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, 1999

                           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
       incorporation or organization)                  Identification No.)
    6905 NW 25TH STREET, MIAMI, FLORIDA                       33122
--------------------------------------------       ----------------------------
  (Address of principal executive offices)                  (Zip Code)

                                 (305) 592-4055
                                 --------------
                         (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 (ss.229.405) 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 13, 2000, 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 13, 2000, which was $6.25 per share) of the
Common Stock held by non-affiliates was approximately $74.3 million.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Registrant's definitive Proxy Statement for its 2000
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, 1999)
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.

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                                     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 GROWTH
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, AVAILABLE CAPITAL TO CONTINUE
TO SUPPORT OUR CURRENT OPERATIONS AND FUTURE GROWTH, OUR MAINTAINING GOOD
WORKING RELATIONSHIPS WITH OUR VENDORS AND CUSTOMERS, OUR ABILITY TO REDUCE OUR
INDEBTEDNESS FROM ITS CURRENT LEVELS THROUGH SALES OF OUR ASSETS, OUR ABILITY TO
ACQUIRE ADEQUATE INVENTORY AND TO OBTAIN FAVORABLE PRICING FOR SUCH INVENTORY,
COMPETITIVE PRICING FOR OUR PRODUCTS AND SERVICES, INCREASED COMPETITION IN THE
AIRCRAFT SPARE PARTS REDISTRIBUTION AND MAINTENANCE, REPAIR AND OVERHAUL
MARKETS, OUR ABILITY TO ATTRACT AND RETAIN QUALIFIED PERSONNEL IN OUR
BUSINESSES, OUR ABILITY TO CONSUMMATE SUITABLE ACQUISITIONS AND/OR TO CONTINUE
TO DEVELOP OUR BUSINESS INTERNALLY, UTILIZATION RATES FOR OUR MR&O FACILITIES,
OUR ABILITY TO EFFECTIVELY INTEGRATE ACQUISITIONS, OUR ABILITY TO EFFECTIVELY
MANAGE THE GROWTH OF 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 inventory and
maintenance, repair and overhaul services. We believe that we are one of the
largest redistributors of aircraft spare parts in the world and the largest
independent provider of heavy maintenance services for aircraft in North
America. We sell aircraft spare parts and provide inventory management services
and aircraft maintenance, repair and overhaul services to commercial passenger
airlines, air cargo carriers, maintenance and repair facilities and other
redistributors throughout the world. We sell airframe and engine components for
commercial aircrafts, including Boeing, Lockheed and Airbus aircraft and jet
engines manufactured by Pratt & Whitney, General Electric and Rolls Royce.

         We offer maintenance and repair services through our eleven 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. We provide
inventory management services including purchasing services, repair management,
aircraft disassembly services and consignment and leasing of inventories of
aircraft parts and engines. We also manufacture various aircraft parts for sale
to original equipment manufacturers, including precision engine parts.

         Our strategy is to be the vendor of choice to our customers, providing
total inventory management solutions (TIM) and total aircraft maintenance
solutions (TAM) to meet our customers' spare parts and maintenance, repair and
overhaul requirements. We believe our future growth will come from internal
growth. We also intend to continue our growth through selective acquisitions of
companies which add to or expand our existing product and service offerings once
we overcome our current liquidity situation and reduce our debt levels. We
expect to achieve internal growth through:

         o        increased customer penetration in existing markets;

         o        improved capacity utilization of our maintenance and repair
                  facilities; and

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         o        continued expansion of the number of products and services
                  which we offer to our customers.

         The services we offer allow our customers to reduce their costs by
outsourcing some or all of their maintenance, repair and overhaul functions and
maximize the value realized for their spare parts inventories by having us
manage the marketing process. As a leading redistributor of aircraft spare
parts, we are able to better service our maintenance and repair customers, due
to the timely availability of our extensive parts inventory. Similarly, as a
leading provider of maintenance and repair services, we are able to market our
aircraft spare parts to our airline customers.

INDUSTRY OVERVIEW

         We believe that the annual worldwide market for aircraft spare parts is
approximately $11.0 billion, of which approximately $1.3 billion reflects annual
sales of aircraft spare parts in the redistribution market. 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 the
demand for maintenance and repair services from large, fully integrated
independent service providers such as Aviation Sales will continue to increase
in the future. Some of the trends currently affecting our industry include:

         GROWTH IN THE MARKET FOR AIRCRAFT PARTS AND MAINTENANCE AND REPAIR
         SERVICES

         The Boeing 1999 Current Market Outlook report projects that:

         -        the worldwide fleet of commercial aircrafts will more than
                  double by 2018;

         -        the number of cargo jet aircraft will increase significantly
                  between 1998 and 2018; and

         -        the aircraft fleet will continue to age.

         We believe that a combination of these factors will increase the demand
for aircraft spare parts from the redistribution market and for maintenance and
repair services.

         INCREASED OUTSOURCING OF INVENTORY MANAGEMENT AND 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 obtaining replacement parts from the redistribution
market and outsourcing inventory management and maintenance and repair functions
are areas in which airlines can reduce their operating costs. Outsourcing of
inventory management and 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.

         REDUCTIONS IN NUMBER OF APPROVED VENDORS

         In order to reduce costs and streamline decisions, airlines have been
reducing the number of their approved vendors. During the last few years,
several major airlines have reduced their supplier lists from as many as 50 to a
core group of five to ten suppliers. As a result of reductions in the supplier
base by airlines, there has been and we believe there will continue to be a
consolidation in the redistribution market.

         CONSIGNMENT

         Some of our customers adjust inventory levels periodically by disposing
of excess aircraft parts. Traditionally, larger airlines have used internal
sales agents to manage these dispositions. We believe that major airlines and
other owners

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of aircraft spare parts, in order to concentrate on their core businesses and to
more effectively redistribute their excess parts inventories, enter into
long-term consignment agreements with redistributors. Consigning inventories to
a redistributor like Aviation Sales allows customers to distribute their
aircraft spare parts to a larger number of prospective inventory buyers, and
allows the customers to maximize the value of their inventory. Consignment also
enables us to offer for sale a significant parts inventory at minimal capital
cost to us. Consignment agreements are generally entered into on a long-term
basis for a large group of parts or entire aircrafts which are disassembled for
sale of the individual parts. The Boeing 1999 Current Market Outlook report
projects that the operators and owners will remove approximately 2,300 aircraft
from active commercial service between 1999 and 2008 with two out of three
expected to be removed during the next five years. Many of these aircraft will
be disassembled in order to sell their parts.

COMPETITIVE STRENGTHS

         We believe that our strong competitive position is based on our diverse
product and service offerings, our reputation for quality products and service
offerings, our sophisticated inventory management information systems and a
consistent record of meeting rigorous customer requirements.

         DIVERSIFIED PRODUCTS AND SERVICES

         We believe that the breadth of our product offerings and services,
including a wide range of aircraft parts, maintenance and repair services
and specialized manufacturing, allows us to be a vendor of choice to our
customers in a highly fragmented industry. Aviation Sales has over 1,000
customers, including commercial passenger airlines, air cargo carriers,
maintenance and repair facilities and other distributors and redistributors.

         LARGE INVENTORY BASE

         We believe that we have one of the largest inventories of aircraft
spare parts in the world, with over 555,000 line items currently in stock. Our
inventory supports a wide range of aircraft in the worldwide commercial fleet
including Airbus A300, A31x, A32x and A340 series aircraft, Boeing 707, 727,
737, 747, 757, 767 and 777 series aircraft, McDonnell Douglas (now part of
Boeing) DC-8, DC-9, DC-10, MD-8x and MD-11 series aircraft, and the Lockheed
L-1011 aircraft. In addition, we have parts available for a broad range of
General Electric, Pratt & Whitney and Rolls Royce engines.

         PROPRIETARY MANAGEMENT INFORMATION SYSTEMS

         Our proprietary management information systems (MIS) are an integral
component of our position as a leader in our industry. Documentation and
traceability of aircraft parts have become key factors in determining which
companies will be able to effectively compete in the redistribution business
because industry, regulatory and public awareness have focused on safety. The
requirement to be able to provide documentation about each part sold has also
made it more expensive for new entrants to become involved in the redistribution
market, and therefore may act as a barrier to new entrants into our market. Our
MIS systems collect and report data regarding inventory turnover, documentation,
pricing, market availability and customer demographic information. We have
pricing information on more than 3.7 million inventory line items. Access to
such information enables us to be aware of and to capitalize on the changing
trends in the marketplace. We utilize electronic data scanning and document
image storage technology for rapid and accurate retrieval of inventory
traceability documents. We intend to continue to invest in technology in order
to allow us to maintain our strength in this area.

         EMPHASIS ON QUALITY

         Our information systems allow us to provide documentation that enables
the aircraft parts we distribute and the maintenance we perform on them to be
traced in a manner that meets or exceeds FAA requirements. As industry,
regulatory and public awareness have focused on safety, our ability to track
this information has become important to customers.

         All of our maintenance and repair facilities are licensed by the FAA.
We emphasize quality and on-time delivery to our customers.

