table below assumes the December 31, 2000
interest rates remain constant (dollars in thousands).

<TABLE>
<CAPTION>
------------------------- ----------- ---------- ---------- --------- -------- ------------- ----------- -------------
                                                                                                           Fair Value
                             2001       2002       2003       2004      2005     Thereafter    Total       December
                                                                                                           31, 2000
------------------------- ----------- ---------- ---------- --------- -------- ------------- ----------- -------------
<S>                        <C>         <C>           <C>        <C>      <C>     <C>          <C>           <C>
Long term debt:
------------------------- ----------- ---------- ---------- --------- -------- ------------- ----------- -------------
   Fixed rate debt         $     29    $ 16,498      --         --       --      $164,345     $180,872      $ 82,527
------------------------- ----------- ---------- ---------- --------- -------- ------------- ----------- -------------
   Average interest rate      12.00%      12.00%     --         --       --          8.13%
------------------------- ----------- ---------- ---------- --------- -------- -------------
   Variable rate debt      $ 35,959       --         --         --       --         --        $ 35,959      $ 35,959
------------------------- ----------- ---------- ---------- --------- -------- ------------- ----------- -------------
   Average interest rates     11.31%      --         --         --       --         --
------------------------- ----------- ---------- ---------- --------- -------- -------------
</TABLE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial information required by Item 8 is included elsewhere in
this report (see Part IV, Item 14).

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

         None.

                                       25
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information required by Item 10 is hereby incorporated by reference
from the Registrant's Proxy Statement for its 2001 Annual Meeting of
Stockholders, which Proxy Statement will be filed within 120 days after the end
of the fiscal year ended December 31, 2000.

ITEM 11. EXECUTIVE COMPENSATION

         The information required by Item 11 is hereby incorporated by reference
from the Registrant's Proxy Statement for its 2001 Annual Meeting of
Stockholders, which Proxy Statement will be filed within 120 days after the end
of the fiscal year ended December 31, 2000.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by Item 12 is hereby incorporated by reference
from the Registrant's Proxy Statement for its 2001 Annual Meeting of
Stockholders, which Proxy Statement will be filed within 120 days after the end
of the fiscal year ended December 31, 2000.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by Item 13 is hereby incorporated by reference
from the Registrant's Proxy Statement for its 2001 Annual Meeting of
Stockholders, which Proxy Statement will be filed within 120 days after the end
of the fiscal year ended December 31, 2000.

                                       26
<PAGE>

                                     PART IV


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

         (A) The consolidated balance sheets as of December 31, 1999 and
December 31, 2000 and the related consolidated statements of operations and
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2000 are filed as part of this report:

(1)      Financial Statements                                               PAGE
         --------------------                                               ----

Report of Independent Certified Public Accountants                           F-2
Consolidated Balance Sheets at December 31, 1999 and 2000                    F-3
Consolidated Statements of Operations for the three years ended
   December 31, 2000                                                         F-4
Consolidated Statements of Stockholders' Equity for the three years
   ended December 31, 2000                                                   F-5
Consolidated Statements of Cash Flows for the three years ended
   December 31, 2000                                                         F-6
Notes to Consolidated Financial Statements                                   F-7

(2)      Consolidated Financial Statement Schedules
         ------------------------------------------

Schedule II - Valuation and Qualifying Accounts for the three years
   ended December 31, 2000                                                  F-29

(3)      Exhibits
         --------

         3.1      Certificate of Incorporation of the Company and amendment
                  thereto (1)

         3.2      Second Amendment to Certificate of Incorporation (3)

         3.3      Bylaws of the Company (1)

         4.1      Form of Common Stock Certificate (1)

         4.2      Indenture, dated as of February 17, 1998, among Aviation Sales
                  Company, certain of its subsidiaries, and Sun Trust Bank
                  Central Florida, National Association, Trustee (2)

         4.3      Common Stock Purchase Warrant Certificate issued on February
                  18, 2000 to Citicorp USA, Inc. (9)

         4.4      Form of Common Stock Purchase Warrants issued in February 2001
                  to four individuals (15)

         10.1     Fourth Amended and Restated Credit Agreement dated May 31,
                  2000 by and among the Company, certain of its subsidiaries and
                  Citicorp USA, Inc., as agent (10)

         10.2     Reserved.

         10.3     Lease dated July 22, 1998 by and between Ben Quevedo, Ltd. and
                  Caribe (6)

+        10.4     Form of Employment Agreement, dated January 1, 1999, by and
                  between Dale S. Baker and the Company (6)

+        10.5     Amended Employment Agreement, effective as of December 2,
                  1994, by and between Harold Woody and the Company (3)

+        10.6     Form of Employment Agreement, dated January 1, 1999, by and
                  between Benito Quevedo and the Company (6)

+        10.7     1996 Director Stock Option Plan (3)

                                       27
<PAGE>

+        10.8     1996 Stock Option Plan (3)

+        10.9     1997 EBITDA Incentive Compensation Plan (4)

+        10.10    Form of Aviation Sales Company 1999 EBITDA Plan (6)

+        10.11    Form of Stock Option Agreement (Non-Plan) by and between the
                  Company and each of Dale S. Baker and Benito Quevedo (6)

+        10.12    Special Incentive Compensation Plan (7)

         10.13    Credit Agreement dated as of December 17, 1998 among First
                  Security Bank, National Association, as owner trustee for the
                  Aviation Sales Trust 1998-1, as lessor, NationsBank, National
                  Association, as administrative agent, and the several lenders
                  thereto (5)

         10.14    Lease Agreement dated as of December 17, 1998 between First
                  Security Bank, National Association, as owner trustee under
                  Aviation Sales Trust 1998-1, as lessor, and the Company, as
                  lessee (5)

         10.15    Guaranty Agreement (Series A Obligations) between the Company,
                  substantially all of its subsidiaries and NationsBank,
                  National Association, as agent for the Series A lenders, dated
                  as of December 17, 1998 (5)

         10.16    Guaranty Agreement (Lease Obligations) between substantially
                  all of the subsidiaries of the Company and First Security
                  Bank, National Association, as owner trustee for the Aviation
                  Sales Trust 1998-1, dated as of December 17, 1998 (5)

         10.17    Participation Agreement between the Company as Construction
                  Agent and Leases, First Security Bank, National Association,
                  as Owner Trustee, the Various Banks and other lending
                  institutions as the holders and lenders, and NationsBank,
                  National Association, as Administrative Agent, dated as of
                  December 17, 1998 (5)

         10.18    Stockholders' Rights Plan (8)

         10.19    Term Loan Note, dated February 18, 2000 (9)

         10.20    Amendment No. 1 to Participation Agreement between the Company
                  as Construction Agent and Leases, First Security Bank,
                  National Association, as Owner Trustee, the Various Banks and
                  other lending institutions as the holders and lenders, and
                  NationsBank, National Association, as Administrative Agent,
                  dated as of February 18, 2000 (9)

         10.21    Standstill Agreement between the Company, LJH Corporation and
                  Lacy J. Harber (9)

         10.22    Amendment No. 1 to Stockholders' Rights Plan (9)

         10.23    Amended and Restated Term Loan Note, dated May 31, 2000 (10)

         10.24    Amendment Agreement No. 2 for Lease Agreement and Certain
                  Other Operating Agreements, dated May 31, 2000 (10)

         10.25    Amendment No. 1, dated as of August 14, 2000, to the Fourth
                  Amended and Restated Credit Agreement (11)

         10.26    Amendment Agreement No. 3 for Lease Agreement and Certain
                  Other Operative Agreements (11)

                                       28
<PAGE>

         10.27    Asset Purchase Agreement by and among Barnes Group Inc.,
                  Aviation Sales Company, Aviation Sales Manufacturing Company,
                  AVS/Kratz-Wilde Machine Company and Apex Manufacturing, Inc.
                  dated as of August 3, 2000 (12)

         10.28    Amendment No. 1 dated September 7, 2000 to the Asset Purchase
                  Agreement by and among Barnes Group Inc., Aviation Sales
                  Company, Aviation Sales Manufacturing Company, AVS/Kratz-Wilde
                  Machine Company and Apex Manufacturing, Inc. dated as of
                  August 3, 2000 (12)

         10.29    Amendment No. 2 dated as of November 14, 2000 to Fourth
                  Amended and Restated Credit Agreement (13)

         10.30    Amendment Agreement No. 4 for Lease Agreement and Certain
                  Other Operative Agreements (13)

         10.31    Asset Purchase Agreement among the Company, Aviation Sales
                  Distribution Services Company ("ASDC") and Kellstrom, dated
                  September 20, 2000 (14)

         10.32    Letter Amendment to Asset Purchase Agreement, dated November
                  28, 2000 (14)

         10.33    Inventory Purchase Agreement among KAV, the Company and ASDC,
                  dated September 30, 2000 (14)

         10.34    Letter Amendment to Inventory Purchase Agreement, dated
                  November 28, 2000 (14)

         10.35    Form of KAV Senior Subordinated Note (14)

         10.36    Form of KAV Junior Subordinated Note (14)

         10.37    Operating Agreement of KAV, dated September 20, 2000, between
                  the Company and Kellstrom (14)

         10.38    Letter Agreement between Kellstrom, KAV and the Company, dated
                  December 1, 2000, with respect to the payment of KAV operating
                  expenses (14)

         10.39    Consignment Agreement between KAV and Kellstrom, dated
                  December 1, 2000 (14)

         10.40    Equipment Lease Agreement, dated December 1, 2000, among the
                  Company, ASDC and Kellstrom (14)

         10.41    Lease Agreement, dated December 1, 2000, among ASDC and
                  Kellstrom (Pearland) (14)

         10.42    Lease Agreement, dated December 1, 2000, between Kellstrom and
                  the Company (Miramar) (14)

         10.43    Non-Competition Agreement, dated December 1, 2000, among ASDC,
                  the Company and Kellstrom (14)

         10.44    License Agreement, dated December 1, 2000, among the Company,
                  ASDC and Kellstrom (14)

         10.45    Cooperation Agreement, dated December 1, 2000, between
                  Kellstrom and the Company (14)

         10.46    Letter Agreement, dated December 1, 2000, between Kellstrom
                  and the Company (Equipment) (14)

         10.47    Letter Agreement, dated December 1, 2000, between Kellstrom
                  and the Company (Pearland) (14)

                                       29
<PAGE>

         10.48    Consent and Amendment No. 3, dated November 28, 2000, to the
                  Fourth Amended and Restated Credit Agreement dated as of May
                  31, 2000, as amended (14)

         10.49    Amendment and Consent Agreement No. 5 for Participation
                  Agreement and Certain Other Operative Agreements, dated as of
                  December 1, 2000 (14)

         10.50    Amendment No. 1 to Agreement, dated December 4, 2000 (14)

         10.51    Amendment No. 2 to Rights Agreement, dated December 4, 2000
                  (14)

         10.52    Agreement, dated February 14, 2001, between various
                  subsidiaries of the Company and Bank of America, N.A. (15)

         10.53    $10.0 million Term Loan Note, dated February 14, 2001 (15)

         10.54    Form of Limited Guaranty in favor of Bank of America, N.A.
                  (15)

         10.55    Amendment No. 4, Consent and Waiver, dated February 14, 2001,
                  to the Fourth Amended and Restated Credit Agreement dated as
                  of May 31, 2000, as amended (15)

         10.56    Amendment and Consent Agreement No. 7 for Lease Agreement and
                  Certain Other Operative Agreements, dated as of February 14,
                  2001 (15)

         10.57    Note Modification Agreement, dated as of February 14, 2001
                  (15)

         10.58    Stock Purchase Agreement, dated December 15, 2000, among
                  Wencor West, Inc., Aviation Sales Company and Aviation Sales
                  Distribution Services Company *

         10.59    Amendment No. 5 and Waiver, dated as of April 17, 2001 to
                  Fourth Amended and Restated Credit Agreement dated as of
                  May 31, 2000, amended *

         10.60    Letter Agreement dated April 17, 2001, regarding $15.5 million
                  term loan *

         10.61    Amendment and Consent Agreement No. 8 for Lease Agreement and
                  Certain Other Operative Agreements *

         21.1     List of Subsidiaries of Registrant *

         23.1     Consent of Arthur Andersen LLP *

----------------------------
*        Filed herewith
+        Compensation plan or agreement


Notes to Exhibits
-----------------

(1)      Incorporated by reference to Company's Registration Statement on Form
         S-1 dated April 15, 1996 (File No. 333-3650)

(2)      Incorporated by reference to Company's Registration Statement on Form
         S-4 dated March 26, 1998 (File No. 333-48669)

(3)      Incorporated by reference to Amendment No. 1 to Company's Registration
         Statement on Form S-1 dated June 6, 1996 (File No. 333-3650)

(4)      Incorporated by reference to the Company's Annual Report on Form 10-K
         for the year ended December 31, 1996

(5)      Incorporated by reference to Company's Current Report on Form 8-K dated
         December 17, 1998

                                       30
<PAGE>

(6)      Incorporated by reference to Company's Annual Report on Form 10-K for
         the year ended December 31, 1998

(7)      Incorporated by reference to Company's Quarterly Report on Form 10-Q
         for the quarter and six months ended June 30, 1999

(8)      Incorporated by reference to Company's Current Report on Form 8-A filed
         November 15, 1999

(9)      Incorporated by reference to Company's Current Report on Form 8-K filed
         on March 27, 2000

(10)     Incorporated by reference to Company's Current Report on Form 8-K filed
         on June 13, 2000

(11)     Incorporated by reference to Company's Quarterly Report on Form 10-Q
         for the quarter and six months ended June 30, 2000

(12)     Incorporated by reference to Company's Current Report on Form 8-K filed
         on September 22, 2000

(13)     Incorporated by reference to Company's Quarterly Report on Form 10-Q
         for the quarter and nine months dated September 30, 2000

(14)     Incorporated by reference to Company's Current Report on Form 8-K filed
         on December 18, 2000

(15)     Incorporated by reference to Company's Current Report on Form 8-K filed
         on March 1, 2001

(B)      REPORTS ON FORM 8-K

The following Current Reports on Form 8-K were filed during the fourth quarter
of 2000 and the first quarter of 2001:

(i)      Current Report on Form 8-K, dated December 1, 2000 reporting under:
         Item 2, the Company's sale of its redistribution operations and under
         Item 5, an amendment to its standstill agreement with a shareholder and
         an amendment to its shareholder's rights plan.