         WORLDWIDE MARKETING PRESENCE

         Our international presence allows us to meet the demands of our global
customer base and to supply parts and services on a timely basis. We sell
aircraft parts to customers located in more than 100 countries and utilize sales

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representatives in 23 countries. During the years ended December 31, 1997, 1998
and 1999, 24%, 18% and 14% of our revenues were derived from sales to
international customers and 76%, 82% and 86% of our revenues were derived from
sales to domestic customers.

         SIGNIFICANT INFORMATION RESOURCES

         Our market presence, industry experience and sophisticated management
information systems enable us to quickly analyze and complete acquisitions of
inventory, giving us what we believe to be a competitive advantage in the
market.

AIRCRAFT SPARE PARTS

         Aircraft spare parts can be categorized by their ongoing ability to be
repaired and returned to service. The general categories are as follows:

         o        rotable;

         o        repairable; and

         o        expendable.

         A rotable is a part which is removed periodically as dictated by an
operator's maintenance program or on an as needed basis and is typically
repaired or overhauled and re-used an indefinite number of times. An important
subset of rotables is life limited parts. A life limited rotable has a FAA
mandated designated number of allowable flight hours and/or cycles (one take-
off and landing constitutes one cycle) after which it is rendered unusable. A
repairable is similar to a rotable except that it can only be repaired a limited
number of times before it must be discarded. An expendable is generally a part
which is used and not thereafter repaired for further use. Our inventory
consists in large part of rotable and repairable parts which are regularly
required by our customers. We also maintain an inventory of expendable parts.

         Aircraft spare parts conditions are classified within the industry as:

         o        factory new;

         o        new surplus;

         o        overhauled;

         o        serviceable; and

         o        as removed.

         A factory new or new surplus part is one that has never been installed
or used. Factory new parts are purchased from manufacturers or their authorized
distributors. New surplus parts are purchased from excess stock of airlines,
repair facilities or other redistributors. An overhauled part has been
completely disassembled, inspected, repaired, reassembled and tested by a
licensed repair facility. An aircraft spare part is classified serviceable if
(1) it is repaired by a licensed repair facility rather than completely
disassembled as in an overhaul or (2) if it is removed by the operator from an
aircraft or engine while operating under an approved maintenance program and is
functional and meets any manufacturer or time and cycle restrictions applicable
to the part. A factory new, new surplus, overhauled or serviceable part
designation indicates that the part is eligible for immediate use on an
aircraft. A part in an as removed condition requires functional testing, repair
or overhaul by a licensed facility prior to being returned to service in an
aircraft.

OUR INVENTORY

         Our inventory consists principally of new, overhauled, serviceable and
repairable aircraft parts that we obtain from many sources. Before parts may be
installed in an aircraft, they must meet enumerated standards of condition
established by the FAA and/or the equivalent regulatory agencies in other
countries. Specific regulations vary from country to country,

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although regulatory requirements in other countries generally coincide with FAA
requirements. Parts must also be traceable to sources deemed acceptable by these
agencies.

         We currently own four Airbus A-300 aircraft, three of which have been
converted from passenger to freighter configuration. We are currently seeking to
sell or lease these aircraft.

OPERATIONS

         Our core business is the buying, selling and leasing of aircraft spare
parts and the providing of maintenance, repair and overhaul of aircraft and
aircraft components and the provision of inventory management services.
Additionally, we manufacture aircraft parts for sale to original equipment
manufacturers.

         Since our customers consist of airlines, maintenance and repair
facilities that service airlines and other distributors and redistributors, as
well as original equipment manufacturers, 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 spare
parts and maintenance and repair services, causing downward pressure on pricing
and increasing the credit risks associated with doing business with airlines.
Additionally, the price of fuel affects the aircraft spare parts and maintenance
and repair markets, since older aircraft, which consume more fuel and which
account for most of our aircraft spare parts and maintenance and repair
business, become less viable as the price of fuel increases. We cannot assure
you that economic and other factors which may affect the airline industry will
not adversely impact our business, financial condition or results of operations.

SALES OF AIRCRAFT SPARE PARTS

         Our daily operations encompass inventory sales and exchanging of
aircraft spare parts. We advertise our available inventories held for sale or
exchange on the Inventory Locator Service and the Airline Inventory
Redistribution System electronic databases. Buyers of aircraft spare parts can
access these databases and determine which companies have the desired inventory
available. We estimate that 70% of our daily sales activity results from an
electronic database inquiry. All major airlines and repair agencies subscribe to
one or both of these databases and, accordingly, we maintain continual on-line
direct access with them.

         We currently have over 555,000 inventory line items in stock with
market availability, pricing and historical data available on more than 3.7
million inventory line items. We sell parts from our inventory. Additionally, we
will purchase parts on behalf of our customers against specific orders or
against a forecast demand. We also offer a customer exchange program for
rotables. In an exchange transaction, we exchange a new surplus, overhauled or
serviceable component taken from stock with a customer's as-removed unit which
has failed. We receive an exchange fee for completing the transaction, plus
reimbursement from the customer for the cost to overhaul or repair the
as-removed unit. If the as-removed part cannot be repaired, it is returned to
the customer and the exchange transaction is converted to an outright sale at a
sales price agreed upon at the time the exchange transaction was negotiated.

         We utilize inside salespersons, regional field salespersons,
independent contract representatives and overseas sales offices in our sales and
marketing efforts. Our outside sales force is responsible for obtaining new
customers and maintaining relationships with existing customers. Our inside
sales force accomplishes the majority of our day-to-day sales.

         We staff our South Florida parts distribution facility to provide sales
and delivery services seven days a week, 24 hours a day. This service is
critical to provide support to airline customers which, at any time, may have an
aircraft grounded in need of a particular part. Our South Florida location, with
easy access to Miami International Airport and Fort Lauderdale International
Airport, assists us in providing reliable and timely delivery of purchased
products.

         We have over 1,000 customers, which include commercial passenger
airlines, air cargo carriers, maintenance and repair facilities and other
aircraft parts redistribution companies. Our top ten customers combined
accounted for approximately 29%, 38% and 45% of our revenues for the years ended
December 31, 1997, 1998 and 1999, respectively. One customer accounted for
approximately 12% of our 1999 revenues.

INVENTORY MANAGEMENT SERVICES

         OUTSOURCING

         We are meeting the outsourcing requirements of our customers by
providing a number of inventory management services. These services assist
airlines in streamlining their inventory management operations while utilizing
their capital more efficiently and reducing their costs. Through the offering of
various services, we believe we can provide an inventory management program
geared to a customer's particular requirements. These services include
consignment, repair management, aircraft disassembly, purchasing services and
leasing.

         CONSIGNMENT AND OTHER SERVICES

         By consigning inventories to Aviation Sales, customers are able to
distribute their aircraft spare parts to a larger number of prospective
inventory buyers, allowing the customers to maximize the value of their
inventory. Consignment also enables us to offer for sale significant parts
inventory at minimal capital cost to us.

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We provide "aircraft disassembly" services at our Ardmore, Oklahoma facility
where we disassemble aircraft and sell the parts in our redistribution business.
We also disassemble a customer's aircraft under consignment arrangements and/or
return the parts from the disassembled aircraft directly to the customer.

         LEASING

         We provide long-term leasing of inventories of aircraft spare parts and
aircraft engines to airline customers. An increasing number of smaller and
start-up airlines have chosen to lease aircraft spare parts in order to preserve
capital while maintaining adequate spare parts support. We believe that we have
a competitive advantage in aircraft engines and aircraft spare parts leasing due
to our ability to maximize the residual value of the parts after termination of
the lease through sales of the parts in the ordinary course of our business. As
of December 31, 1997, 1998 and 1999, we had $22.8 million, $28.4 million and
$17.4 million of inventories on long-term lease.

MAINTENANCE AND REPAIR SERVICES

         In 1997, we made a strategic decision to expand our service offerings
to include the maintenance, repair and overhaul of aircraft and aircraft
components. We made six acquisitions between 1997 and 1999 which allow us to
provide maintenance, repair and overhaul services for passenger, freighter and
military aircraft, including the maintenance and repair of airframe components,
hydraulic, pneumatic, electrical and electromagnetic aircraft components, and
interior cabin components.

         COMPONENT REPAIR AND OVERHAUL SERVICES

         We provide repair and overhaul services at our 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.

         AIRCRAFT HEAVY MAINTENANCE

         We perform maintenance, repair and modification services of aircraft at
TIMCO's five repair stations. These services principally consist of scheduled
"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 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.

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         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 door or cargo doors; and

         o        install fire detection and suppression systems.

         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.

         ENGINEERING SERVICES

         We recently formed an engineering and manufacturing services group
within our heavy aircraft maintenance operation. This group provides integrated
aircraft engineering, including aircraft certification, design and approval of
modifications to aircraft systems and structures 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 a Supplemental Type
Certificate 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 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.

MANUFACTURING SERVICES

         The Boeing 1999 Current Market Outlook report projects that:

         o        global air travel will increase by an average of 4.7% per year
                  through the year 2008;

         o        average passenger fleet miles flown will increase
                  significantly over the next few years, requiring current
                  operators to increase the size of their fleets; and

         o        many new airlines will commence operations in the United
                  States and abroad.