(ii)     Current Report on Form 8-K, dated February 14, 2001, reporting under
         Item 5 the $10.0 million term loan and certain amendments to credit
         agreements.


(C)      EXHIBITS

For exhibits, see Item 14(A)(3) above.

                                       31
<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.

AVIATION SALES COMPANY
(Registrant)


By: /s/ Dale S. Baker                                    April 19, 2001
----------------------------------
Dale S. Baker, Chairman 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 AND TITLE                                   DATE:
       -------------------                                   -----

/s/ Dale S. Baker                                        April 19, 2001
--------------------------------------------
Dale S. Baker
Chairman and Chief Executive Officer
(Principal Executive Officer)


/s/ Benito Quevedo                                       April 19, 2001
--------------------------------------------
Benito Quevedo
President, Chief Operating Officer
and Director


/s/ Michael C. Brant                                     April 19, 2001
--------------------------------------------
Michael C. Brant
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)


/s/ Robert Alpert                                        April 19, 2001
--------------------------------------------
Robert Alpert
Director



--------------------------------------------
Sam Humphreys
Director

                                       32
<PAGE>


/s/ Philip B. Schwartz                                   April 19, 2001
--------------------------------------------
Philip B. Schwartz
Director


/s/ Roy T. Rimmer                                        April 19, 2001
--------------------------------------------
Roy T. Rimmer
Director


/s/ Steven L. Gerard                                     April 19, 2001
--------------------------------------------
Steven L. Gerard
Director


/s/ Harold M. Woody                                      April 19, 2001
--------------------------------------------
Harold M. Woody
Director

                                       33
<PAGE>

                     AVIATION SALES COMPANY AND SUBSIDIARIES
                          INDEX TO FINANCIAL STATEMENTS

PAGE

Report of Independent Certified Public Accountants..........................F-2
Consolidated Balance Sheets at December 31, 1999 and 2000...................F-3
Consolidated Statements of Operations for the three years ended
    December 31, 2000.......................................................F-4
Consolidated Statements of Stockholders' Equity for the three years
    ended December 31, 2000.................................................F-5
Consolidated Statements of Cash Flows for the three years ended
    December 31, 2000.......................................................F-6
Notes to Consolidated Financial Statements..................................F-7
Financial Statement Schedule:
  Schedule II - Valuation and Qualifying Accounts for the three years
    ended December 31, 2000.................................................F-29

                                      F-1
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To Aviation Sales Company:

         We have audited the accompanying consolidated balance sheets of
Aviation Sales Company (a Delaware corporation) and subsidiaries as of December
31, 1999 and 2000, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2000. These financial statements and the schedule referred to
below 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 auditing standards generally
accepted in the United States. 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 significant
estimates made by 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 financial statements referred to above present
fairly, in all material respects, the financial position of Aviation Sales
Company and subsidiaries as of December 31, 1999 and 2000, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 2000 in conformity with accounting principles generally
accepted in the United States.

         The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company incurred net losses for the years ended
December 31, 1999 and 2000 and required cash to fund its operating activities
for each of the three years in the period ended December 31, 2000. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans are also discussed in Note 1. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

         Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.

ARTHUR ANDERSEN LLP


Miami, Florida,
March 30, 2001, (except for the matters discussed in the fourth
                paragraph in Note 1 and Note 7 as to which the date
                is April 17, 2001 and for the matter discussed in
                Note 11, as to which the date is April 19, 2001).

                                      F-2
<PAGE>

                     AVIATION SALES COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                   December 31,
                                                                                          ----------------------------
                                                                                              1999           2000
                                                                                          ------------   -------------
<S>                                                                                       <C>            <C>
                                          ASSETS
   CURRENT ASSETS:
 Cash and cash equivalents                                                                $     21,431   $          --
 Accounts receivable, net of allowances of $9,593 and
   $7,454 in 1999 and 2000, respectively                                                        91,926          67,558
 Inventories, net of reserves of $16,348 and $8,614 in
   1999 and 2000, respectively                                                                  90,145          53,115
 Deferred income taxes                                                                           2,292              --
 Other current assets                                                                           37,032          10,784
                                                                                          ------------   -------------
     Total current assets                                                                      242,826         131,457
                                                                                          ------------   -------------

 EQUIPMENT ON LEASE, net of accumulated amortization                                            17,393           5,749
 FIXED ASSETS, net                                                                              64,309          65,770
 AMOUNTS DUE FROM RELATED PARTIES                                                                2,099           1,792

   OTHER ASSETS:
 Goodwill, net                                                                                  51,241          41,390
 Deferred financing costs, net                                                                   7,953           5,928
 Notes receivable from KAV Inventory, LLC                                                           --          29,400
 Net assets of discontinued operations                                                         314,397           3,479
 Other                                                                                          10,657          15,646
                                                                                          ------------   -------------
     Total other assets                                                                        384,248          95,843
                                                                                          ------------   -------------
     Total assets                                                                         $    710,875   $     300,611
                                                                                          ============   =============

                            LIABILITIES AND STOCKHOLDERS' EQUITY
   CURRENT LIABILITIES:
 Accounts payable                                                                         $     13,948   $      30,214
 Accrued expenses                                                                               27,587          27,725
 Current maturities of notes payable                                                             3,887              29
 Current maturities of capital lease obligations                                                    84             178
 Revolving loan                                                                                269,580          35,959
 Customer deposits                                                                                 586           7,559
 Other                                                                                              --           5,120
                                                                                          ------------   -------------
     Total current liabilities                                                                 315,672         106,784
                                                                                          ------------   -------------
   LONG-TERM LIABILITIES:
 Senior subordinated notes                                                                     164,254         164,345
 Notes payable, net of current portion                                                           1,066          16,498
 Capital lease obligations, net of current portion                                               4,093           3,852
 Deferred income                                                                                 1,113              36
 Other long-term liabilities                                                                     6,155           2,204
                                                                                          ------------   -------------
     Total long-term liabilities                                                               176,681         186,935
                                                                                          ------------   -------------

Commitments and Contingencies

   STOCKHOLDERS' EQUITY:
 Preferred stock, $.01 par value, 1,000,000 shares authorized, none outstanding, 15,000
     shares designated Series A Junior participating                                                --              --
 Common stock, $.001 par value, 30,000,000 shares authorized, 15,015,317 issued and
     outstanding at December 31, 1999 and 2000, respectively                                        15              15
 Additional paid-in capital                                                                    150,288         150,288
 Retained earnings (accumulated deficit)                                                        68,219        (143,411)
                                                                                          ------------   -------------
     Total stockholders' equity                                                                218,522           6,892
                                                                                          ------------   -------------
     Total liabilities and stockholders' equity                                           $    710,875   $     300,611
                                                                                          ============   =============
</TABLE>
              The accompanying notes are an integral part of these
                          consolidated balance sheets.

                                      F-3
<PAGE>

                     AVIATION SALES COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                               For the Years Ended December 31,
                                                                       -----------------------------------------------
                                                                            1998             1999            2000
                                                                       -------------    -------------    -------------
<S>                                                                    <C>              <C>              <C>
Operating Revenues:
 Sales, net                                                            $     177,279    $     359,956    $     333,289
 Other                                                                         7,169           11,797            4,788
                                                                       -------------    -------------    -------------
    Total operating revenues                                                 184,448          371,753          338,077
Cost of sales                                                                141,569          307,944          353,331
                                                                       -------------    -------------    -------------
  Gross profit (loss)                                                         42,879           63,809          (15,254)
Operating expenses                                                            17,721           41,774           74,580
                                                                       -------------    -------------    -------------
  Income (loss) from operations                                               25,158           22,035          (89,834)
Interest expense                                                              13,895           18,649           20,347
Other (income) expense                                                          (196)          (1,327)             925
                                                                       -------------    -------------    -------------
  Income (loss) before income taxes, equity income of affiliates and
   discontinued operations                                                    11,459            4,713         (111,106)
Income tax expense                                                             4,281            3,004            4,810
                                                                       -------------    -------------    -------------
  Income (loss) before equity income of affiliates and discontinued
    operations                                                                 7,178            1,709         (115,916)
Equity income of affiliates, net of income tax                                 1,356            1,289               43
                                                                       -------------    -------------    -------------
  Income (loss) from continuing operations                                     8,534            2,998         (115,873)

Discontinued Operations:
  Operations, net of income taxes                                             16,959          (24,721)         (23,432)
  Loss on disposal, net of income taxes                                           --               --          (72,325)
                                                                       -------------    -------------    -------------
  Net income (loss)                                                    $      25,493    $     (21,723)   $    (211,630)
                                                                       =============    =============    =============

Basic Earnings (Loss) Per Share:
  Income (loss) from continuing operations                             $        0.70    $        0.22    $       (7.72)
  Income (loss) from discontinued operations                                    1.38            (1.78)           (6.37)
                                                                       -------------    -------------    -------------
  Net income (loss)                                                    $        2.08    $       (1.56)   $      (14.09)
                                                                       =============    =============    =============

Diluted Earnings (Loss) Per Share:
  Income (loss) from continuing operations                             $        0.68    $        0.21    $       (7.72)
  Income (loss) from discontinued operations                                    1.34            (1.77)           (6.37)
                                                                       -------------    -------------    -------------
  Net income (loss)                                                    $        2.02    $       (1.56)   $      (14.09)
                                                                       =============    =============    =============

Weighted average shares outstanding:

  Basic                                                                   12,277,020       13,906,000       15,015,317
                                                                       =============    =============    =============
  Diluted                                                                 12,626,394       14,168,442       15,015,317
                                                                       =============    =============    =============
</TABLE>

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

                                      F-4
<PAGE>

                     AVIATION SALES COMPANY AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                       COMMON STOCK                                           TREASURY STOCK
                                 ------------------------                                 ------------------------
                                                                              Retained
                                                              Additional      Earnings                                  Total
                                                               Paid-in     (Accumulated                             Stockholders'
                                    Shares       Amount        Capital        Deficit)       Shares        Amount      Equity
                                 ------------   ---------   -------------  ------------   ------------   ---------  -------------
<S>                                <C>          <C>         <C>             <C>             <C>          <C>         <C>
Balance as of December 31, 1997    13,362,568   $      13   $      72,962   $    64,449     (1,111,562)  $ (16,145)  $ 121,279
Net income                                 --          --              --        25,493             --          --      25,493
Stock issued in acquisition           182,143          --           5,720            --             --          --       5,720
Rescinded stock grants                (18,000)         --              --            --             --          --          --
Stock options exercised               100,660          --           1,806            --             --          --       1,806
Retirement of treasury stock       (1,111,562)         (1)        (16,144)           --      1,111,562      16,145          --
                                 ------------   ---------   -------------   -----------   ------------   ---------   ---------

Balance as of December 31, 1998    12,515,809          12          64,344        89,942             --          --     154,298
Net loss                                   --          --              --       (21,723)            --          --     (21,723)
Secondary stock offering            2,300,000           3          79,859            --             --          --      79,862
Stock options exercised               199,508          --           6,085            --             --          --       6,085
                                 ------------   ---------   -------------   -----------   ------------   ---------   ---------

Balance as of December 31, 1999    15,015,317          15         150,288        68,219             --          --     218,522
Net loss                                   --          --              --      (211,630)            --          --    (211,630)
                                 ------------   ---------   -------------   -----------   ------------   ---------   ---------

Balance as of December 31, 2000    15,015,317   $      15   $     150,288   $  (143,411)            --   $      --   $   6,892
                                 ============   =========   =============   ===========   ============   =========   =========
</TABLE>

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

                                      F-5
<PAGE>

                     AVIATION SALES COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                           For the Years Ended December 31,
                                                                        ---------------------------------------
                                                                            1998          1999         2000
                                                                        -----------   -----------   -----------
<S>                                                                     <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                       $    25,493   $   (21,723)  $  (211,630)
Adjustments  to reconcile  net income  (loss) to net cash  provided by
(used in) operating  activities:
  Loss on disposal of discontinued operations                                    --            --        72,325
  Depreciation and amortization                                               5,687        10,132        21,941
  Write-off of fixed assets                                                      --           297            --
  Proceeds from sale of equipment on lease, net of gain                       1,290         2,960         3,188
  Gain on sale of fixed assets                                                  (72)       (1,432)           --
  Equity (income) loss of affiliate, net of income taxes                     (1,356)       (1,289)          (43)
  Provision for inventory obsolescence                                           --        12,814         3,525
  Provision for doubtful accounts                                               670         4,995        20,343
  Write down of shareholder note                                                 --            --           200
  Loss on sale of joint venture                                                  --            --           859
  Deferred income taxes                                                      (1,107)        3,174         1,492
  (Increase) decrease in accounts receivable                                  1,849       (46,894)        4,025
  (Increase) decrease in inventories                                        (37,304)      (37,962)       35,472
  (Increase) decrease in other current assets                                   180       (29,470)       26,248
  (Increase) decrease in other non-current assets                            (2,870)          289        (4,078)
  Increase (decrease) in accounts payable                                       894        (3,369)       16,266
  Increase (decrease) in accrued expenses                                    (2,569)        7,289        11,696
  Increase (decrease) in deferred income                                        409          (257)       (1,077)
  Increase (decrease) in other liabilities                                      (72)        1,405        (3,457)
                                                                        -----------   -----------   -----------
        Net cash used in continuing operating activities                     (8,878)      (99,041)       (2,705)
                                                                        -----------   -----------   -----------
        Net cash provided by (used in) discontinued operations              (73,312)      (15,598)       50,678
                                                                        -----------   -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash used in acquisitions, net of cash acquired                           (75,703)      (18,080)           --
  Purchases of fixed assets                                                  (5,381)      (17,635)       (9,802)
  Purchases of equipment on lease                                           (23,411)       (9,087)           --
  Proceeds from sale of fixed assets                                            751            --            --
  Purchase of facility                                                           --        (3,500)           --
  Proceeds from sale of land held for investment                                 --        11,556            --
  Purchase of land held for investment                                           --       (10,124)           --
  Payments from related parties                                                 687           105           106
  Investment in joint venture                                                    --        (2,500)       (3,734)
  Proceeds from sale of joint venture                                            --            --         1,455
  Net proceeds from the sale of discontinued operations                          --            --       175,315
                                                                        -----------   -----------   -----------
      Net cash provided by (used in) investing activities                  (103,057)      (49,265)      163,340
                                                                        -----------   -----------   -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings of amounts under senior debt facility                           77,880       567,815       460,593
  Proceeds from sale of common stock                                             --        79,862            --
  Proceeds from issuance of senior subordinated notes                       164,002            --            --
  Repayment of amounts under senior debt facility                           (56,190)     (472,242)     (694,214)
  Proceeds of term loan                                                          --            --        15,500
  Proceeds from equipment loans                                              10,488            --            --
  Payments on equipment loans                                                  (921)         (627)         (201)
  Payments on capital leases                                                    (41)         (184)         (147)
  Stock options exercised                                                     1,806         5,220            --
  Payment of deferred financing costs                                        (7,478)       (1,573)      (10,525)
  Payments on notes payable                                                      --        (3,472)       (3,750)
                                                                        -----------   -----------   -----------
     Net cash provided by (used in) financing activities                    189,546       174,799      (232,744)
                                                                        -----------   -----------   -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          4,299        10,895       (21,431)
                                                                        -----------   -----------   -----------
CASH AND CASH EQUIVALENTS, beginning of period                                6,237        10,536        21,431
                                                                        -----------   -----------   -----------
CASH AND CASH EQUIVALENTS, end of period                                $    10,536   $    21,431   $        --
                                                                        ===========   ===========   ===========

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
  Notes received for sale of inventory to joint venture                 $        --   $        --   $    29,401
                                                                        ===========   ===========   ===========
  Value of warrants issued in connection with origination of
    $15,500 term loan recorded as deferred financing costs              $        --   $        --   $     1,079
                                                                        ===========   ===========   ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Interest paid                                                         $    15,684   $    32,817   $    39,705
                                                                        ===========   ===========   ===========
  Income taxes paid                                                     $    18,669   $    18,673   $     1,028
                                                                        ===========   ===========   ===========
</TABLE>

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

                                      F-6
<PAGE>

                     AVIATION SALES COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             (FINANCIAL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND OPERATIONS

         Aviation Sales Company ("ASC" or the "Company") is a Delaware
corporation which through its subsidiaries provides aircraft maintenance, repair
and overhaul services to commercial passenger airlines, air cargo carriers,
aircraft leasing companies, maintenance and repair facilities and aircraft parts
redistributors throughout the world. During 2000, the Company sold substantially
all of the assets of its parts redistribution operation, its new parts
distribution operation and its manufacturing operations. See Note 4 for further
discussion. The results of operations for these businesses are included in the
accompanying consolidated statements of operations as discontinued operations.

         On July 31, 1998, ASC acquired Whitehall Corporation ("Whitehall") for
consideration of 2,844 shares of ASC common stock. Under the terms of the
acquisition agreement, each share of Whitehall common stock was exchanged for
 .5143 shares of ASC common stock. The acquisition of Whitehall has been
accounted for under the pooling of interests method of accounting. The
accompanying consolidated financial statements give retroactive effect to the
acquisition of Whitehall. All share amounts have been restated to include the
conversion of the Whitehall common stock to ASC common stock in the merger and a
two-for-one stock split effected by Whitehall in March 1997. The operations of
ASC and its other subsidiaries and Whitehall retroactively consolidated are
referred to herein as the operations of the Company.

SECONDARY OFFERING

         On June 16, 1999, ASC closed a public offering of 2,000 shares of
common stock and on June 24, 1999, the underwriters of the public offering
exercised their option to purchase an additional 300 shares of common stock. The
net proceeds of the offering, $79,862, were used to repay senior indebtedness.

LIQUIDITY

         The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Notes 7
and 11, the Company was not in compliance at December 31, 1999 and March 31,
2000 with certain of the financial covenants contained in the Company's credit
agreement with its senior lenders and certain of the lease agreements to which
the Company is a party. On May 31, 2000, the Company amended and restated its
senior credit facility and amended certain of its lease agreements. These
agreements were further amended on June 25, 2000, September 30, 2000, November
28, 2000, February 14, 2001 and April 17, 2001. As discussed in Note 4, during
2000, the Company sold substantially all of the assets of its parts
redistribution operation, new parts distribution operation and manufacturing
operations. The proceeds from these sales were used to repay senior
indebtedness. In addition, in February 2000, the Company borrowed $15,500 under
a supplemental term loan with the financial institution that is the agent for
the revolving credit facility. In February 2001, the Company borrowed $10,000
under a term loan from a second financial institution. The proceeds from these
loans were used to repay senior indebtedness and for working capital purposes.
The revolving credit facility and the $15,500 term loan mature in July 2002 and
the $10,000 term loan matures in August 2002. As a result of the above
transactions, the outstanding balance on the revolving credit facility was
reduced from $269,580 as of December 31, 1999 to $35,959 as of December 31,
2000.

         As of March 31, 2001, the Company has $2,200 of availability for
borrowing under its revolving credit facility. The Company has also recently
closed (on a temporary basis) one of its maintenance, repair and overhaul
("MR&O") facilities, consolidated the operations of one of its component
overhaul businesses from two facilities to one, and reduced its headcount at
certain of its other MR&O facilities in order to lower its operating expenses.
The Company is also actively considering selling one or more additional
operations, or the sale of additional additional securities, in order to repay
additional debt and to fund the working capital requirements of its operations.
While the Company expects to be able to meet its working capital requirements
from its available resources, there can be no assurance that the Company will
have sufficient working capital to meet its obligations. The Company incurred
net losses for the years ended December 31, 1999 and 2000 and required cash to
fund its operating activities for the years ended December 31, 1998, 1999 and
2000. As a result of these matters the Company's auditors have issued their
opinion with a going concern qualification. The accompanying consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

                                      F-7
<PAGE>

ACCOUNTING ESTIMATES

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
Principal estimates made by the Company include the estimated losses on disposal
of discontinued operations, the allowance to reduce inventory to the lower of
cost or net realizable value, the estimated profit recognized as aircraft
maintenance, design and construction services are performed, the allowance for
doubtful accounts and notes receivable, medical benefit accruals, the estimated
fair value of the facilities under operating lease discussed in Note 11, and the
allowances for litigation and environmental costs. A principal assumption made
by the Company is that inventory will be utilized and realized in the normal
course of business and may be held for a number of years.

PRINCIPLES OF CONSOLIDATION

         The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries (collectively the "Company").
Investments in joint ventures are accounted for under the equity method of
accounting. All significant intercompany transactions and balances have been
eliminated.

RECLASSIFICATIONS

         Assets, liabilities, revenues and expenses of discontinued operations
have been separately reclassified in the 1999 and 1998 consolidated financial
statements. Certain other prior year amounts included in the accompanying
consolidated financial statements have been reclassified to conform with the
2000 presentation.

CASH AND CASH EQUIVALENTS

         The Company considers all deposits with an original maturity of three
months or less to be cash equivalents. Cash and cash equivalents at December 31,
1999 include cash held by the Company in demand deposit accounts.

REVENUE RECOGNITION

         Revenues from aircraft maintenance service are generally recognized
when services are performed and unbilled receivables are recorded based upon the
percentage of completion method. Unbilled receivables are billed on the basis of
contract terms (which are generally on completion of an aircraft) and
deliveries. These service fees are recorded in revenue over the course of the
contract as the services are rendered. Gain on sale of equipment on lease is
included in other revenue in the accompanying consolidated statements of
operations. The Company exchanges rotable parts in need of service or overhaul
for new, overhauled or serviceable parts in its inventory for a fee. Fees on
exchanges are recorded as sales at the time the unit is shipped.

         With respect to discontinued business, repairs and sales of aircraft
parts are recognized as revenue when a unit is shipped and title has passed to
the customer or when a repaired unit is returned to the customer. Transfers of
inventory to customers which include a related acquisition of inventory from the
same third party for a similar amount are not recognized as revenue at the time
of transfer. Certain of the Company's discontinued operations also warehoused
and sold inventories on behalf of others under consignment arrangements. Sales
of aircraft parts from consignment inventories were recorded as revenue upon
shipment of the unit. The Company also performs inventory repair management and
warehouse management services for customers on a contractual basis.

INVENTORIES

         Inventories, which consist primarily of new, overhauled, serviceable
and repairable aircraft parts, are stated at the lower of cost or market on
primarily a specific identification basis. In instances where bulk purchases of
inventory items are made, cost is determined based upon an allocation by
management of the bulk purchase price to the individual components. Expenditures
required for the recertification of parts are capitalized as inventory and are
expensed as the parts associated with the recertification are sold. Cost of

                                      F-8
<PAGE>

inventory includes raw materials, labor and overhead. The Company maintains raw
materials, work in progress and finished goods inventories in support of its
operations. At December 31, 1999 and 2000, inventories consisted of the
following:

                                                     1999            2000
                                                -------------    ------------

           Finished goods                            $35,862         $34,112
           A-300 aircraft                             45,709           3,150
           Work in progress                            3,848          15,415
           Raw materials                               4,726             438
                                                -------------    ------------
                                                     $90,145         $53,115
                                                =============    ============

         The Company provides an allowance to reduce the inventory carrying
value to the lower of cost or net realizable value. In determining net
realizable value, the Company assumes the inventory will be utilized in the
normal course of business and not on a liquidation basis. Such inventory may be
held for a number of years.

EQUIPMENT ON LEASE

         The Company leases engines and spare parts inventories to customers in
the airline industry on a worldwide basis through operating leases. Operating
lease income is recognized on a straight-line basis over the term of the
underlying leases and is included in other operating revenue in the accompanying
consolidated statement of operations. The cost of equipment on lease is
amortized, principally on a straight-line basis, to the estimated remaining net
realizable value over the shorter of the lease term or the economic life of the
equipment.

FIXED ASSETS, NET

         Fixed assets are stated at cost, and at December 31, 1999 and 2000,
consisted of the following:

<TABLE>
<CAPTION>
                                                 Depreciable
                                                    Life               1999           2000
                                               ---------------    -------------    -----------
<S>                                            <C>                    <C>            <C>
Land                                                                  $     71       $    114
Buildings                                         29 years               5,553          5,709
Machinery and equipment                         3 to 7 years            39,981         36,967
Furniture and fixtures                          3 to 5 years             3,179         11,715
Leasehold improvements                           Shorter of
                                               lease term or
                                                useful life             35,918         40,473
                                                                  -------------    -----------
                                                                        84,702         94,978
Accumulated depreciation and amortization                              (20,393)       (29,208)
                                                                  -------------    -----------
                                                                      $ 64,309       $ 65,770
                                                                  =============    ===========
</TABLE>

         For financial reporting purposes, the Company provides for depreciation
and amortization of fixed assets using the straight-line method at annual rates
sufficient to amortize the cost of the assets less estimated salvage values over
their estimated useful lives. Maintenance and repair expenditures are charged to
expense as incurred, and expenditures for improvements and major renewals are
capitalized. The carrying amounts of assets which are sold or retired and the
related accumulated depreciation are removed from the accounts in the year of
disposal, and any resulting gain or loss is reflected in income. Depreciation
and amortization expense amounted to $2,707, $5,061 and $8,815, for the years
ended December 31, 1998, 1999 and 2000, respectively.

         In March 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants ("ACSEC") issued Statement of
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use." SOP 98-1 establishes criteria for determining
which costs of developing or obtaining internal-use computer software should be
charged to expense and which should be capitalized. The Company adopted SOP 98-1
prospectively on January 1, 1999. The adoption of SOP 98-1 did not have a
material effect on the Company's financial position or results of operations.

                                      F-9
<PAGE>

         Impairment of long-lived assets is recognized when events or changes in
circumstances indicate that the carrying amount of the asset, or related groups
of assets, may not be recoverable and the Company's estimate of undiscounted
cash flows over the assets' remaining estimated useful life are less than the
assets' carrying value. Measurement of the amount of impairment may be based
upon appraisals, market values of similar assets or estimated discounted future
cash flows resulting from the use and ultimate disposition of the asset.