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         We currently own two companies which manufacture various aircraft parts
for sale to original equipment manufacturers. Kratz-Wilde specializes in the
manufacture of machined components primarily for jet engines, and also produces
machined parts for other industries including automotive and faucet components.
Kratz-Wilde is a leading supplier of CFM56 and CF6 engine components to General
Electric's Aircraft Engine business. Kratz-Wilde's operations are housed in two
manufacturing facilities in the greater Cincinnati area and one facility in
Juarez, Mexico. Kratz-Wilde provides us with precision manufacturing
capabilities. Apex, located in Phoenix, Arizona, manufactures precision
aerospace parts and specializes in the machining of metal parts, including
precision shafts, fuel shrouds, housings and couplings for aerospace actuating
systems, fuel controls and engines.

         We are currently considering attempting to sell our manufacturing
operations to reduce our debt.

MANAGEMENT INFORMATION SYSTEMS

         We have developed a proprietary management information system which is
an important component of our business and a significant factor in our leading
position in the redistribution market. Our management information system
collects and reports data regarding inventory turnover and traceability,
pricing, market availability, and other important data. We also maintain
databases on recommended upgrades or replacements, including airworthiness
directives. In addition, we maintain data that allows us to provide our
customers with information with respect to obsolescence and interchangeability
of parts. We utilize electronic data scanning and document image storage
technology for accurate and rapid retrieval of inventory traceability documents
that must accompany all sales. Our customers require these in order for them to
comply with applicable regulatory guidelines.

         We believe that to maintain our competitive advantages, accommodate
growth and keep pace with the rapid changes in technology, we must continue to
have state of the art management information systems to ensure the capability to
meet our needs. During 1998 and 1999, we sought to implement an enterprise wide
information system in our redistribution operation, which we were not able to
implement. Instead, we remediated the existing information systems for Year 2000
compliance and are continuing to use those systems. We are currently evaluating
and intend to implement over the next year a new information system in our
redistribution operation.

         We also implemented during 1999 new management information systems in
our maintenance, repair and overhaul and manufacturing operations. These new
systems provide access to and improved timeliness of information which can be
used in the management of these operations.

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COMPETITION

         There are numerous suppliers of aircraft parts in the aviation market
worldwide and, through inventory listing services, customers have access to a
broad array of suppliers. These include major aircraft manufacturers, airline
and aircraft service companies and aircraft spare parts redistributors.
Competition in the redistribution market is generally based on price,
availability of product and quality, including traceability. Our major
competitors in the redistribution market include AAR Corp., The Ages Group and
The Memphis Group. There is also substantial competition, both domestically and
overseas, from smaller, independent dealers who generally participate in niche
markets.

         In the maintenance and repair market, our major competitors are B.F.
Goodrich, Dee Howard Company and Mobile Aerospace Inc. We also compete for
military maintenance and repair contracts. Our principal competitors for
military maintenance and repair contracts include Boeing Military Aircraft,
Lockheed-Martin Aeromod and Raytheon-E Systems.

         Since our markets are extremely competitive, we cannot assure you that
competitive pressures will not materially adversely affect our business,
financial condition or results of operations.

GOVERNMENT REGULATION; TRACEABILITY

         The aviation industry is highly regulated. While our spare parts
business is not regulated, the aircraft spare parts we sell to our customers
must be accompanied by documentation which enables the customer to comply with
applicable regulatory requirements. Additionally, Aviation Sales must be
certified by the FAA and, in some cases, authorized by original equipment
manufacturers in order to manufacture or 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. Presently, we utilize FAA and/or Joint
Aviation Authority certified repair stations (including our eleven FAA-licensed
repair facilities) to repair and certify parts to ensure worldwide
marketability. We closely monitor the FAA and industry trade groups in an
attempt to understand how possible future regulations might impact us.

         An important factor in the aircraft spare parts redistribution market
relates to the documentation or traceability that is supplied with an aircraft
spare part. We require all of our suppliers to provide adequate documentation as
dictated by the appropriate regulatory authority. We utilize electronic data
scanning and storage techniques to maintain complete copies of all
documentation. Documentation required includes, where applicable:

         o        a maintenance release from a certified airline or repair
                  facility signed and dated by a licensed airframe and/or power
                  plant mechanic who repaired the aircraft spare part and an
                  inspector certifying that the proper methods, materials and
                  workmanship were used;

         o        a "teardown" report detailing the discrepancies and corrective
                  actions taken during the last shop repair; and

         o        an invoice or purchase order from an approved source.

         Before parts may be installed on an aircraft, they must meet standards
of condition established by the FAA and/or the equivalent regulatory agencies in
other countries. Our parts may not meet applicable standards or standards may
change in the future, requiring parts in our inventory to be scrapped or
modified. Aircraft manufacturers may also develop new parts which replace parts
in our inventory. To the extent that we have these parts in our inventory, their
value may be reduced. We also cannot assure you that new or more stringent
regulations if adopted in the future will not adversely impact our business.

                                       9
<PAGE>

         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 of 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 spare part sold, manufactured
or repaired by us or from our negligence in the repair or maintenance of an
aircraft or an aircraft part. We may also have exposure to product liability
claims if the use of our leased aircraft, aircraft engines or aircraft spare
parts inventory is alleged to have resulted in bodily injury or property damage.
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 financial
condition.

EMPLOYEES

         As of December 31, 1999, we employed approximately 4,300 persons. None
of our employees are covered by collective bargaining agreements. We believe
that our relations with our employees are good.

                                       10
<PAGE>
ITEM 2.           PROPERTIES.

         Our executive offices are located in Miami, Florida. We intend to move
in April 2000 into our new corporate headquarters and warehouse facility. Our
new facility is located on a 41 acre parcel in the City of Miramar, Florida. We
have two buildings on this property. One contains approximately 545,000 square
feet and will allow us to consolidate our redistribution operations, as well as
serve as the corporate headquarters. The second, which will contain
approximately 85,000 square feet of office and warehouse space, will be used by
one of our maintenance and repair operations.

         The following table identifies, as of December 31, 1999, our principal
properties. See Notes 7 and 10 to Consolidated Financial Statements.
<TABLE>
<CAPTION>
                                                                                      SQUARE           OWNED OR
FACILITY DESCRIPTION                               LOCATIONS                          FOOTAGE           LEASED
------------------------------------------------------------------------------    ---------------   ---------------
<S>                                                <C>                                    <C>           <C>
REDISTRIBUTION OPERATIONS
Warehouse and corporate headquarters               Miami, FL                              166,000       Leased
Aircraft Disassembly and Storage                   Ardmore, OK                            130,000       Leased
Warehouse                                          Pearland, TX                           100,000        Owned
Warehouse                                          Miami, FL                               40,000       Leased
Warehouse                                          Miami, FL                               11,200       Leased
Warehouse                                          Miami, FL                               10,000       Leased
Regional Purchasing Office                         Van Nuys, CA                             6,300       Leased
Office and Warehouse                               College Park, GA                         6,000       Leased
Warehouse                                          Claremore, OK                            1,000       Leased

MAINTENANCE, REPAIR AND OVERHAUL
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
Office and Repair                                  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
Office and maintenance                             Minneapolis, MN                         34,000       Leased
Office and Maintenance                             Miami, FL                               30,000       Leased

MANUFACTURING OPERATIONS
Office and Manufacturing                           West Chester, OH                        95,000        Owned
Office and Manufacturing Facility                  Phoenix, AZ                             48,000       Leased
Office and Manufacturing Facility                  Covington, KY                           38,200        Owned
Manufacturing Facility                             Juarez, Mexico                          16,000       Leased
Manufacturing Facility (sold February 2000)        Fairfield, OH                           30,500        Owned
</TABLE>

         Our ownership interests and leasehold interests in such properties are
pledged as collateral for amounts borrowed.

                                       11
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.

PENDING LAWSUITS AND INVESTIGATIONS

         Several lawsuits have been filed against us and certain of our 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 March
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 intend to file a motion to dismiss these 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 in one or more future periods.

         The U.S. Securities and Exchange Commission is conducting an informal
inquiry into our accounting for certain transactions. We intend to cooperate
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. Paine Webber alleges that it is due a fee in connection with our
acquisition of TIMCO, based upon a 1997 agreement between Whitehall and Paine
Webber relating to a then proposed acquisition of TIMCO by Whitehall which did
not occur. Paine Webber is seeking approximately $1.0 million, plus costs and an
unstated amount of punitive damages. Paine Webber is also seeking approximately
$0.3 million allegedly due relating to the failure of Whitehall to honor an
alleged right of first refusal provision in the 1997 agreement. We believe that
our acquisition of TIMCO was not within the scope of the 1997 Paine
Webber/Whitehall agreement and that claims brought under this agreement against
us and Whitehall are without merit. We are vigorously defending these claims.
Although we can give no assurance, based upon the available facts, we believe
that the ultimate outcome of this matter will not have a material adverse effect
upon our financial condition.

         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 seeks 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
involves a contractual dispute relative to certain purchase price adjustments
and inventory purchases. We are vigorously defending this action. Although we
can give no assurance, based upon the available facts, we believe that the
ultimate outcome of this matter will not have a material adverse effect upon our
financial condition.

         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 financial position.

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.
We are currently monitoring the remediation, which will extend into the future.
Subsequently, our 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, we
believe that we have established an accrual for our best

                                       12
<PAGE>

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 $1.7 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.