INVESTMENTS

         During 1994, Whitehall obtained a 40% ownership interest in a joint
venture involved in the development of aircraft-related technology for an
initial investment of $1. The Company accounts for its investment in the joint
venture under the equity method. In 1994, Whitehall loaned $2,000 to the joint
venture, which is evidenced by a promissory note which accrues interest at a
maximum rate of 5% per annum. Principal and accrued interest became due on
January 5, 1999. During February 2000, management elected to convert the then
outstanding note and accrued interest balance into a capital contribution.
During May 2000, the Company liquidated its investment in the joint venture. In
connection with the disposition of the joint venture, the Company recorded a
charge of $859, which is included in other (income) expense in the accompanying
consolidated statement of operations.

         In August 1999, the Company obtained a 50% interest in a limited
liability corporation that designs, manufactures and installs an FAA approved
conversion kit that converts certain Boeing 727 aircraft from passenger
configuration to cargo configuration. The initial investment was $2,500. During
2000, the Company invested an additional $3,734 in the form of cash, advances
and services. The Company accounts for this investment under the equity method.

         The total carrying value of the equity investments, including Whitehall
notes receivable and accrued interest, at December 31, 1999 and 2000 was $7,647
and $6,234, respectively, and is included in other assets in the accompanying
consolidated balance sheets. Summarized balance sheet information for the equity
investments as of December 31, 1999 and 2000 is as follows:

                                                 1999                2000
                                            ---------------    ---------------

      Current assets                               $14,741         $    --
      Noncurrent assets                              3,150          13,234
      Current liabilities                            3,622           1,234
      Noncurrent liabilities                         2,000              --


         Summarized results of operations for the equity investments for the
years ended December 31, 1998, 1999 and 2000 are as follows:

                                     1998              1999             2000
                                  ------------     ------------     ------------

      Net sales                       $45,483         $38,338         $  725
      Gross profit                      7,754           7,341             --
      Net income                        5,557           5,298             --

                                      F-10
<PAGE>

INTANGIBLE ASSETS

         The costs associated with obtaining financing are included in the
accompanying consolidated balance sheets as deferred financing costs and are
being amortized over the terms of the loans to which such costs relate.
Amortization of deferred financing costs included in continuing operations for
the years ended December 31, 1998, 1999 and 2000 was $460, $510 and $2,622,
respectively, and is included in interest expense in the accompanying
consolidated statements of operations. Amortization of deferred financing costs
included in discontinued operations for the years ended December 31, 1998, 1999
and 2000 was $489, $1,214 and $11,039, respectively. During 2000, the Company
completed the sales of certain of its operations and assets and the liquidation
of a joint venture, and used the proceeds to repay senior indebtedness
outstanding under the credit facility. See Notes 4 and 7. As a result of these
dispositions, the Company's commitment under its credit facility was reduced and
the Company wrote off the deferred financing costs of $5,407 that related to
that reduction in the quarter ended December 31, 2000, of which $1,074 is
included in amortization of deferred financing costs in continuing operations
and $4,333 is included in amortization of deferred financing costs in
discontinued operations. See Note 7. The cost and accumulated amortization of
deferred financing costs as of December 31, 1999 and 2000 is as follows:

                                                    1999            2000
                                                ------------    ------------

         Original basis                             $10,951         $22,587
         Accumulated amortization                   (2,998)         (16,659)
                                                ------------    ------------
                                                     $7,953         $ 5,928
                                                ============    ============

         The excess of the purchase price over the fair values of the net assets
acquired from acquisitions of businesses has been recorded as goodwill and is
being amortized on a straight-line basis over 20 years. Effective January 1,
1999, the Company revised the estimated fair market values allocated to goodwill
and inventories relating to an acquisition accounted for under the purchase
method. This revision resulted in a reduction in goodwill and increase in
inventories of $1,410. Amortization expense for the years ended December 31,
1998, 1999 and 2000 was $784, $2,360 and $9,852, respectively. Goodwill and
accumulated amortization at December 31, 1999 and 2000 are as follows:

                                                    1999            2000
                                                ------------    ------------

         Original basis                             $54,216         $46,855

         Accumulated amortization                    (2,975)         (5,465)
                                                ------------    ------------
                                                    $51,241         $41,390
                                                ============    ============

         The Company continually evaluates whether events and circumstances have
occurred that may warrant revision of the estimated useful life of intangible
assets or whether the remaining balance of intangible assets should be evaluated
for possible impairment. The Company uses an estimate of the related
undiscounted cash flows over the remaining life of the intangible assets in
measuring whether there is an impairment. Measurement of the amount of
impairment may be based upon appraisals, market values of similar assets or
estimated discounted cash flow resulting from the use and ultimate disposition
of the asset. In April 2000, a customer which represented a significant portion
of the operations at one of the Company's heavy airframe maintenance facilities
filed for protection under the U.S. bankruptcy code. As a result of this event,
the Company has temporarily closed this facility and has determined that the
goodwill relating to this facility and certain capitalized contract costs
associated with the customer are impaired. Accordingly, during the quarter ended
December 31, 2000, the Company recorded a charge of $7,808 to write off the
carrying value of the goodwill and contract costs, which is included in
operating expenses in the accompanying consolidated statement of operations for
the year ended December 31, 2000. The Company has determined that no other
impairments have occurred.

RECENTLY ISSUED ACCOUNTING STANDARDS

         Notes receivable is comprised of notes due from KAV Inventory, LLC
("KAV"), a 50% owned limited liability company which acquired all of the
aircraft and engine spare parts inventory and the engine inventory of the
Company's redistribution operation as discussed in Note 4. These notes bear
interest at 14% and are subordinated in all respects to certain institutional
financing of KAV. Management does not expect to receive any payments under the
notes during 2001. Because of the contingencies discussed in Note 4, recognition
of interest income under the notes will be deferred and recognized as collected
following collection of all outstanding principal amounts.

                                      F-11
<PAGE>

DEFERRED INCOME

         Advance payments and deposits received on operating leases are
initially deferred and subsequently recognized as the Company's obligations
under the lease agreements are fulfilled.

ENVIRONMENTAL COSTS

         Environmental expenditures that relate to current operations are
expensed as incurred. Remediation costs that relate to existing conditions
caused by past operations are accrued when it is probable that these costs will
be incurred and can be reasonably estimated. Environmental costs are included in
operating expenses in the accompanying consolidated statements of operations.

STOCK COMPENSATION PLANS

         The Company accounts for the fair value of its grants under its stock
option plans in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). The Company adopted
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") on January 1, 1996.

INCOME TAXES

         The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS
109"). Under SFAS 109, deferred tax assets or liabilities are computed based
upon the difference between the financial statement and income tax bases of
assets and liabilities using the enacted marginal tax rate applicable when the
related asset or liability is expected to be realized or settled. Deferred
income tax expenses or benefits are based on the changes in the asset or
liability from period to period. If available evidence suggests that it is more
likely than not that some portion or all of the deferred tax assets will not be
realized, a valuation allowance is required to reduce the deferred tax assets to
the amount that is more likely than not to be realized. Future changes in such
valuation allowance would be included in the provision for deferred income taxes
in the period of change.

FINANCIAL INSTRUMENTS

         The carrying amounts of cash and cash equivalents, accounts receivable
and accounts payable approximate fair value due to the short maturity of the
instruments and the provision for what management believes to be adequate
reserves for potential losses. Management believes the fair value of the
revolving loan approximates the carrying amount of the revolving loan in the
accompanying consolidated balance sheets because management believes the
interest rate to be the fair market interest rate. The fair value of the senior
subordinated notes is $66,000 based on the market value of the notes as of
December 31, 2000. Management believes the fair value of notes receivable
approximates the carrying amount of the notes because the interest rates on the
notes represent fair market interest rates.

START UP ACTIVITIES

         In April 1998, the ACSEC issued Statement of Position ("SOP") 98-5,
"Reporting on the Costs of Start-Up Activities." SOP 98-5 establishes standards
for the reporting and disclosure of start-up costs, including organization
costs. The Company adopted SOP 98-5 effective on January 1, 1999. The adoption
of SOP 98-5 did not have a material effect on the Company's financial position
or results of operations. The Company expenses start-up costs as incurred.

COMPREHENSIVE INCOME

         For all periods presented, comprehensive income is equal to historical
net income or loss.

SEGMENT REPORTING

         In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments
of an Enterprise and Related Information". SFAS No. 131 establishes standards
for the way that public companies report selected information about operating
segments in

                                      F-12
<PAGE>

annual and interim financial reports to shareholders. It also establishes
standards for related disclosures about an enterprise's business segments,
products, services, geographic areas and major customers. SFAS No. 131, which
supersedes SFAS No. 14 "Financial Reporting for Segments of a Business
Enterprise", retains the requirement to report information about major customers
and requires that a public company report financial and descriptive information
about its reportable operating segments. Generally, financial information is
required to be reported on the basis that it is used internally for evaluating
segment performance and deciding how to allocate resources to segments. SFAS No.
131 requires that a public company report a measure of segment profit or loss,
certain specific revenue and expense items and segment assets. The Company
adopted SFAS No. 131 effective December 31, 1998. The Company operates its
businesses as a single segment: airline services.

RECENTLY ISSUED ACCOUNTING STANDARDS

         In January 2000, Securities and Exchange Commission Staff Accounting
Bulletin ("SAB") No. 101 regarding revenue recognition was issued. SAB No. 101
clarifies issues relating to revenue recognition in financial statements
including income statement presentation and disclosure. SAB No. 101 became
effective in 2000 and did not have a material effect on the Company's financial
position or the results of operations.

         In May 2000, the Emerging Issues Task Force of the Financial Accounting
Standards Board reached a consensus on Issue No. 00-14, "Accounting for Certain
Sales Incentives", ("EITF Issue No. 00-14") which addresses the recognition,
measurement and income statement classification for sales incentives offered by
vendors to customers. EITF Issue No. 00-14 became effective for the Company
during the quarter ended September 30, 2000. Sales incentives within the scope
of this issue include offers that can be used by a customer to receive a
reduction in the price of a product or service at the point of sale. The
consensus states that the cost of the sales incentive should be recognized at
the latter of the date at which the related revenue is recorded or the date at
which the sales incentive is offered. The consensus also states that when
recognized, the reduction in or refund of the selling price should be classified
as a reduction of revenue, and that if the sales incentive is a free product or
service delivered at the time of sale, the cost should be classified as an
expense. The adoption of EITF Issue No. 00-14 did not have a material effect on
the Company's financial position or results of operations.

         In March 2000, the FASB issued FASB Interpretation ("FIN") 44,
"Accounting for Certain Transactions involving Stock Compensation," which
clarifies the application of APB Opinion No. 25 for certain issues. The
interpretation was effective July 1, 2000, except for the provisions that relate
to modifications that directly or indirectly reduce the exercise price of an
award and the definition of an employee, which were effective after December 15,
1998. The adoption of FIN 44 did not have a material effect on the Company's
financial position or results of operations.

         In July 2000, the Emerging Issues Task Force ("EITF") issued 00-10,
"Accounting for Shipping and Handling Fees and Costs." EITF 00-10 became
effective in the fourth quarter of 2000. EITF 00-10 prohibits the netting of
shipping and handling costs against shipping and handling revenues. EITF 00-10
permits companies to adopt a policy of including shipping and handling costs in
cost of sales or other income statement line items. The adoption of EITF 00-10
did not have a material effect on the Company's financial position or results of
operations.

NOTE 2 - BUSINESS COMBINATIONS

ACQUISITIONS ACCOUNTED FOR UNDER THE PURCHASE METHOD OF ACCOUNTING

         In March 1998, the Company completed the acquisition of Caribe
Aviation, Inc. ("Caribe") and Caribe's wholly owned subsidiary Aircraft Interior
Design, Inc. ("AIDI") for $23,300, consisting of $5,000 in cash, and $5,000 in
promissory notes payable over two years; the issuance of 182 shares of the
Company's common stock; and the repayment of approximately $7,600 of
indebtedness owed by Caribe and AIDI to a financial institution. See Note 8.

         In September 1998, the Company completed the acquisition of Triad
International Maintenance Corporation ("TIMCO") for $63,300 in cash.
Additionally, as a part of the transaction, the Company agreed to guarantee
certain industrial revenue bond financing incurred in connection with the
development of TIMCO's Greensboro operating facilities, in the approximate
amount of $11,700 and the Company has posted an irrevocable letter of credit to
secure its obligations thereunder.

         In August 1999, the Company completed the acquisition of the assets of
Kitty Hawk, Inc.'s airframe and JT8D engine maintenance operations ("TIMCO
Oscoda") located in Oscoda, Michigan and entered into agreements to provide
heavy airframe and engine maintenance services to Kitty Hawk for a three-year
period. Under the terms of the acquisition agreement, the Company paid $18,080
in cash and was to deliver $3,500 in purchase credits to Kitty Hawk during
future periods. The pre-acquisition operations of Kitty Hawk, Inc.'s airframe
and JT8D engine maintenance operations were not material to the operations of
the Company for 1998 or 1999. During 2000, Kitty Hawk filed bankruptcy and
recently the Company closed its airframe maintenance facility in Oscoda,
Michigan on a temporary basis. See Note 1.

         The Company's acquisitions of Caribe, AIDI, TIMCO and TIMCO Oscoda have
been accounted for under the purchase method of accounting and accordingly, the
purchase price has been allocated to the assets purchased and liabilities
assumed based upon the fair values at the date of acquisition, and their results
of operations have been included in the accompanying consolidated financial
statements from the date of acquisition.