         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, 1999
include $2.0 million relating to obligations to remediate 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 held our 1999 Annual Meeting of Stockholders on November 19, 1999.
At the meeting, our stockholders took the following actions:

         1.       Our stockholders approved an amendment to our 1996 Stock
                  Option Plan to increase the number of shares of common stock
                  for which options may be granted under our plan from the
                  greater of 650,000 shares of common stock, or 8% of the number
                  of common shares then outstanding, to the greater of 2,250,000
                  shares of common stock or 15% of the number of shares of
                  common stock then outstanding. The vote on this amendment was:
                  6,855,915 in favor, 2,753,725 opposed and 48,013 abstained.

         2.       Our stockholders elected three directors to serve on our Board
                  of Directors. Dale S. Baker was elected to serve until the
                  2002 Annual Meeting of Stockholders, or until his successor is
                  elected and qualified, Philip B. Schwartz was elected to serve
                  until the 2001 Annual Meeting of Stockholders, or until his
                  successor is elected and qualified, and Harold M. Woody was
                  elected to serve until the 2000 Annual Meeting of
                  Stockholders, or until his successor is elected and qualified.
                  The votes cast for and against each of these directors were as
                  follows:

                                                       VOTES CAST
                                                 ------------------------
                  NOMINEE                           FOR           AGAINST
                  --------------------------     ------------------------
                  Dale S. Baker.............     12,812,429       345,736
                  Philip B. Schwartz........     12,816,589       341,576
                  Harold M. Woody...........     12,816,054       342,111

                  The terms of directors Robert Alpert and Sam Humphreys
                  continued after the meeting.

         3.       Our stockholders ratified the decision of our Board of
                  Directors selecting Arthur Andersen LLP as our independent
                  auditors for the 1999 fiscal year. The vote on this selection
                  was: 13,098,403 in favor, 25,545 opposed, and 34,217
                  abstained.

                                       13
<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 April 13, 2000, there were approximately 600
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
                                  ------            ------
1998
First Quarter                     $44.75            $33.12
Second Quarter                     41.00             34.87
Third Quarter                      41.37             24.00
Fourth Quarter                     40.62             26.25

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                      19.38              6.31
Second Quarter (to 4/13/00)         6.88              6.18

         We did not declare any cash dividends during the year ended December
31, 1999. See Note 6 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 an agreement with LJH Corporation, which
is wholly owned by Lacy Harber, and with Mr. Harber, that limits for a period of
five years the number of shares of the Company's common stock that Mr. Harber
and LJH (together) are authorized to acquire. The agreement permits Mr. Harber
and LJH (together) to acquire beneficial ownership of up to 25% of our
outstanding shares. The agreement 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 also agreed not to engage in certain activities without approval of a
majority of the disinterested members of our Board of Directors. Simultaneous
with entering into the agreement, we amended the Stockholders' Rights Plan so
that it is consistent with our agreement with Mr. Harber and LJH.

                                       14

<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.
<TABLE>
<CAPTION>

                                                              Year Ended December 31, (1)
                                               ---------------------------------------------------------
                                                 1995        1996         1997       1998        1999
                                               ---------   ---------   ---------   ---------   ---------
                                                         (In thousands, except per share data)
<S>                                            <C>         <C>         <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues                             $ 169,771   $ 231,734   $ 322,538   $ 500,816   $ 671,514
Cost of sales and services                       119,438     169,787     244,758     372,728     561,484
                                               ---------   ---------   ---------   ---------   ---------
Gross profit                                      50,333      61,947      77,780     128,088     110,030

Operating expenses                                28,884      33,958      52,782      66,719     105,466
                                               ---------   ---------   ---------   ---------   ---------
Income from operations                            21,449      27,989      24,998      61,369       4,564

Interest expense                                   8,287       5,411       8,059      21,343      35,112
Other expense (income)                            (1,025)       (461)      4,696        (196)      6,342
                                               ---------   ---------   ---------   ---------   ---------
Income (loss) before taxes, equity income
   (loss) of affiliate and extraordinary item     14,187      23,039      12,243      40,222     (36,890)

Income tax expense (benefit) (2)                   5,002       8,648       7,260      15,486     (13,878)
                                               ---------   ---------   ---------   ---------   ---------
Income (loss) before equity income (loss)
   of affiliate and extraordinary item             9,185      14,391       4,983      24,736     (23,012)
Equity income (loss) of affiliate                     38         255        (139)      1,356       1,289
                                               ---------   ---------   ---------   ---------   ---------
Income (loss) before extraordinary item            9,223      14,646       4,844      26,092     (21,723)

Extraordinary item, net of income taxes               --       1,862          --         599          --
                                               ---------   ---------   ---------   ---------   ---------
Net income (loss) (2)                          $   9,223   $  12,784   $   4,844   $  25,493    $(21,723)
                                               =========   =========   =========   =========   =========
EARNINGS PER SHARE DATA:
Income (loss) before extraordinary item
   per share (2)                               $    1.01   $    1.36   $    0.39   $    2.06    $  (1.56)
Extraordinary item per share                          --        0.17          --        0.05          --
                                               ---------   ---------   ---------   ---------   ---------
Diluted net income (loss) per share (2)(3)     $    1.01   $    1.19   $    0.39   $    2.01    $  (1.56)
                                               =========   =========   =========   =========   =========
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                                                    As of December 31,
                                               ---------------------------------------------------------
                                                 1995       1996        1997        1998         1999
                                               ---------   ---------   ---------   ---------   ---------

<S>                                            <C>         <C>         <C>         <C>         <C>
BALANCE SHEET DATA:
Accounts receivable, net                       $  41,173   $  55,548   $  82,779   $ 115,974   $ 163,318
Inventories                                       56,094      79,414     145,343     277,131     350,610
Working capital                                   68,039      88,222      89,988     169,742     194,923
Total assets                                     134,660     190,118     341,332     599,377     778,792
Total debt                                        62,042      34,651     161,544     361,959     438,787
Stockholders' equity                              44,298     115,896     121,280     154,298     218,522
</TABLE>
------------
(1)    Dixie Bearings, which was acquired in August 1996, Kratz-Wilde, which was
       acquired in October 1997, Caribe and Aircraft Interior Design, which were
       acquired in March 1998, TIMCO, which was acquired in September 1998, and
       TIMCO Oscoda, which was acquired in August 1999, were accounted for
       under the purchase method of accounting and accordingly, their results
       of operations have been included in our historical results of operations
       from their respective dates of acquisition.

       AvEng, which was acquired in December 1996, Aerocell, which was acquired
       in September 1997, Apex, which was acquired in December 1997, and
       Whitehall, which was acquired in July 1998, were accounted for under the
       pooling of interests method of accounting. AvEng is included in our
       historical results of operations and financial position for all periods
       presented subsequent to 1995. Aerocell and Apex are included for all
       periods presented subsequent to 1996. Historical results of operations
       and financial position for 1995 have not been restated to give
       retroactive effect to the acquisition of AvEng and historical operating
       results for periods presented prior to 1997 have not been restated to
       give retroactive effect to the acquisitions of Aerocell and Apex, due to
       the immateriality of the effects of a potential restatement. Whitehall is
       included in our historical results of operations and financial position
       for all periods presented.

(2)    Periods presented prior to 1997 include pro forma adjustments to record
       income taxes, as we conducted our business as a partnership prior to June
       26, 1996.

(3)    Weighted average common and common equivalent shares used in calculating
       diluted earnings per share are 9,161,379 for 1995; 10,769,408 for 1996;
       12,450,176 for 1997; 12,696,394 for 1998 and 13,905,538 for 1999. Per
       share data for periods before 1997 assumes that the 4,425,000 shares of
       common stock issued to the partners and the 575,000 shares of common
       stock, the net proceeds in respect of which were paid to J/T Aviation
       Partners, were outstanding for periods prior to the closing of our
       initial public offering in July 1996.

                                       15
<PAGE>

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

RECENT DEVELOPMENTS

         We have determined to record pre-tax charges during the fourth quarter
of 1999 of $67.0 million, approximately $60.9 million of which are non-recurring
charges. Significantly all of these charges are non-cash items. Certain items,
which make up a significant portion of these charges, are as follows:

         o        a reduction in the carrying value of our inventory at December
                  31, 1999 of $28.9 million ($23.4 million of which is
                  non-recurring), primarily relating to inventory held for sale
                  by our redistribution operation,

         o        a $9.8 million write-down in the carrying value of the four
                  A-300 aircraft which we own,

         o        a $7.7 million 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,

         o        a $7.7 million addition to the allowance for doubtful accounts
                  receivable, and

         o        a $4.8 million accrual of expenses to be incurred during 2000
                  relating to the runoff of one of our health insurance plans.

         Additionally, during the fourth quarter of 1999, we wrote-off
previously capitalized 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. The above-described reduction in the carrying
value of our inventory is recorded in cost of sales. All other charges are
included in operating expenses except the write-down of capitalized costs
relating to the development of the new software system which charge is included
in other expense.

         In connection with the preparation of our financial statements for the
year ended December 31, 1999, we identified several transactions which, 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
accounting and sales practices. The committee retained outside professionals to
conduct an in-depth review and investigation of these matters, which has now
been concluded. As a result of this process, we have taken certain actions,
including the implementation of revised policies and procedures, designed to
ensure that the matters do not reoccur in the future.

         We have 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 have also concluded that seven
additional 1999 transactions arising in our 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 $32.7 million of revenues and
$7.3 million of gross margin, representing approximately 4.8% of our revenues
and 6.5% of our gross margin for the 1999 fiscal year, respectively. The 1998
transaction represented an aggregate of $12.8 million of revenue and $3.1
million of gross margin, or approximately 2.6% and 2.5% of our fiscal 1998
revenue and gross margin, respectively. We have determined that this transaction
was not material to our previously reported 1998 financial results. We are
currently evaluating whether to restate our previously filed 1999 quarterly
financial statements as a result of these 1999 transactions. See Note 16 to
Consolidated Financial Statements for further discussion.

         As a result of the recording of the charges discussed above, we were
not in compliance at December 31, 1999 or March 31, 2000 with certain of the
financial covenants contained in our credit agreements with our senior lenders.
Our lenders have agreed to forbear in regards to these covenant violations and
other matters until May 31, 2000. During this period, we intend to pursue a new
credit facility with our lenders. There can be no assurance that we will
successfully execute a new credit facility during this period and failure of
this to occur


                                       16
<PAGE>

would likely have a material adverse effect upon us.

         We are currently taking actions designed to reduce our debt through the
possible sales of our assets, including the potential sale of our manufacturing
operations and/or other assets. We are also continuing our efforts to sell or
lease the four A-300 aircraft that we own and reduce our debt through that
process. There can be no assurance that we will successfully reduce our debt
through this process or as to the occurrence or timing of any such asset sales.
Our auditors have stated in their report on our 1999 consolidated financial
statements that there exists a substantial doubt as to our ability to continue
our business as a going concern.

RESULTS OF OPERATIONS

GENERAL

         Operating revenues consist primarily of gross sales of products and
service revenues, net of allowances for returns. Cost of sales and services
consists primarily of product costs, labor, freight charges, commissions to
outside sales representatives and changes in the provision for slow moving
inventory. Product costs consist of the acquisition cost of the products and any
costs associated with repairs, overhaul or certification.

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

         o        the timing of orders and payments from large customers,

         o        the timing of expenditures to purchase inventory in
                  anticipation of future sales,

         o        the timing of bulk inventory purchases,

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

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

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

         o        the timeliness of customer aircraft arriving for scheduled
                  maintenance, and

         o        the mix of available aircraft spare parts contained, at any
                  time, in our inventory.

         Large portions of our operating expenses are relatively fixed. Since we
typically do not obtain long-term purchase orders or commitments from our
customers, we must anticipate the future volume of orders based upon the
historic purchasing 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.

         See Note 2 to Consolidated Financial Statements for a discussion of the
acquisitions that we completed during the three years ended December 31, 1999.

                                       17
<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
                                                     -----------------------------------     ------------------------------------
                                                                          Percent of                                Percent of
                                                         Amount            Revenues              Amount              Revenues
                                                     ---------------    ----------------     ----------------     ---------------
                                                                               (Dollars in thousands)
<S>                                                        <C>                   <C>                <C>                   <C>
Operating revenues:
  Sales of products, net                                   $359,245               71.7%             $346,422               51.6%
  Services and other                                        141,571               28.3%              325,092               48.4%
                                                     ---------------    ----------------     ----------------     ---------------
                                                            500,816              100.0%              671,514              100.0%
Cost of sales and services                                  372,728               74.4%              561,484               83.6%
                                                     ---------------    ----------------     ----------------     ---------------
Gross profit                                                128,088               25.6%              110,030               16.4%
Operating expenses                                           66,719               13.3%              105,466               15.7%
                                                     ---------------    ----------------     ----------------     ---------------
Income from operations                                       61,369               12.3%                4,564                0.7%
Interest expense                                             21,343                4.3%               35,112                5.2%
Other expense (income)                                         (196)                 -                 6,342                0.9%
                                                     ---------------    ----------------     ----------------     ---------------
Income (loss) before income taxes, equity
   income of affiliate and extraordinary item                40,222                8.0%             (36,890)              (5.4%)
Income tax expense (benefit)                                 15,486                3.1%             (13,878)              (2.0%)
                                                     ---------------    ----------------     ----------------     ---------------
Income (loss) before equity income of affiliate
  and extraordinary item                                     24,736                4.9%             (23,012)              (3.4%)
Equity income of affiliate                                    1,356                0.3%               1,289                0.2%
                                                     ---------------    ----------------     ----------------     ---------------
Income (loss) before extraordinary item                      26,092                5.2%             (21,723)              (3.2%)
Extraordinary item, net of income taxes                         599                0.1%                    -                   -
                                                     ---------------    ----------------     ----------------     ---------------
Net income (loss)                                           $25,493                5.1%            ($21,723)              (3.2%)
                                                     ===============    ================     ================     ===============
</TABLE>

         Revenues for the year ended December 31, 1999 increased $170.7 million
or 34.1% to $671.5 million, from $500.8 million for the year ended December 31,
1998.

         Revenues from our MR&O operations, which includes TIMCO, Caribe,
Aerocell, Aircraft Interior Design and TIMCO's engine repair operation,
increased $187.0 million to $369.3 million in 1999, from $182.3 million in 1998.
This increase was due, in part, to a full year contribution from TIMCO, which
was acquired at the end of the third quarter of 1998. Also contributing to the
1999 increase in revenues was a substantial increase in revenues at TIMCO (which
for all of 1999 combines the aircraft maintenance operations historically
operated by TIMCO with the aircraft maintenance operations previously operated
by Whitehall Corporation). This increase included revenues generated at new MR&O
facilities opened during 1999, as well as revenues generated at the maintenance
facilities acquired in August 1999 from Kitty Hawk, Inc.

         Revenues from our distribution operations, which includes our
redistribution company, Dixie Bearings and our leasing company, increased $15.4
million to $289.8 million for 1999, from $274.4 million in 1998. Total revenues
from distribution operations for 1999 were impacted by the above-described
determination that 14 transactions reported as revenues during 1999 should not
have been treated as such. The Company believes that revenues from distribution
activities will decline during 2000 as the Company seeks to repay debt through
the reduction of inventory levels in our distribution operations.

         Revenues from our manufacturing operations decreased $5.9 million, from
$50.0 million in 1998 to $44.1 million in 1999. Revenues in 1999 were adversely
impacted by third and fourth quarter slowdowns in purchases by a large customer
and by management challenges that occurred at this business. During the third
quarter of 1999, we made significant changes in the management of this business
and we anticipate a better performance from this operation during future
periods.

         Gross profit decreased $18.1 million or 14.1%, from $128.1 million for
the year ended December 31, 1998 to $110.0 million for the year ended December
31, 1999. Gross profit margin for the year ended December 31, 1999 was 16.4%, a
decrease of 9.2 percentage points from a gross profit margin of 25.6% for the
year ended December 31, 1998. We reported a negative gross profit for the three
months ended December 31, 1999 of $16.1 million. The reductions in gross margin
arose for the reasons set forth below.

                                       18
<PAGE>

         During the fourth quarter of 1999, we recorded a one-time,
non-recurring reduction in the carrying value of our inventory at December 31,
1999 of $38.7 million, primarily relating to inventory held for sale by our
redistribution operation and the carrying value of the four A-300 aircraft which
we own. These charges resulted in the gross profit margin in our distribution
operations decreasing from 28.2% to 12.9% from 1998 to 1999. Excluding one-time,
non-recurring charges, the gross profit margin in our distribution businesses
for 1999 would have been 23.2%.

         Gross profit margin in our MR&O operations decreased by 2.8 percentage
points from 19.4% in 1998 to 16.6% in 1999. Gross profit margin for the MR&O
operations decreased due to an increase in labor expenses coupled with increased
competition and pressure to maintain level pricing for services. Gross profit
margins in our MR&O businesses are expected to decline slightly during 2000 due
to increased competition. For the reasons stated above, gross profit margin for
our manufacturing operations decreased 5.9 percentage points from period to
period.

         Operating expenses increased $38.8 million to $105.5 million for
the year ended December 31, 1999, compared with $66.7 million for the year ended
December 31, 1998. Operating expenses as a percentage of operating revenues were
15.7% for the 1999 fiscal year, compared to 13.3% for 1998.

         The largest factor causing the increase in operating expenses during
1999 compared to 1998 was the above-described non-recurring, primarily non-cash,
fourth quarter 1999 charges, $20.0 million of which were recorded as operating
expenses. Excluding these charges, operating expenses for the year ended
December 31, 1999 would have been $85.5 million, or 12.7% of revenues. The
increase in operating expenses relates primarily to the growth of operations.
Additionally, professional fees aggregating approximately $2.0 million relating
to several large transactions that were not completed adversely impacted results
for fiscal 1999. Results were also impacted by the fact that a higher percentage
of our revenues were derived during 1999 from our MR&O operations, which
generally operate at lower operating expense ratios than our other operations.

         Operating expenses as a percentage of revenue were 6.5% in our MR&O
operations, compared to 7.8% during 1998. This is primarily due to economies of
scale. Operating expenses at our manufacturing and distribution operations
increased substantially during 1999. In our manufacturing operations, operating
expenses increased 12.9%, as we incurred costs related to a facility in Ohio
which was significantly expanded and to the opening of a new plant in Juarez,
Mexico. Operating expenses in our MR&O operations were adversely impacted during
1999 by start up costs associated with the opening of five new facilities during
the fiscal year. Operating expenses at our distribution operations and corporate
operating expenses were primarily impacted by the non-recurring, one-time
charges described above.