                                      F-13
<PAGE>

         Unaudited pro forma consolidated results of operations assuming Caribe,
AIDI and TIMCO acquisitions had occurred at the beginning of the period
presented are as follows:

                                                                   December 31,
                                                                       1998
                                                                  --------------

         Revenue                                                      $ 298,532
         Income from continuing operations                               10,142
         Net income                                                      27,100
         Diluted earnings per share                                        2.13

         The unaudited pro forma results of operations are presented for
informational purposes only and may not necessarily reflect the future results
of operations of the Company or what the results of operations would have been
had the Company owned and operated these businesses as of January 1, 1998.

PURCHASE PRICE ALLOCATIONS

         The purchase price allocations for business combinations accounted for
under the purchase method of accounting (including historical accounts of
immaterial acquisitions accounted for under the pooling of interests method of
accounting) were as follows:

                                                         Year Ended December 31,
                                                         -----------------------
                                                            1998        1999
                                                         ----------   ----------

         Accounts receivable                              $  31,874   $      --
         Inventories                                         15,057       3,535
         Other current assets                                 1,127          --
         Other non-current assets                               483       1,000
         Fixed assets                                        22,245       2,322
         Goodwill                                            40,903      14,723
         Accounts payable                                    (8,842)         --
         Accrued expenses                                   (16,424)     (3,500)
         Notes payable                                       (5,000)         --
         Common stock issued                                 (5,720)         --
                                                          ---------   ---------
         Cash used in acquisitions, net of cash acquired  $  75,703   $  18,080
                                                          =========   =========

ACQUISITIONS ACCOUNTED FOR UNDER THE POOLING OF INTERESTS METHOD OF ACCOUNTING

         Shares issued to consummate acquisitions accounted for under the
pooling of interests method of accounting are reflected as outstanding for all
periods presented in the accompanying consolidated financial statements. In July
1998, the Company acquired Whitehall for consideration of 2,844 shares of AVS's
common stock. The acquisition was accounted for using the pooling of interests
method of accounting and thus, the accompanying consolidated financial
statements have been restated to give retroactive effect for the acquisition for
all periods presented. Operating revenues and net income of Whitehall in 1998
for the period prior to the pooling were $86,498 and $6,115, respectively.

NOTE 3 - ADJUSTMENTS TO CARRYING VALUE OF CERTAIN ASSETS AND OTHER CHARGES

         During the quarter ended December 31, 1999, the Company recorded
adjustments to the carrying value of certain assets and other charges totaling
approximately $60,858. These charges include a reduction in the carrying value
of the Company's inventory at December 31, 1999 of $23,351 primarily relating to
inventory held for sale by the Company's redistribution operations, a $9,830
write-down in the carrying value of the four A-300 aircraft owned by the Company
and included in inventory, and a $7,700 write-down of previously capitalized
costs expended relating to the development of a new software system which has
not been implemented and will not be completed.

                                      F-14
<PAGE>

Also included in these charges is a $7,747 addition to the allowance for
doubtful accounts receivable, $4,800 of accrued expenses relating to the runoff
of one of the Company's health insurance plans, $2,000 of Year 2000 remediation
costs, accrued severance and increased professional fees of $1,163, and the
write-off of financing fees relating to a new credit facility which did not
close and miscellaneous deposits and other assets which have been determined not
to be collectible of $4,267. These charges are substantially non-cash items.

         Of the total 1999 charges and adjustments, approximately $16,545 relate
to the Company's continuing operations and $44,313 relate to discontinued
operations. In regard to the charges incurred in relation to continuing
operations, $12,673 and $5,304, respectively, are included in cost of sales and
operating expenses, in the accompanying consolidated statement of operations for
the year ended December 31, 1999. In addition, other expense (income) included a
gain on sale of land of $1,432 for the year ended December 31, 1999.

         During the year ended December 31, 2000, the Company recorded charges
totaling $6,638 relating to the disposal of three A-300 aircraft that it owned
and an adjustment of $4,871 to the carrying value of leased assets. These
charges are included in cost of sales in the accompanying consolidated statement
of operations for the year ended December 31, 2000. In addition, during 2000,
the Company recorded charges totaling $30,016 relating to the temporary closure
of one of its heavy airframe maintenance facilities and bad debt allowances
relating primarily to a customer who filed for bankruptcy in 2000 and a customer
who recently ceased operations. These charges are included in operating expenses
in the accompanying consolidated statement of operations for the year ended
December 31, 2000.

NOTE 4 - DISCONTINUED OPERATIONS

         In September 2000, the Company completed the sale of substantially all
of the assets of its manufacturing operations for $41,000, excluding transaction
expenses and possible post-closing adjustments. The cash proceeds of the sale
were used to repay senior indebtedness.

         In December 2000, the Company completed the sale to another
redistributor Kellstrom Industries, Inc. (the "Purchaser") of substantially all
of the assets and business of its redistribution operation in a series of
transactions intended to constitute a single transaction (the "Transaction").
The aggregate purchase price received in the Transaction was $156,400,
approximately $127,000 of which was paid in cash ($122,000 after payment of
transaction expenses). The net proceeds of the Transaction were used to repay
senior indebtedness. As part of the Transaction, the Company acquired a 50%
interest in a limited liability company, KAV Inventory, LLC ("KAV") organized by
the Purchaser and the Company. Substantially all of the aircraft and engine
spare parts inventory and the engine inventory of the Company's redistribution
operation, as well as certain rotable parts inventories from two of the
Company's MR&O operations, were sold to KAV for 89% of the closing date book
value of such inventory ($148,600, subject to post-closing adjustments).
Compensation for the sale of inventory was comprised of cash of approximately
$105,000 and two subordinated notes, each in the principal amount of $13,700,
and one subordinated note in the principal amount of $15,701. The notes bear
interest at 14% per annum and are subordinated in all respects to the KAV
institutional financing. In addition, the Company posted an $8,500 letter of
credit to secure, in part, KAV's institutional financing. Further, the Company
and the Purchaser each advanced $2,300 to KAV to allow it to pay fees and costs
relating to its institutional financing. The Company and the Purchaser will
receive reimbursement of these advances after payment of the institutional
financing and prior to repayment of the senior subordinated notes.

         KAV's sole business is the liquidation of the inventory it acquired
from the Company. KAV entered into an agreement to consign all of its
inventories to the Purchaser. The Transaction agreement specifies that all of
the proceeds from sales of the inventory, less a consignment commission to the
Purchaser of 20%, will be used to pay interest and principal on KAV's
institutional debt. After the institutional debt is paid in full, proceeds from
the sale of inventory will be used to reimburse the Company and the Purchaser
for advances made to KAV to allow it to pay fees and costs relating to its
institutional financing and thereafter to pay interest and principal on the two
$13,700 notes. Interest and principal on the $15,701 note will be paid from the
remaining proceeds from the sale of inventory, less a 35% consignment commission
to the Purchaser. Under the Transaction agreement, the Company has approval
rights relating to the sale price of certain inventory. After considering a
third-party appraisal of the inventory and projections of cash distributions in
accordance with the Transaction agreement, management believes the total amount
of the notes of $29,401 will be fully realized. Interest income on the notes
will be deferred and recognized as collected following collection of all
outstanding principal amounts. The projections of cash distributions to the
Company are highly dependent upon the timing of the sales and the sale prices
obtained by the Purchaser for KAV's inventory.

                                      F-15
<PAGE>

         The second component of the Transaction consisted of a sale of certain
non-inventory assets of the redistribution operation, including one of the
$13,700 subordinated notes described above, net of certain payables assumed by
the Purchaser, for approximately $21,500, all of which was paid in cash. Under
the terms of the Transaction, the Purchaser has the right after one year from
the date of the Transaction to require the Company to repurchase receivables
sold in accordance with the Transaction to the extent they remain uncollected.
As of March 31, 2001, $8,515 of receivables sold pursuant to the Transaction
had not been collected by the Purchaser. In addition, the purchase price for the
sale of inventory and non-inventory assets is subject to post-closing
adjustments as set forth in the agreements. The Purchaser has indicated that
post-closing adjustments would result in a reduction in the aggregate
consideration received pursuant to the Transaction of approximately $4,500. The
Company has notified the Purchaser of its intention to dispute their calculation
of post-closing adjustments and the proposed reduction in consideration. While
there can be no assurance, the Company does not believe that the resolution of
this dispute or the amount of receivables which the Company may ultimately be
obligated to repurchase will have a material impact on the Company's financial
position or results of operations. During the year ended December 31, 2000, the
Company recorded a charge of $56,700, including $20,400 in the quarter ended
December 31, 2000, to reduce the carrying value of its investment in the
redistribution operation to its estimated net realizable value.

         In addition, as part of the sale of the redistribution operations
described above, the Purchaser leased a facility and certain furniture, fixtures
and equipment used in the redistribution operations for a one-year period. The
Purchaser has an option to acquire these assets during the term of the lease and
after one year the Company has an option to require the Purchaser to acquire the
assets, which can be extended by the Purchaser for six months under certain
circumstances. The Company also entered into a sublease agreement relating to
the redistribution operation's warehouse and corporate headquarters facility for
a five-year period with the right to renew for five consecutive five-year
periods at a market rental rate. The Company also entered into a non-competition
agreement whereby the Company is restricted from engaging in the redistribution
business for a period of up to five years. In addition, the Company entered into
a cooperation agreement under which it agreed to provide repair services for the
KAV parts inventory and the Purchaser's parts inventory and the Purchaser agreed
to supply parts to the Company's MR&O operations.

         In December 2000, the Company completed the sale of the stock of its
subsidiary, Aviation Sales Bearings Company, which operates the Company's Dixie
Aerospace Bearings new parts distribution operation. In the transaction, the
Company received net aggregate consideration of $17,700 inclusive of debt
assumed by the purchaser. The net cash proceeds from the sale, which
approximated $13,500, were used to reduce outstanding senior indebtedness. Also,
as part of the transaction, the Company retained certain accounts receivable and
inventories. Such retained assets are being sold and collected pursuant to
consignment and collection agreements executed with the purchaser. The Company
anticipates that the liquidation of these assets will provide additional
consideration as these receivables are collected and inventory is sold.

         The net income (loss) of these operations prior to their respective
disposal dates net of income taxes, is included in the accompanying consolidated
statements of operations under "discontinued operations". Previously issued
financial statements have been changed to reflect those operations as
discontinued operations. Revenues from such operations through the disposal
dates were $316,367, $317,326 and $222,299 for the years ended December 31,
1998, 1999 and 2000, respectively. The aggregate results of operations of the
discontinued operations through the disposal dates, net of income tax provision
(benefit) of $11,865, $(16,758) and $624, were $16,959, $(24,721) and ($23,432)
for the years ended December 31, 1998, 1999 and 2000, respectively.

         The provision for loss on disposal of discontinued operations reflected
in the accompanying consolidated statement of operations for 2000 of $73,325
includes the write-down of the assets of the operations to estimated net
realizable values, subject to post-closing adjustments. No expected tax benefit
has been recorded relating to the provision for loss on disposition as all loss
carrybacks relating to the discontinued operations have been utilized and the
Company has provided a full valuation allowance on its deferred tax assets (see
Note 13).

                                      F-16
<PAGE>

         A summary of the net assets of the discontinued operations as of
December 31, 1999 and 2000 is as follows:

                                                     1999             2000
                                                  -----------     -----------

         Accounts receivable, net                 $    71,392     $     8,492
         Inventories                                  260,464           6,565
         Other current assets                           3,829             137
         Fixed assets, net                             26,771           9,356
         Other assets                                  19,858           2,081
         Accounts payable and accrued expenses        (67,917)        (19,077)
         Notes payable                                     --          (4,075)
                                                  -----------     -----------
         Net assets of discontinued operations    $   314,397     $     3,479
                                                  ===========     ===========

         The above amounts are net of reserves of $28,185 and $28,048 as of
December 31, 1999 and 2000, respectively.

NOTE 5 - ACCOUNTS RECEIVABLE

         The Company distributes products and services to commercial airlines,
air cargo carriers, distributors, maintenance facilities, corporate aircraft
operators and other companies. The Company performs periodic credit evaluations
of its customers' financial conditions and provides allowances for doubtful
accounts as required. Accrued sales not billed for aircraft maintenance services
are billed on the basis of contract terms (which are generally on completion of
an aircraft) and deliveries. Accrued sales not billed amounted to $45,074 and
$28,733 at December 31, 1999 and 2000, respectively, and are included in
accounts receivable in the accompanying consolidated balance sheets.

         The Company's top ten customers combined accounted for approximately
49.6% and 56.2% of operating revenues, for the years ended December 31, 1999 and
2000, respectively. One customer accounted for 22.6% and 14.0% of operating
revenues for the years ended December 31, 1999 and 2000, respectively. No other
customer accounted for more than 10% of operating revenues in 1999 and 2000. No
customer accounted for more than 10% of accounts receivable as of December 31,
1999 and 2000. These was no concentration of credit risk associated with any
specific customer in 1998.

NOTE 6 - EQUIPMENT ON LEASE

         In the normal course of business, the Company leases engines and spare
parts to third parties pursuant to noncancelable operating leases ranging from
one to ten years. The cost and accumulated amortization of equipment on lease
are as follows:

                                                  December 31,
                                              --------------------
                                                1999        2000
                                              --------     -------

         Equipment on lease, at cost          $ 19,755     $ 7,156
         Accumulated amortization               (2,362)     (1,407)
                                              --------     -------
                                              $ 17,393     $ 5,749
                                              ========     =======

         Deposits of $1,113 and $36 as of December 31, 1999 and 2000,
respectively, received on outstanding leases are recorded as deferred income in
the accompanying consolidated balance sheets and will be applied in connection
with the final settlement of these leases. Amortization expense on equipment on
lease amounted to $2,018, $2,151 and $1,035 for the years ended December 31,
1998, 1999 and 2000, respectively. Future minimum lease payments receivable
under outstanding leases are as follows:

                 Years ending December 31,
            ---------------------------------

                            2001                       $ 1,162
                            2002                           753
                            2003                           226
                            2004                           104
                                                 --------------
                                                        $2,245
                                                 ==============

                                      F-17
<PAGE>

NOTE 7 - NOTES PAYABLE AND REVOLVING LOAN

         Prior to May 31, 2000, the Company had a revolving loan and letter of
credit facility (the "Credit Facility") of $300,000 with a group of financial
institutions. Effective May 31, 2000, the Credit Facility was amended and the
commitment was reduced to $285,000. Following the liquidation of the AvAero
joint venture, and the sales of the A-300 aircraft, manufacturing operations and
redistribution operations described above, the commitment was reduced to
$88,000. As of April 17, 2001, the commitment is effectively $75,000. The Credit
Facility expires in July 2002. The Credit Facility was further amended on June
25, 2000, September 30, 2000, November 28, 2000, February 14, 2001 and April 17,
2001. Interest under the Credit Facility is, at the option of the Company, (a)
prime plus 3.0%, or (b) LIBOR plus 4.5%. During the year ended December 31, 1999
and 2000, the weighted average interest rate on the Credit Facility was 7.21%
and 10.94%, respectively. As of December 31, 1999 and December 31, 2000, the
outstanding balance on the Credit Facility was $269,580 and $35,959,
respectively. Borrowings under the Credit Facility are secured by a lien on
substantially all of the Company's assets and the borrowing base consists
primarily of certain of the Company's receivables and inventory.

         The Credit Facility contains certain financial covenants regarding the
Company's financial performance and certain other covenants, including
limitations on the amount of annual capital expenditures and the incurrence of
additional debt, and provides for the suspension of borrowing and repayment of
all debt in the event of a material adverse change in the business of the
Company or a change in control as defined. A default under the Credit Facility
could potentially result in a default under other agreements to which the
Company is a party, including its lease agreements. In addition, the Credit
Facility requires mandatory repayments and a reduction in the total commitment
under the Credit Facility from the proceeds of a sale of assets or an issuance
of equity or debt securities or as a result of insufficient collateral to meet
the borrowing base requirements thereunder. At December 31, 1999 and March 31,
2000, the Company was not in compliance with certain of the financial covenants
contained in the Credit Facility. The financial institutions which are party to
the Credit Facility agreed to forbear in regards to these covenant violations
and other matters until May 31, 2000 at which point in time the Credit Facility
was amended. The Credit Agreement was further modified effective June 25, 2000,
September 30, 2000, November 28, 2000, February 14, 2001 and April 17, 2001. The
Company was required to pay fees of $3,000 in relation to the standstill
agreement associated with the early 2000 forbearance, which were amortized over
the period from February 1, 2000 through May 31, 2000. In connection with the
June 25, 2000 amendment, the Company paid fees of $2,154, which are being
amortized between July 1, 2000 and June 30, 2002. To the extent the Credit
Facility remains outstanding as of certain dates, the Company is committed to
pay incremental financing fees as follows: June 30, 2001 - $1,000, August 14,
2001 - 2% of outstanding commitment less $1,000, November 14, 2001 - 2% of
outstanding commitment and February 14, 2002 - 2% of outstanding commitment. At
December 31, 2000, $2,441 was available for borrowing under the Credit Facility
and outstanding letters of credit aggregated $30,233.

         In February 2000, the Company executed a $15,500 term loan with the
financial institution that is the agent under the Credit Facility. The term loan
is senior secured debt, bears interest at 12% per annum, contains financial
covenants which are consistent with the Credit Facility and matures in July
2002. Principal payments of $500 per month are due beginning in January 2002
with a final principal payment of $12,000 due in July 2002. Under the term loan
agreement, the Company also granted the lender common stock purchase warrants to
purchase 129 shares of the Company's common stock exercisable for nominal
consideration at any time until December 31, 2005. If the term loan is not
repaid in full, the warrants entitle the holder to require the Company,
subsequent to July 31, 2000 and subject to a vesting schedule, to repurchase the
warrants or common shares issued upon prior exercise of the warrants at $8.50
per share. The lender has not required the Company to repurchase any warrants
through December 31, 2000. The Company has recorded the value of these warrants
($1,079) as additional deferred financing costs and is amortizing this amount to
interest expense over the term of the loan.

         In February 2001, the Company obtained a $10,000 term loan from a
financial institution. The term loan is senior secured debt, bears interest at
LIBOR plus 2% and matures in August 2002. The proceeds of the term loan were
used to pay the semi-annual interest payment on the senior subordinated notes in
February 2001 of $6,704 and for working capital purposes. In connection with the
term loan, the Company issued warrants to purchase 250 shares of its unissued
common stock at an exercise price of $4.00 per share to each of four
individuals, two of whom

                                      F-18
<PAGE>

are officers and/or directors of the Company and one of whom is a principal
stockholder of the Company. Each of these individuals provided credit support to
the financial institution which advanced the loan proceeds.

SENIOR SUBORDINATED NOTES

         In February 1998, the Company sold $165,000 of senior subordinated
notes with a coupon rate of 8.125% at a price of 99.395%. The proceeds of the
sale were used to repay all amounts then outstanding under the Credit Facility
and to fund the cash requirements related to certain acquisitions. The senior
subordinated notes mature on February 15, 2008. Interest is payable on February
15 and August 15 of each year. The senior subordinated notes are general
unsecured obligations of the Company, subordinated in right of payment to all
existing and future senior debt, including indebtedness outstanding under the
Credit Facility and under facilities which may replace the Credit Facility in
the future. In addition, the senior subordinated notes are effectively
subordinated to all secured obligations to the extent of the assets securing
such obligations, including the Credit Facility.

         The indenture pursuant to which the senior subordinated notes have been
issued permits the Company and its subsidiaries to incur additional
indebtedness, including additional senior debt. Under the indenture, the Company
may borrow unlimited additional amounts so long as after incurring such debt it
meets a fixed charge coverage ratio for the most recent four fiscal quarters.
Additionally, the indenture allows the Company to borrow and have outstanding
additional amounts of indebtedness (even if it does not meet the required fixed
charge coverage ratios), up to enumerated limits. The Company did not meet the
fixed charge coverage ratio for the one-year period ended December 31, 2000.
Accordingly, its ability to incur additional debt is currently limited under its
indenture. The senior subordinated notes are also effectively subordinated in
right of payment to all existing and future liabilities of any of its
subsidiaries which do not guarantee the senior subordinated notes.

         The senior subordinated notes are fully and unconditionally guaranteed,
on a senior subordinated basis, by substantially all of the Company's existing
subsidiaries and each subsidiary that will be organized in the future by the
Company unless such subsidiary is designated as an unrestricted subsidiary.
Subsidiary guarantees are joint and several, full and unconditional, general
unsecured obligations of the subsidiary guarantors. Subsidiary guarantees are
subordinated in right of payment to all existing and future senior debt of
subsidiary guarantors, including the Credit Facility, and are also effectively
subordinated to all secured obligations of subsidiary guarantors to the extent
of the assets securing their obligations, including the Credit Facility.
Furthermore, the indenture permits subsidiary guarantors to incur additional
indebtedness, including senior debt, subject to certain limitations. The Company
has not presented separate financial statements and other disclosures concerning
each of the subsidiary guarantors because management has determined that such
information is not material to investors.

         The senior subordinated notes are redeemable, at the Company's option,
in whole or in part, at any time after February 15, 2003, at the following
redemption prices, plus accrued and unpaid interest and liquidated damages, if
any, to the redemption date: (i) 2003--104.063%; (ii) 2004--102.708%; (iii)
2005--101.354%; and (iv) 2006 and thereafter - 100%. Upon the occurrence of a
change in control, the Company will be required to make an offer to repurchase
all or any part of each holder's senior subordinated notes at a repurchase price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest
and liquidated damages, if any, thereon to the repurchase date. There can be no
assurance that the Company will have the financial resources necessary to
purchase the senior subordinated notes upon a change in control or that such
repurchase will then be permitted under the Credit Facility.

         Under the indenture, if the Company sells assets (other than inventory
in the ordinary course of business or leases or assets subject to leases in the
ordinary course of business) with a fair market value in excess of $2,000 or for
net proceeds in excess of $2,000, the Company must comply with certain
requirements. Additionally, the Company must use the proceeds from such asset
sales, within 270 days after completion of the sales, to either permanently
repay senior debt or to acquire other businesses or assets (or, if such proceeds
are not used for these purposes, then such proceeds must be used to repurchase
senior subordinated notes). Further, if the value of the assets sold exceeds
$15,000, the Board of Directors must determine that the Company is receiving
fair market value for the assets sold.

         The indenture contains certain other covenants that, among other
things, limit the Company's ability and that of its subsidiaries to incur
additional indebtedness and issue preferred stock, pay dividends or make other
distributions, make investments, issue capital stock of subsidiaries, create
certain liens securing indebtedness, enter

                                      F-19
<PAGE>

into certain transactions with affiliates, sell assets or enter into certain
mergers and consolidations or sell all or substantially all of the Company's
assets.

OTHER LOANS

         In connection with the Company's acquisition of Kratz-Wilde Machine
Company in October 1997, a subsidiary of the Company delivered a
non-interest-bearing promissory note (guaranteed by the Company) to the sellers
in the original principal amount of $2,500 (discounted to $2,200). A payment of
$1,250 was made during January 1999 and the final payment of $1,250 was made
during January 2000. Interest on this note was imputed at 8%.

         In connection with the acquisition of Caribe and AIDI, a subsidiary of
the Company delivered to the sellers a promissory note in the original principal
amount of $5,000, which was guaranteed by the Company. The note was payable over
a two year period with an interest rate of 8% per annum. The first payment of
$2,500 was made during March 1999 and the second payment of $2,500 was made
during March 2000. See Note 8.

NOTE 8 - RELATED PARTY TRANSACTIONS

         The Company leased its former corporate headquarters and warehouse in
Miami, Florida (the "Miami Property") from an entity controlled by certain
stockholders of the Company. The lease on the Miami Property called for annual
payments in the amount of $893 expiring on December 2, 2014. In connection with
the purchase of the Miami Property by the related party, the Company made an
unsecured $2,466 loan to the related party, which bears interest at 8% per
annum. The loan was being repaid in monthly installments with any remaining
outstanding principal and interest due on December 2, 2004. In January 2001, the
loan was sold to a principal shareholder of the Company for 90% of the then
outstanding principal balance of $2,006. In March 2001, the Miami Property was
sold and the Company was relieved of its remaining obligations under the lease
agreement.

         The Company also leases two facilities and periodically utilizes
aircraft owned by an officer/director of the Company. Total expense incurred in
relation to these items was $1,370 and $2,707 in 1999 and 2000, respectively.
This same officer/director sold Caribe and AIDI to the Company in 1998. See
Note 2.

         Certain shareholders of the Company provided letters of credit in the
aggregate amount of $8.0 million for the benefit of Bank of America, as agent
under the Kellstrom Industries, Inc. senior credit facility, in connection with
the Transaction.

         See Note 7 for a description of debt guarantees by certain officers,
directors and principal stockholders in connection with a term loan to the
Company. See Note 11 for a description of credit support provided by certain
stockholders in connection with an amendment to an operating lease of the
Company.

         The Company believes that the terms of its agreements with related
parties are no less favorable than could have been obtained from unaffiliated
third parties.

         At December 31, 1997, as payment of bonuses, six officers of the
Company were each granted 3 shares of the Company's common stock. On June 18,
1998, the Compensation Committee of the Company's Board of Directors rescinded
this share grant. No consideration was provided or will be provided in the
future in connection with the rescission.

NOTE 9 - PREFERRED SHARE PURCHASE RIGHTS

         On November 2, 1999, the Company declared a dividend distribution of
one Preferred Share Purchase Right (a "Right") on each outstanding share of its
common stock. Each Right will entitle shareholders to buy one one-thousandth of
a share of newly created Series A Junior Participating Preferred Stock of the
Company at an initial exercise price of $90.00. In general, the Rights become
exercisable if a person or group hereafter acquires 15% or more of the
outstanding common stock of the Company or announces a tender offer for 15% or
more of the common stock. The Board of Directors will in general be entitled to
redeem the Rights at one percent per Right at any time before any such person
hereafter acquires 15% or more of the outstanding common stock.