         As a result of all of these factors, income from operations was $4.6
million for 1999, compared to $61.4 million for 1998.

         Interest expense for the year ended December 31, 1999 increased $13.8
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 inventory in our
distribution operations, the acquisition of the assets of Kitty Hawk, Inc.'s
maintenance operations and additional substantial investments in facilities,
equipment and computer systems to support the Company's operations. During 1999,
we opened four new MR&O facilities and two manufacturing 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 and manufacturing operations, and expended
funds to remediate the computer system in our distribution operations. All of
these factors caused net borrowings to increase substantially during 1999,
despite our June 1999 public offering in which we raised net proceeds of $79.9
million.

         As set forth above, we have recently entered into an agreement with our
senior lenders under which our lenders have agreed to forbear in regard to
certain covenant violations and other matters until May 31, 2000. As a result of
these matters, our lenders have increased by 2% the interest rate at which we
are borrowing funds. They have also charged us substantial fees for extensions
of their forbearance. All of these charges will adversely impact our 2000
results.

         Other expense (income) includes a $7.7 million charge in 1999 relating
to the write-down of capitalized costs previously expended in relation to the
development of a new software system which has not been implemented and will not
be completed. It also includes a gain on a sale of real estate of approximately
$1.4 million.

                                       19
<PAGE>

         In connection with the repayment of the term and acquisition portions
of the Credit Facility utilizing the proceeds of our Senior Subordinated Notes
due 2008, we wrote off, during the first quarter of 1998, $1.0 million of
deferred financing costs resulting in an extraordinary item, net of income
taxes, of $0.6 million ($.05 per diluted share).

         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 ($2.01 per
diluted share) for the year ended December 31, 1998. Weighted average common and
common equivalent shares outstanding (diluted) were 13.9 million for the year
ended December 31, 1999, compared to 12.7 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. As a result
of the fourth quarter charges described above, the net loss for the three months
ended December 31, 1999 was $46.5 million, compared to net income of $8.2
million for the three months ended December 31, 1998.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1998

The following tables set forth certain information relating to our operations
for the periods indicated:
<TABLE>
<CAPTION>
                                                                    1997                                    1998
                                                     -----------------------------------     ------------------------------------
                                                                          Percent of                                Percent of
                                                         Amount            Revenues              Amount              Revenues
                                                     ---------------    ----------------     ----------------     ---------------
                                                                               (Dollars in thousands)
<S>                                                        <C>                   <C>                <C>                   <C>
Operating revenues:
  Sales of products, net                                   $244,340               75.8%             $359,245               71.7%
  Services and other                                         78,198               24.2%              141,571               28.3%
                                                     ---------------    ----------------     ----------------     ---------------
                                                            322,538              100.0%              500,816              100.0%
Cost of sales and services                                  244,758               75.9%              372,728               74.4%
                                                     ---------------    ----------------     ----------------     ---------------
Gross profit                                                 77,780               24.1%              128,088               25.6%
Operating expenses                                           52,782               16.3%               66,719               13.3%
                                                     ---------------    ----------------     ----------------     ---------------
Income from operations                                       24,998                7.8%               61,369               12.3%
Interest expense                                              8,059                2.5%               21,343                4.3%
Other expense (income)                                        4,696                1.5%                (196)                  -
                                                     ---------------    ----------------     ----------------     ---------------
Income before income taxes, equity (loss) income of
   affiliate and extraordinary item                          12,243                3.8%               40,222                8.0%
Income tax expense                                            7,260                2.3%               15,486                3.1%
                                                     ---------------    ----------------     ----------------     ---------------
Income before equity (loss) income of affiliate
   and extraordinary item                                     4,983                1.5%               24,736                4.9%
Equity (loss) income of affiliate                              (139)                 -                 1,356                0.3%
                                                     ---------------    ----------------     ----------------     ---------------
Income before extraordinary item                              4,844                1.5%               26,092                5.2%
Extraordinary item, net of income taxes                           -                   -                  599                0.1%
                                                     ---------------    ----------------     ----------------     ---------------
Net Income                                                   $4,844                1.5%              $25,493                5.1%
                                                     ===============    ================     ================     ===============
</TABLE>

         Operating revenues for the year ended December 31, 1998 increased
$178.3 million or 55.3% to $500.8 million, from $322.5 million for the year
ended December 31, 1997. Operating revenues from companies acquired in 1997 and
1998 and accounted for under the purchase method of accounting increased 1998
operating revenues by $111.4 million. Operating revenues also increased due to
increased customer penetration, increased sales from investments made in
additional inventories and improved capacity utilization of our airframe
maintenance facilities. Service revenues for 1997 were adversely impacted as a
result of the unanticipated cancellation of a U.S. Air Force C-130 maintenance
contract awarded in April 1997 and cancelled at the convenience of the
government in June 1997.

         Gross profit for the year ended December 31, 1998 increased $50.3
million or 65.0% to $128.1 million, compared with $77.8 million for the year
ended December 31, 1997. Gross profit margin for the year ended December 31,
1998 increased to 25.6% from 24.1% for the year ended December 31, 1997. Margins
were negatively impacted in 1997 as a result of the C-130 contract previously
discussed. Gross profit margin was favorably impacted during 1998 due


                                       20
<PAGE>

to improved utilization of our MR&O facilities, which was partially offset by an
increase in the percentage of our total business derived from our MR&O
operations, which generally operate at lower gross margin percentages than our
distribution operations.

         Our operating expenses increased $13.9 million to $66.7 million for the
year ended December 31, 1998, compared to $52.8 million for the year ended
December 31, 1997. Included in the 1998 operating expenses were $1.8 million of
merger expenses relating to our July 1998 merger with Whitehall Corporation.
Operating expenses as a percentage of operating revenues for 1998 were 13.3%
(13.0% after adjustment for Whitehall merger expenses), compared to 16.4% for
1997. The reduction in operating expenses as a percentage of operating revenues
is due primarily to improved operating efficiencies and economies of scale.

         Interest expense for the year ended December 31, 1998 increased due to
substantial borrowings utilized to finance the acquisitions of Kratz-Wilde,
Caribe and TIMCO, and to finance additional acquisitions of inventory and
equipment on lease.

         Other expense in 1997 includes a $4.5 million writedown of Whitehall's
investment in the preferred stock of the purchaser of its ocean systems business
and a $0.7 million gain on the sale by Whitehall of its electronics business.

         Income before income taxes, equity income of affiliate and
extraordinary item for the year ended December 31, 1998 was $40.2 million, an
increase of 228.5% over the year ended December 31, 1997.

         During the first quarter of 1998, we repaid all of our outstanding term
and revolving debt with the proceeds from the sale of our senior subordinated
notes. In connection with the repayment of this debt, we wrote off $1.0 million
of deferred financing costs, resulting in an extraordinary item, net of income
taxes, of $0.6 million.

         Net income for the year ended December 31, 1998 was $25.5 million
($2.01 per diluted share), compared to net income of $4.8 million ($0.39 per
diluted share) for the year ended December 31, 1997. Weighted average common and
common equivalent shares outstanding (diluted) were 12.7 million for the year
ended December 31, 1998, compared with 12.5 million for the year ended December
31, 1997.

LIQUIDITY AND CAPITAL RESOURCES

CASH

         Net cash used in operating activities during the years ended December
31, 1999, 1998 and 1997 was $102.7 million, $71.0 million and $53.7 million,
respectively. This increase is primarily the result of the growth in our
operations, which resulted in increased accounts receivable, net of accounts
payable, additional investments in inventory by our distribution operations and
costs associated with the conversion from passenger to cargo configuration of
the A-300 aircraft that we own.

         Net cash used in investing activities during the years ended December
31, 1999, 1998 and 1997 was $61.2 million, $114.3 million and $58.4 million,
respectively. Cash used in investing activities during 1999 was primarily
comprised of capital expenditures of $32.0 million relating to additional
investments in the facilities, equipment and management information systems used
to support future growth in our business and $18.1 million relating to the
acquisition of the assets of Kitty Hawk, Inc.'s maintenance operations. Capital
expenditures during 2000 are expected to be approximately $17.0 million. Cash
used in investing activities during 1998 was primarily comprised of the cost
associated with acquisitions of businesses and other assets relating to the
growth of operations during this period.

         Net cash provided from financing activities during the years ended
December 31, 1999, 1998 and 1997 was $174.8 million, $189.6 million and $114.4
million, respectively. Net cash provided during 1999 was primarily comprised of
net borrowings under the Credit Facility of $95.6 million and the proceeds of
our public stock offering completed in June 1999 of $79.9 million. Net cash
provided from financing activities during 1998 was primarily comprised of the
proceeds from the issuance of senior subordinated notes of $164.0 million and
net borrowings under the Credit Facility of $21.7 million.

                                       21
<PAGE>

SUBSTANTIAL LEVERAGE

         As of March 31, 2000 we had outstanding indebtedness of approximately
$475.0 million (including capitalized leases), of which $308.8 million was
senior debt and $166.2 million was other indebtedness. As of March 31, 2000, we
had approximately $6.8 million available for future borrowing under our Credit
Facility. Our ability to make payments of principal and interest on, or to
refinance our debt, 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.