                                      F-20
<PAGE>

         In March 2000, the Company amended the rights agreement to allow one of
its stockholders to acquire beneficial ownership of up to 25% of the outstanding
shares of the Company. Simultaneously, the stockholder agreed not to engage in
certain activities without the prior approval of a majority of the Company's
disinterested board members. In December 2000, the rights agreement was further
amended to allow the same stockholder to increase its beneficial ownership to up
to 30% of the outstanding shares of the Company.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

LITIGATION AND CLAIMS

         Several lawsuits have been filed against the Company and certain of its
officers and directors, and its auditors, in the United States District Court
for the Southern District of Florida, which have now been consolidated into a
single lawsuit. The consolidated complaint, as amended in March 2000 and in
September 2000, alleges violations of Sections 11 and 15 of the Securities Act
of 1933 and Sections 10(b) and 20(a) of, and Rule 10b-5 under, the Securities
Exchange Act of 1934. Among other matters, the amended consolidated complaint
alleges that the Company's reported financial results were materially misleading
and violated generally accepted accounting principles. The amended consolidated
complaint seeks damages and certification of two classes, one consisting of
purchasers of the Company's common stock in the June 1999 public offering and
one consisting of purchasers of the Company's common stock during the period
between April 30, 1997 and April 14, 2000. The Company has filed a motion to
dismiss the claims in the amended consolidated complaint. The Company believes
that the allegations contained in the amended consolidated complaint are without
merit and intends to vigorously defend these and any related actions.
Nevertheless, unfavorable resolution of these lawsuits could have a material
adverse effect on the Company in one or more future periods.

         The U.S. Securities and Exchange Commission is conducting an inquiry
into the Company's accounting for certain transactions. The Company is
cooperating with the SEC in its inquiry.

         On January 8, 1999, Paine Webber Incorporated filed in the Supreme
Court of the State of New York a complaint against the Company and its
subsidiary, Whitehall, alleging breach of contract claims and related claims
against the Company and Whitehall and a tortious interference with a contract
claim against the Company. This suit was settled in November 2000 for a non
material amount.

         On June 24, 1998, Zantop International Airlines, Inc. filed an action
against Aero Corp.-Macon, Inc., one of the Company's subsidiaries (which is now
part of TIMCO), in the Superior Court of Bibb County, Georgia. The suit was for
an unspecified amount of damages and certain equitable relief arising out of the
July 1997 sale to Aero Corp.-Macon, Inc. (then a subsidiary of Whitehall) of
certain assets used in connection with the operation of Aero Corp.-Macon, Inc.
The nature of the action involved a contractual dispute relative to certain
purchase price adjustments and inventory purchases. The Company settled the suit
for a non material amount during July 2000.

         The Company is also involved in various lawsuits and other
contingencies arising out of its operations in the normal course of business. In
the opinion of management, the ultimate resolution of these claims and lawsuits
will not have a material adverse effect upon the financial position or results
of operations of the Company.

ENVIRONMENTAL MATTERS

         The Company is taking remedial action pursuant to Environmental
Protection Agency and Florida Department of Environmental Protection ("FDEP")
regulations at TIMCO-Lake City. Ongoing testing is being performed and new
information is being gathered to continually assess the impact and magnitude of
the required remediation efforts on the Company. Based upon the most recent cost
estimates provided by environmental consultants, the Company believes that the
total testing, remediation and compliance costs for this facility will be
approximately $1,400. Testing and evaluation for all known sites on TIMCO-Lake
City's property is substantially complete and the Company has commenced a
remediation program. The Company is currently monitoring the remediation, which
will extend into the future. Subsequently, the Company's accruals were increased
because of this monitoring, which indicated a need for new equipment and
additional monitoring. Based on current testing, technology, environmental law
and clean-up experience to date, the Company believes that it has established an
accrual for a reasonable estimate of the costs associated with its current

                                      F-21
<PAGE>

remediation strategies. To comply with the financial assurances required by the
FDEP, the Company has issued a $1,400 standby letter of credit in favor of the
FDEP.

         Additionally, there are other areas adjacent to TIMCO-Lake City's
facility that could also require remediation. The Company does not believe that
it is responsible for these areas; however, it may be asserted that Whitehall
and other parties are jointly and severally liable and are responsible for the
remediation of those properties. No estimate of any such costs to the Company is
available at this time.

         The Company owns a parcel of real estate on which Whitehall previously
operated an electronics business. The Company is currently assessing
environmental issues with respect to this property. When the Company acquired
Whitehall, its environmental consultants estimated that remediation costs
relating to this property could be up to $1,000.

         Accrued expenses in the accompanying December 31, 1999 and 2000
consolidated balance sheets includes $3,148 and $1,702, respectively, related to
obligations to remediate the environmental matters described above. Future
information and developments will require the Company to continually reassess
the expected impact of the environmental matters discussed above. Actual costs
to be incurred in future periods may vary from the estimates, given the inherent
uncertainties in evaluating environmental exposures. These uncertainties include
the extent of required remediation based on testing and evaluation not yet
completed and the varying costs and effectiveness of remediation methods.

OTHER MATTERS

         The Company has employment agreements with certain of its officers and
key employees which extend from two to four years. The employment agreements
provide that such officers and key employees may earn bonuses, based upon a
sliding percentage scale of their base salaries, provided the Company achieves
certain financial operating results, as defined. Further, certain of these
employment agreements provide for certain severance benefits in the event of a
change of control.

         The Company has a commitment with a vendor to convert one Airbus
aircraft from passenger configuration to cargo configuration. The terms of the
agreement specify that the Company has the right to terminate the agreement;
however, the Company could be subject to a termination fee. The termination fee
would be calculated as the unused costs incurred by the vendor plus a fee equal
to 10% of such unused costs.

NOTE 11 - LEASES

         On December 17, 1998, the Company entered into an operating lease for
its build-to-suit corporate headquarters and warehouse facility with First
Security Bank, National Association, as trustee of a newly created trust, as
lessor. The lease has an initial term of five years and is a triple net lease
with annual rent as provided in the lease. The lease contains financial
covenants regarding the Company's financial performance and certain other
affirmative and negative covenants which it will be obligated to comply with
during the term of the lease.

         Substantially all of the Company's subsidiaries have guaranteed the
Company's obligations under the lease. Additionally, the Company has an option
to acquire the new facility at the end of the lease for an option price as
determined in the lease. Alternatively, if the Company does not purchase the new
facility at the end of the lease, it will be obligated to pay certain amounts as
provided in the lease. Management estimates that the current fair value of the
facilities exceeds the Company's purchase option. Accordingly, no accrual for
the obligation has been recorded by the Company.

         Lease payments are currently at a rate of LIBOR plus 4.50% and the
Company is responsible for all property taxes, insurance and maintenance of the
property. The Company has subleased a portion of the facility to the purchaser
of the Company's redistribution business (see Note 4). The sublease is for an
initial term of five years

                                      F-22
<PAGE>

with an additional option to renew for five consecutive five-year terms at
market rates. Payments during the initial term are the lesser of $384 per month
or the actual amount paid by the Company relating to the premises subleased. See
Note 4.

         The development of the new facility was financed by the trust through a
$43,000 loan facility provided by a financial institution. Pursuant to the
agreements entered into in connection with this financing, the Company was
obligated to develop the new facility on behalf of the trust and was responsible
for the timely completion thereof within an established construction budget. The
Company and substantially all of its subsidiaries have guaranteed the repayment
of $37,840 of the trust's obligations under the agreements. The trust's
obligations under these agreements are secured by a lien on the real property
and improvements comprising the facilities and on the fixtures therein. Further,
the Company has posted an irrevocable letter of credit in favor of the trust in
the amount of $9,000 to secure both its obligations under the lease and the
trust's obligations under these agreements.

         The Company was not in compliance at December 31, 1999 and March 31,
2000 with certain of the financial covenants contained in the lease agreement.
The lessor agreed to forbear in regards to these covenant violations and other
matters until May 31, 2000 at which point in time the lease agreement was
amended. The lease agreement was further modified effective June 25, 2000,
September 30, 2000, November 28, 2000, December 31, 2000, February 14, 2001 and
April 19, 2001. Under the terms of the April 19, 2001 amendment, two
shareholders of the Company provided a guarantee in relation to the proceeds to
be received from the sale of one of the leased buildings in an amount up to $1.0
million. Such guarantee expires January 2, 2002. As part of the amendment, the
lessor has agreed to waive non-compliance with financial covenants, if any,
through the period ended December 31, 2001. The Company will assess the
accounting impact, if any, including the classification of the lease, as a
result of this amendment during 2001.

         The Company leases certain buildings and office equipment under
operating lease agreements. Two of the buildings are leased from related parties
of the Company (see Note 8). For the years ended December 31, 1998, 1999 and
2000, rent expense under all leases amounted to $2,423, $8,112 and $8,090,
respectively. Minimum rental commitments under all leases are as follows:

<TABLE>
<CAPTION>
                                                    Operating Leases                     Capital Leases
                                         -----------------------------------------     ------------------
                                             To related
                                              parties            To third parties
                                         ------------------    -------------------
         Years Ending December 31,
    ----------------------------------
               <S>                                <C>                    <C>                    <C>
                    2001                          $    181               $ 10,808               $    432
                    2002                                --                 10,644                    432
                    2003                                --                 10,571                    432
                    2004                                --                 10,126                    432
                    2005                                --                  9,864                    432
                 Thereafter                             --                 78,293                  5,649
                To interest                             --                     --                 (3,779)
                                         ------------------    -------------------     ------------------
                                                  $    181               $130,306               $  4,030
                                         ==================    ===================     ==================
</TABLE>

                                      F-23
<PAGE>
NOTE 12 - EARNINGS PER SHARE

         The Company adopted Statement of Financial Accounting Standards No. 128
("SFAS 128"), "Earnings Per Share" during 1997. SFAS 128 establishes standards
for computing and presenting basic and diluted earnings per share. Basic
earnings per share is computed by dividing net income by the weighted average
common shares outstanding during the year. Diluted earnings per share is based
on the combined weighted average number of common shares and common share
equivalents outstanding which include, where appropriate, the assumed exercise
of options and warrants. In computing diluted earnings per share, the Company
has utilized the treasury stock method. The computation of weighted average
common and common equivalent shares used in the calculation of basic and diluted
earnings per share is as follows:
<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                             -----------------------------------------------------------
                                                                  1998                 1999                 2000
                                                             ----------------     ----------------    ------------------
<S>                                                                   <C>                  <C>                   <C>
Weighted average shares outstanding used in
calculating basic earnings per share                                  12,277               13,906                15,015
Effect of dilutive options and warrants                                  419                  262                     -
                                                             ----------------     ----------------    ------------------
Weighted average common and common equivalent shares                  12,696               14,168                15,015
                                                             ================     ================    ==================
Options and warrants outstanding which are not
included in the calculation of diluted earnings per
share because their impact is antidilutive                                55                1,680                 2,247
                                                             ================     ================    ==================
</TABLE>
         For business combinations accounted for as pooling of interests,
earnings per share computations are based on the aggregate of the
weighted-average outstanding shares of the constituent businesses, adjusted to
equivalent shares of the surviving business for all periods presented.

NOTE 13 - INCOME TAXES

         Income tax expense (benefit) relating to continuing operations for the
years ended December 31, 1998, 1999 and 2000 consists of the following:
<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                             -----------------------------------------------------------
                                                                   1998                 1999                 2000
                                                             ----------------     ----------------    ------------------
<S>                                                                  <C>                 <C>                    <C>
Current
  Federal                                                            $ 2,483             $(13,430)              $ 2,328
  State                                                                1,174               (2,182)                1,020
                                                             ----------------     ----------------    ------------------
                                                                       3,657              (15,612)                3,348
                                                             ----------------     ----------------    ------------------
Deferred
  Federal                                                                703               14,395                 1,515
  State                                                                  (79)               4,221                   (53)
                                                             ----------------     ----------------    ------------------
                                                                         624               18,616                 1,462
                                                             ----------------     ----------------    ------------------
Income tax expense related to continuing operations                  $ 4,281             $  3,004               $ 4,810
                                                             ================     ================    ==================
<CAPTION>
                                                                              Year Ended December 31,
                                                             -----------------------------------------------------------
                                                                   1998                 1999                 2000
                                                             ----------------     ----------------    ------------------
<S>                                                                  <C>                 <C>                    <C>
Current
  Federal                                                            $13,751             $(15,285)              $ 2,370
  State                                                                2,899               (1,643)                1,260
                                                             ----------------     ----------------    ------------------
                                                                      16,650              (16,928)                3,630
                                                             ----------------     ----------------    ------------------
Deferred
  Federal                                                               (447)               3,964                 1,804
  State                                                                  (57)                (790)                   --
                                                             ----------------     ----------------    ------------------
                                                                        (504)               3,174                 1,804
                                                             ----------------     ----------------    ------------------
Income tax expense (benefit) related to continuing and
  discontinued operations                                            $16,146             $(13,754)              $ 5,434
                                                             ================     ================    ==================
</TABLE>

                                      F-24
<PAGE>

         The tax effects of temporary differences that give rise to significant
portions of net deferred tax assets as of December 31, 1999 and 2000 are as
follows:

<TABLE>
<CAPTION>
                                                                 December 31,
                                                     ------------------- -- ------------------
                                                            1999                  2000
                                                     -------------------    ------------------
<S>                                                            <C>                   <C>
Deferred tax assets, net:
  Allowance for doubtful accounts                              $  1,570              $ 12,523
  Accruals                                                        1,310                 8,951
  Writedown of investment                                         1,800                 1,800
  Inventories                                                    12,808                 2,354
  Property and equipment                                         (4,804)                  552
  Spare parts on lease                                           (1,161)                 (211)
  NOL/Credit carryforwards                                        1,642                62,070
  Other                                                          (9,298)               (3,925)
                                                     -------------------    ------------------
                                                                  3,867                84,114
Less:  valuation allowance                                       (2,405)              (84,114)
                                                     -------------------    ------------------
Net deferred tax assets                                        $  1,462              $     --
                                                     ===================    ==================
</TABLE>

         As of December 31, 2000, the Company has net operating loss carry
forwards of approximately $156,000 which begin to expire in 2020. The Company
has established a valuation allowance to offset the net deferred tax assets that
have resulted from items that will only be deductible when such items are
actually incurred. The valuation allowance will be maintained until it is more
likely than not that these net deferred tax assets will be realized.