         During 1997, 1998 and 1999, we relied primarily upon significant
borrowings under our credit facility, and sales of our securities, including our
previously issued senior subordinated notes, to satisfy our funding requirements
relating to our acquisitions of several businesses and to finance the growth of
our business. We cannot assure you that financing alternatives will be available
to us in the future to support our continued growth.

CREDIT FACILITY

         On September 18, 1998, we entered into a four year Senior Secured
Revolving Credit Facility (the "Credit Facility") which provided us with a
$200.0 million revolving line of credit, including a $30.0 million letter of
credit sublimit, with the imposition of certain borrowing criteria based on the
satisfaction of certain debt ratios. The eligible borrowing base includes
certain receivables and inventories. The interest rate on the Credit Facility
is, at our option, (a) prime plus a margin, or (b) LIBOR plus a margin, where
the respective margin determination is made upon our financial performance over
a 12 month period (ranging from 0.0% to 1.0% in the event prime is utilized, or
1.125% to 2.5% in the event LIBOR is utilized).

         In November 1998 and May 1999, the Credit Facility was amended to
increase the revolving loan and letter of credit facility to $250.0 and $300.0
million, respectively. During 1999 and 1998, the interest rate on the Credit
Facility ranged from 6.9% to 9.25% and 6.9% to 8.75%, respectively. As of
December 31, 1999 and 1998, the outstanding balance under the Credit Facility
was $269.6 million and $174.0 million, respectively.

         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.
Substantially all of our assets are pledged as collateral for amounts borrowed.

         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
have agreed to forbear in regards to these covenant violations and other matters
until May 31, 2000 and they have increased the interest rate which we are paying
on our senior borrowings by 2% during this period. We are currently pursuing a
new credit facility with our senior lenders. There can be no assurance that we
will successfully execute a new credit facility during this period and failure
of this to occur would likely have a material adverse effect upon us.

         In February 2000, we executed a $15.5 million term loan with the
financial institution which is the agent to the Credit Facility. The term loan
matures in February 2001, bears interest at 12% and contains financial covenants
which are consistent with the Credit Facility.

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 of our 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.

                                       22
<PAGE>

         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. 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%. In addition, on or prior to February 15, 2001, we may redeem
up to 35% of the aggregate principal amount of the Notes at a redemption price
of 108.125% of the principal amount thereof, plus accrued and unpaid interest
and liquidated damages, if any, thereon to the redemption date with the net
proceeds of a public offering of our common stock; provided, that at least 65%
of the aggregate principal amount of the Notes originally issued remains
outstanding immediately after the occurrence of such redemption.

         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.

         The Indenture contains certain covenants that, among other things, will
limit (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, dispose of assets, 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.

LEASE FOR NEW FACILITY

         In 1998, we decided to move to a new corporate headquarters and
warehouse facility. On December 17, 1998, we entered into an operating lease for
a new 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. 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. We expect to move
into our new headquarters and warehouse facility in April 2000.

         The lessor has financed the development of the new facility through a
$43.0 million loan from a financial institution. We are obligated to develop the
new facility on behalf of the lessor and are responsible for the timely
completion of the facility within an established construction budget. We and
substantially all of our 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 approximately $12.0 million to secure both
our obligations under the lease and the lessor's obligations under the loan
agreement.

                                       23
<PAGE>

         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 have agreed to forbear in regards to these covenant violations
and other matters until May 31, 2000. During this period, we intend to
pursue a replacement of the Credit Facility with our senior lenders, including
the lender which has financed construction of our new corporate headquarters and
warehouse facility. Upon execution of a new Credit Facility, the covenants and
other terms of the lease agreement will likely be amended consistent with the
new Credit Facility. There can be no assurance that these defaults will be
resolved to the satisfaction of the lessor and the lenders. The failure to
resolve these issues would likely have a material adverse effect upon us.

LIQUIDITY

         We are currently taking actions designed to reduce our debt through
sales of our assets, including the potential sale of our manufacturing
operations or other assets, including reducing inventory levels in our
redistribution operations and using a portion of the funds generated through
that process to repay debt. We are also continuing our efforts to sell or lease
the four A-300 aircraft that we own and reduce our debt through that process.
There can be no assurance that we will successfully execute these transactions
or as to the timing of any potential transactions. We believe that our available
capital resources, assuming that we are able to successfully execute a new
credit facility with our senior lenders, will be sufficient to satisfy our
working capital requirements for our existing businesses over the next 12
months. However, there can be no assurance that we will successfully execute a
new credit facility during this period and failure of this to occur would likely
have a material adverse effect upon us.

         We may also consider selling additional equity and/or debt securities
in the future to meet working capital requirements of our current business and
to continue the further development of our business.

COMPUTER SYSTEMS AND IMPACT OF THE YEAR 2000

         Since the fourth quarter of 1997, we have been implementing new
management information systems ("MIS") in order to both meet our needs into the
foreseeable future and to mitigate the Year 2000 issues inherent in our existing
systems. The Year 2000 issue is the potential for system and processing failures
of date-related data and the result of computer-controlled systems using two
digits rather than four to define the applicable year. We may be affected by
Year 2000 issues in our non-compliant information technology ("IT") systems or
non-IT systems, as well as by Year 2000 issues related to non-compliant IT and
non-IT systems operated by third parties.

         Prior to December 31, 1999, we completed an assessment of internal and
external IT systems and non-IT systems. We also substantially completed the
implementation of new MIS systems in our MR&O and manufacturing operations. We
had been in the process of implementing a new MIS system in our distribution
operations. However, that system was not expected to be fully implemented until
sometime in 2000. In order to continue our operations, during the third and
fourth quarters of 1999, we remediated the MIS system used in our distribution
operations, and such system was Year 2000 compliant prior to December 31, 1999.
Total costs associated with Year 2000 remediation incurred during the year ended
December 31, 1999 were approximately $2.0 million. As discussed below, we have
decided to not complete the implementation of the new MIS system for our
distribution operations, and we are seeking at this time to acquire a new MIS
system for our distribution operations.

         As a result of the procedures performed in regards to the Year 2000
issue as described above, we did not incur any significant affect from the Year
2000 issue. In addition, although there can be no assurance, we are not
currently aware of any Year 2000 problems relating to systems or the systems
operated by third parties which would materially adversely affect our business,
results of operations or financial condition.

         As noted above, since 1998, we had been implementing a new MIS system
in our distribution operations. As of December 31, 1999, we had expended
approximately $8.7 million in relation to development and implementation of this
new system. Of that amount, approximately $1.0 million related to the finance
component of the system that was successfully implemented and is currently being
depreciated. The remaining $7.7 million is related to the components of the
system intended to support all other areas of the distribution operations,
excluding finance. Management has made the decision to discontinue
implementation of this portion of the system and has begun to review
alternatives to the finance component for which the licensing agreement expires
in September 2000. Based upon the decision to not complete the implementation,
we have recognized a charge of $7.7 million as of December 31, 1999 to write-off
those costs incurred relating to the development and implementation of the
components of the MIS system that will not be completed.

                                       24

<PAGE>
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, 1999
interest rates remain constant (dollars in thousands).
<TABLE>
<CAPTION>
                                                                                         Fair Value
                                                                                        December 31,
                              2000     2001   2002   2003   2004   Thereafter   Total       1999
                            -------    ----   ----   ----   ----   ----------  -------  ------------
<S>                        <C>           <C>    <C>    <C>    <C>   <C>       <C>         <C>
Long term debt:
  Fixed rate debt.....                                              $164,254  $164,254    $164,254
  Average interest rate         --       --     --     --     --        8.13%
  Variable rate debt:.     $269,580      --     --     --     --          --   269,580     269,580
  Average interest rates       8.50%
</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 2000 Annual Meeting of
Stockholders, which Proxy Statement will be filed within 120 days after the end
of the fiscal year ended December 31, 1999.

ITEM 11. EXECUTIVE COMPENSATION.

         The information required by Item 11 is hereby incorporated by reference
from the Registrant's Proxy Statement for its 2000 Annual Meeting of
Stockholders, which Proxy Statement will be filed within 120 days after the end
of the fiscal year ended December 31, 1999.

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 2000 Annual Meeting of
Stockholders, which Proxy Statement will be filed within 120 days after the end
of the fiscal year ended December 31, 1999.

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 2000 Annual Meeting of
Stockholders, which Proxy Statement will be filed within 120 days after the end
of the fiscal year ended December 31, 1999.