         The reconciliation of the federal statutory rate and the Company's
effective tax rate is as follows for the years ended December 31, 1998, 1999 and
2000:

<TABLE>
<CAPTION>
                                                                  1998                 1999                 2000
                                                             ----------------     ----------------     ----------------
<S>                                                               <C>                  <C>                 <C>
Federal income tax (benefit) at the statutory rate                35.0%                35.0%               (35.0%)
Increases (reductions) in tax rate resulting from:
  Losses not currently utilized                                                                             33.5
  Change in net deferred tax asset                                (5.4)                   -                  1.3
  State income taxes, net of federal tax benefit                   6.3                 28.1                  0.6
  Other                                                            1.5                   .7                  3.9
                                                             ----------------     ----------------     ----------------
Effective income tax (benefit) rate                               37.4%                63.8%                 4.3%
                                                             ================     ================     ================
</TABLE>

NOTE 14 - STOCK OPTION PLANS

         The Company has two stock option plans (the "Plans"), (i) the 1996
Director Stock Option Plan (the "Director Plan"), under which options to acquire
a maximum of the greater of 150 shares or 2% of the number of shares of Common
Stock then outstanding may be granted to directors of the Company, and (ii) the
1996 Stock Option Plan, as amended (the "1996 Plan"), under which options to
acquire a maximum of the greater of 2,250 shares of Common Stock or 15% of the
number of shares of Common Stock then outstanding may be granted to executive
officers, employees (including employees who are directors), independent
contractors and consultants of the Company. The price at which the Company's
common stock may be purchased upon the exercise of options granted under the
Plans will be required to be at least equal to the per share fair market value
of the Common Stock on the date the particular options are granted. Options
granted under the Plans may have maximum terms of not more than ten years.
Generally, options granted under the Plans may be exercised at any time up to
three months after the person to whom such options were granted is no longer
employed or retained by the Company or serving on the Company's Board of
Directors.

         Pursuant to the Plans, unless otherwise determined by the Compensation
Committee of the Company's Board of Directors, one-third of the options granted
under the Plans are exercisable upon grant, one-third are exercisable on the
first anniversary of such grant and the final one-third are exercisable on the
second anniversary of such grant. However, options granted under the Plans shall
become immediately exercisable if the holder of such options is terminated by
the Company or is no longer a director of the Company, as the case may be,
subsequent to certain events which are deemed to be a "change in control" of the
Company.

                                      F-25
<PAGE>

         In connection with the merger with Whitehall, outstanding stock options
to purchase shares of Whitehall common stock under the Whitehall stock option
plans were converted into the right to receive that number of shares of the
Company's common stock as the holders would have been entitled to receive had
they exercised their options immediately prior to the merger and participated in
the merger.

         On January 1, 1999, the Company entered into employment agreements with
certain executive officers. The employment agreements provided for option grants
to purchase 700 shares of common stock (granted outside of any plan) at $40.625
per share, with one-third of the options granted vesting on January 1, 2000,
one-third of the options granted vesting on January 1, 2001, and one-third of
the options granted vesting on January 1, 2002.

         On November 11, 2000, the Company granted certain executive officers
the option to purchase 375 shares of common stock (granted outside of any plan)
at $3.3125 per share, with one third of the options vesting upon grant, one
third of the options granted vesting on November 11, 2001 and one third of the
options granted vesting on November 11, 2002.

         The following summarizes outstanding stock options:

<TABLE>
<CAPTION>
                                                                                       Weighted
                                                                                        Average
                                                                   Total            Exercise Price
                                                             -------------------    ----------------
<S>                                                                <C>                 <C>
Outstanding at December 31, 1997                                     746               $  23.10
     Granted                                                         446                  27.93
     Cancelled                                                        (6)                 22.85
     Exercised                                                      (101)                 17.98
                                                             -------------------    ----------------
Outstanding at December 31, 1998                                   1,085                  24.15
     Granted                                                       1,127                  35.70
     Cancelled                                                       (70)                 24.95
     Exercised                                                      (200)                 25.87
                                                             -------------------    ----------------
Outstanding at December 31, 1999                                   1,942                  30.65
     Granted                                                         611                   4.20
     Cancelled                                                      (435)                 32.58
                                                             -------------------    ----------------
Outstanding at December 31, 2000                                   2,118               $  22.63
                                                             ===================    ================

Options exercisable:
At December 31, 2000                                               1,222               $  24.11
Available to grant under Plans at December 31, 2000                1,335
</TABLE>

         The following table summarizes information about outstanding and
exercisable stock options at December 31, 2000:

<TABLE>
<CAPTION>
                                                 Outstanding                     Exercisable
                                          --------------------------    ------------------------------
                                              Weighted average                Weighted average
                                                         Remaining
                                                        contractual
                                                            life
           Range of exercise prices        Shares        (in years)       Shares        Exercise price
           --------------------------     ----------    ------------    -----------     --------------
<S>                                           <C>            <C>             <C>            <C>
            $  3.00  - $13.00                 718            9.4             331            $  6.73
               13.01 -  23.00                 265            6.1             109              17.92
               23.01 -  33.00                 386            7.3             384              26.10
               33.01 -  42.00                 749            8.5             398              38.37
           --------------------------     ----------    ------------    -----------     --------------
            $  11.00 - $42.00               2,118            8.3           1,222            $ 24.11
           ==========================     ==========    ============    ===========     ==============
</TABLE>

                                      F-26
<PAGE>

         The Company accounts for the fair value of its option grants in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" whereby no compensation cost related to stock options
is deducted in determining net income (loss). Had compensation cost for the
Company's stock option plans been determined pursuant to Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"), the Company's net income and earnings (loss) per share would have
decreased (increased) accordingly. Using the Black-Scholes option pricing model,
the Company's pro forma net income (loss), pro forma earnings (loss) per share
and pro forma weighted average fair value of options granted, with related
assumptions, are as follows:

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                           ---------------------------------------------------
                                                               1998              1999               2000
                                                           --------------    --------------     --------------
<S>                                                          <C>              <C>               <C>
     Pro forma net income (loss)                             $ 19,887         $ (26,934)        $(212,685)
     Pro forma basic earnings (loss) per share                  1.62             (1.94)           (14.16)
     Pro forma diluted earnings (loss) per share                1.57             (1.94)           (14.16)
     Risk free interest rates                                    5%               6%                 6%
     Expected lives                                         7-10 years        7-10 years        7-10 years
     Expected volatility                                        40%              62%               117%
     Weighted average grant date fair value                  $ 16.43          $  26.80          $    4.00
     Expected dividend yield                                     0%               0%                 0%
</TABLE>

NOTE 15 - SAVINGS PLAN

         Effective January 1, 1995, the Company established a qualified defined
contribution plan (the "Plan") for eligible employees. The Plan provides that
employees may contribute up to the maximum percent of pretax earnings as allowed
by the U.S. tax code and the Company may elect, at its discretion, to make
contributions to the Plan in any year. The Company contributed approximately
$810, $3,629 and $3,662 to the Plan in 1998, 1999, and 2000, respectively. The
Company does not provide retired employees with health or life insurance
benefits.

NOTE 16 - QUARTERLY FINANCIAL DATA (UNAUDITED)

         In connection with the preparation of its consolidated financial
statements for the year ended December 31, 1999, the Company identified several
transactions which, after review, should not have been recorded as revenues in
its books and records. Based upon these findings, in early February 2000, the
Company's Board of Directors organized a special committee to review certain
matters relating to the Company's accounting and sales practices. The committee
retained outside professionals to conduct an in-depth review and investigation
of these matters, which was concluded in April 2000.

         The Company concluded that seven 1999 transactions arising in its
redistribution operation should have been accounted for as exchange transactions
rather than as sales. The Company has also concluded that seven additional 1999
transactions arising in its redistribution operation should not have been
recorded as sales due to certain contingencies associated with the transactions
that had not been resolved at the date of the sales. In the aggregate, these
1999 transactions represented $32,719 of revenues of discontinued operations and
$7,269 of gross margin of discontinued operations, representing approximately
4.8% and 6.5% of the revenues and gross margin for the 1999 fiscal year,
respectively (including that of discontinued operations).

         During 2000, the Company recognized revenue related to the design and
construction of specialized parts when services were performed. Effective
December 31, 2000, such revenues are recognized when the manufactured units are
delivered. Including the effects of this change, revenues of $22,000 previously
recognized in the first three quarters of 2000 were reversed in the fourth
quarter of 2000. Income (loss) from operations for each of the quarterly periods
in the year ended December 31, 2000 was not affected by this change as no gross
margin had been recognized in relation to these revenues.

                                      F-27
<PAGE>

         Results for the quarterly periods in the years ended December 31, 1999
(as reported and as reported, with adjustments) and 2000 are as follows:

<TABLE>
<CAPTION>
                                                                       FIRST         SECOND        THIRD        FOURTH
                                                                      QUARTER       QUARTER       QUARTER       QUARTER
                                                                     ---------     ---------     ---------     ---------
                                                                           (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S>                                                                 <C>            <C>           <C>          <C>
1999, as reported:
Operating revenues                                                  $85,388       $92,493       $79,980      $113,892
Income (loss)from operations                                          5,077         7,294         4,759       (14,132)
Income (loss) from discontinued operations                            2,840         2,209         2,586       (32,356)
Net income (loss)                                                     7,917         9,503         7,345       (46,488)
Diluted income (loss) per share from continuing operations             0.39          0.55          0.31         (1.04)
Diluted income (loss) per share from discontinued operations           0.22          0.16          0.17         (2.32)
Diluted net income (loss) per share                                    0.61          0.71          0.48         (3.36)

<CAPTION>
                                                                       FIRST         SECOND        THIRD        FOURTH
                                                                      QUARTER       QUARTER       QUARTER       QUARTER
                                                                     ---------     ---------     ---------     ---------
                                                                           (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S>                                                                  <C>           <C>          <C>           <C>
1999, as reported with adjustments:
Operating revenues                                                   $ 85,388      $92,493      $79,980      $113,892
Income (loss)from operations                                            5,077        7,294        4,759       (14,132)
Income (loss) from discontinued operations                              1,820          886        1,940       (29,367)
Net income (loss)                                                       6,897        8,180        6,699       (43,499)
Diluted income (loss) per share from continuing operations               0.39         0.55         0.31         (1.04)
Diluted income (loss) per share from discontinued operations             0.14         0.06         0.13         (2.10)
Diluted net income (loss) per share                                      0.53         0.61         0.44         (3.14)

<CAPTION>
                                                                       FIRST         SECOND        THIRD        FOURTH
                                                                      QUARTER       QUARTER       QUARTER       QUARTER
                                                                     ---------     ---------     ---------     ---------
                                                                           (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S>                                                                  <C>           <C>          <C>           <C>
2000:
Operating revenues                                                   $101,876     $ 95,159     $ 81,252      $ 59,790
Income (loss)from operations                                            1,141      (17,883)     (27,720)      (71,411)
Income (loss) from discontinued operations                             (2,847)     (13,392)     (54,548)      (24,970)
Net income (loss)                                                      (1,606)     (31,275)     (82,268)      (96,481)
Diluted income (loss) per share from continuing operations               0.08        (1.19)       (1.85)        (4.76)
Diluted income (loss) per share from discontinued operations            (0.18)       (0.89)       (3.63)        (1.67)
Diluted net income (loss) per share                                     (0.10)       (2.08)       (5.48)        (6.43)
</TABLE>

         See Note 3 for a discussion of the charges recorded in the fourth
quarter of 1999 and 2000.

                                      F-28
<PAGE>

                                   SCHEDULE II

                     AVIATION SALES COMPANY AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS
                       THREE YEARS ENDED DECEMBER 31, 2000
                                 (In thousands)

<TABLE>
<CAPTION>
                                        Balance at          Additions
                                       Beginning of      charged to cost                                          Balance at end
           Description                     Year            and expenses          Other           Deductions          of year
----------------------------------     --------------    ---------------    --------------     --------------     ---------------
<S>                                          <C>                <C>                <C>                <C>               <C>
Allowances for doubtful
accounts  receivable:
Year ended December 31,
1998                                         $ 3,847            $   670            $5,304(A)         $ 2,011(B)         $ 7,810
1999                                           7,810              4,995                --              3,212(B)           9,593
2000                                           9,593             20,343                --             22,482(B)           7,454

Reserves relating to
discontinued operations:
1998                                         $ 4,742            $ 2,283            $   --            $    --            $ 7,025
1999                                           7,025             24,833                --              3,673             28,185
2000                                          28,185             18,868                --             19,005(C)          28,048
</TABLE>


         (A)      Represents allowance for doubtful accounts acquired in
                  purchase accounting.

         (B)      Represents accounts receivable written-off.

         (C)      Utilization of reserve upon disposition of business.

                                      F-29
<PAGE>

                                  EXHIBIT INDEX

EXHIBIT           DESCRIPTION

10.58             Stock Purchase Agreement, dated December 15, 2000

10.59             Amendment No. 5 and Waiver, dated as of April 17, 2001

10.60             Letter Agreement dated April 17, 2001, regarding $15.5 million
                  term loan

10.61             Amendment and Consent Agreement No. 8 for Lease Agreement and
                  Certain Other Operative Agreements

21.1              List of Subsidiaries of Registrant

23.1              Consent of Arthur Andersen LLP