                                       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, 1998 and
December 31, 1999 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, 1999 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, 1998 and 1999                    F-3
Consolidated Statements of Operations
  for the three years ended December 31, 1999                                F-4
Consolidated Statements of Stockholders' Equity
  for the three years ended December 31, 1999                                F-5
Consolidated Statements of Cash Flows
  for the three years ended December 31, 1999                                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, 1999                               F-31

(3)      EXHIBITS
<TABLE>
<S>             <C>
          3.1   Certificate of Incorporation of the Company and amendment thereto(1)

          3.2   Second Amendment to Certificate of Incorporation(4)

          3.3   Bylaws of the Company(1)

          4.1   Indenture, dated as of February 17, 1998, among Aviation Sales
                Company, certain of its subsidiaries, and Sun trust Bank Central
                Florida, National Association, Trustee(3)

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

         10.1   Third Amended and Restated Credit Agreement, dated as of October 17, 1997, by and among the
                Company, certain of its subsidiaries and Citicorp USA, Inc., as agent(2)

         10.2   Lease, dated as of December 2, 1994, by and between Aviation Properties and the Partnership(1)

         10.3   Memorandum of Purchase and Sale effective as of March 31, 1998
                by and between Aviation Properties of Texas and Aviation Sales
                Operating Company for Pearland facility (14)

         10.4   Lease dated July 22, 1998 by and between Ben Quevedo, Ltd.  and Caribe (14)

+        10.5   Form of Employment Agreement, dated January 1, 1999, by and between Dale S. Baker and the
                Company (14)

+        10.6   Amended Employment Agreement, effective as of December 2, 1994, by and between Harold Woody
                and the Company(4)

         10.7   Intentionally omitted

+        10.8   Amended Employment Agreement, effective as of June 1, 1996, by and between Michael A. Saso and
                the Company(4)
</TABLE>

                                       27
<PAGE>
<TABLE>
<S>             <C>
+        10.9   Form of Employment Agreement, dated January 1, 1999, by and between Benito Quevedo and the
                Company (14)

+       10.10   1996 Director Stock Option Plan(4)

+       10.11   1996 Stock Option Plan(4)

+       10.12   1997 EBITDA Incentive Compensation Plan(5)

+       10.13   Form of Aviation Sales Company 1999 EBITDA Plan  (14)

+       10.14   Form of Stock Option Agreement (Non-Plan) by and between the Company and each of Dale S. Baker
                and Benito Quevedo (14)

+       10.15   Special Incentive Compensation Plan (16)

        10.16   Merger Agreement by and among Aviation Sales Company, AVS/ASI Merger Corp., Aerocell
                Structures, Inc. and the shareholders of Aerocell Structures, Inc., dated as of September 30, 1997(6)

        10.17   Asset Purchase Agreement by and between Aviation Sales Company
                and Kratz-Wilde Machine Company, dated as of September 30,
                1997(7)

        10.18   Stock for Asset Purchase Agreement by and between Aviation Sales Company, AVS/AMI Merger
                Corp., Apex Manufacturing, Inc. and the shareholders of Apex Manufacturing, Inc., dated as of
                December 31, 1997(8)

        10.19   Merger Agreement by and among Aviation Sales Company, VS/CAI Merger Corp., Caribe Aviation,
                Inc., Aircraft Interior Design, Inc. and Benito Quevedo(9)

        10.20   Agreement and Plan of Merger dated as of March 26, 1998 by and among Aviation Sales Company,
                WHC Acquisition Corp. and Whitehall Corporation (10)

        10.21   Stock Purchase Agreement dated August 10, 1998 by and among Aviation Sales Maintenance, Repair
                & Overhaul Company, Primark Corporation and Triad International Maintenance Corporation (11)

        10.22   First Amendment to Stock Purchase Agreement dated September 22, 1998(11)

        10.23   Amendment No.  2 and Consent dated as of September 18, 1998 to Third Amendment and Restated Credit
                Agreement dated as of October 17, 1997(11)

        10.24   Amendment No.  3 dated as of November 24, 1998 to Third Amended and Restated Credit Agreement
                dated as of October 17, 1997(12)

        10.25   Amendment No.  4 dated as of December 15, 1998 to Third Amended and Restated Credit Agreement
                dated as of October 17, 1997 (13)

        10.26   Amendment No.  5 dated as of February 15, 1999 to Third Amended and Restated Credit Agreement
                dated as of October 17, 1997 (14)

        10.27   Amendment No. 6 dated as of May 11, 1999 to Third Amended and Restated Credit Agreement dated as
                of October 17, 1997 (15)

        10.28   Amendment No. 7 dated as of June 30, 1999 to Third Amended and Restated Credit Agreement dated as
                of October 17, 1997 (16)
</TABLE>

                                       28
<PAGE>
<TABLE>
<S>             <C>
        10.29   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 (13)

        10.30   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 (13)

        10.31   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

        10.32   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 (13)

        10.33   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 (13)

        10.34   Shareholders Rights Plan (17)

        10.35   Term Loan Note, dated February 18, 2000 (18)

        10.36   Amendment No. 8 and Waiver, dated  February 18, 2000, to Third Amended and Restated Credit
                Agreement (18)

        10.37   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 (18)

        10.38   Standstill Agreement between the Company, LJH Corporation and Lacy J. Harber (18)

        10.39   Amendment No. 1 to Stockholders' Rights Plan (18)

*       10.40   Amendment No. 9, Standstill and Waiver, dated March 31, 2000, to Third Amended and Restated Credit
                Agreement

*       10.41   Standstill Agreement, dated March 31, 2000 with First Security Bank and NationsBank, National Association

*        21.1   List of Subsidiaries of Registrant

*        23.1   Consent of Arthur Andersen LLP

*        27.1   Financial Data Schedule
</TABLE>
------------
*        Filed herewith
+        Compensation plan or agreement

(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 the Company's Quarterly Report on Form
         10-Q for the quarter and nine months ended September 30, 1997

                                       29
<PAGE>

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

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

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

(6)      Incorporated by reference to the Registrant's Current Report on Form
         8-K dated September 30, 1997

(7)      Incorporated by reference to the Registrant's Current Report on Form
         8-K dated October 17, 1997

(8)      Incorporated by reference to the Registrant's Current Report on Form
         8-K dated December 31, 1997

(9)      Incorporated by reference to the Registrant's Current Report on Form
         8-K dated March 6, 1998

(10)     Incorporated by reference to Registrant's Registration Statement on
         Form S-4 filed April 30, 1998 (File No. 333-31479)

(11)     Incorporated by reference to Registrant's Current Report on Form 8-K
         dated September 22, 1998

(12)     Incorporated by reference to Registrant's Current Report on Form 8-K
         dated November 24, 1998

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

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

(15)     Incorporated by reference to Registrant's Quarterly Report on Form 10-Q
         for the quarter and three months ended March 31, 1999

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

(17)     Incorporated by reference to Registrant's Current Report on Form 8-K
         dated November 2, 1999

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

                                       30
<PAGE>

         (B)      REPORTS ON FORM 8-K.

         The following Current Report on Form 8-K was filed during the fourth
quarter of 1999:

                  (i)      Current Report on Form 8-K, dated November 2, 1999
                           reporting under: Item 5, the Company's adoption of a
                           shareholder's rights plan.

         (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 14, 2000
------------------------
Dale S. Baker, President

         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 14, 2000
----------------------------------
Dale S. Baker
President, Chief Executive Officer
and Chairman of the Board
(Principal Executive Officer)


/s/ Harold M. Woody                                               April 14, 2000
----------------------------------
Harold M. Woody
Executive Vice President and Director


/s/ Michael C. Brant                                              April 14, 2000
----------------------------------
Michael C. Brant
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)


/s/ Robert Alpert                                                 April 14, 2000
----------------------------------
Robert Alpert
Director


/s/ Sam Humphreys                                                 April 14, 2000
----------------------------------
Sam Humphreys
Director


/s/ Philip B. Schwartz                                            April 14, 2000
----------------------------------
Philip B. Schwartz
Director


/s/ Roy T. Rimmer                                                 April 14, 2000
----------------------------------
Roy T. Rimmer
Director

                                       32
<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, 1998 and 1999....................F-3
Consolidated Statements of Operations
  for the three years ended December 31, 1999................................F-4
Consolidated Statements of Stockholders' Equity
  for the three years ended December 31, 1999................................F-5
Consolidated Statements of Cash Flows
  for the three years ended December 31, 1999................................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, 1999......................F-31

                                       F-1

<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of Aviation Sales Company:

         We have audited the accompanying consolidated balance sheets of
Aviation Sales Company (a Delaware corporation) and subsidiaries as of December
31, 1998 and 1999, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1999. 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, 1998 and 1999, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999 in conformity with accounting principles generally
accepted in the United States.

         The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Notes 1 and 6 to
the financial statements, the Company was not in compliance at December 31, 1999
or April 14, 2000 with certain of the financial covenants contained in the
Company's revolving loan agreement with its senior lenders. The Company's
lenders have agreed to forbear in regards to these covenant violations and other
matters until May 31, 2000. The revolving loan has an outstanding balance of
$269.6 million at December 31, 1999, and the Company has insufficient liquidity
to repay the loan. A default under this loan could result in cross defaults
under certain of the Company's other financing arrangements and leases. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also discussed
in Notes 1 and 6. 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,
   April 13, 2000.

                                      F-2
<PAGE>
                     AVIATION SALES COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>

ASSETS                                                                               December 31,
                                                                                 ------------------
                                                                                   1998      1999
                                                                                 --------  --------
<S>                                                                              <C>       <C>
CURRENT ASSETS:
 Cash and cash equivalents                                                       $ 10,536  $ 21,431
 Accounts receivable, net of allowance for doubtful accounts of $12,489 and
   $19,242 in 1998 and 1999, respectively                                         115,974   163,318
 Inventories                                                                      277,131   350,610
 Deferred income taxes                                                              5,932     2,292
 Income taxes recoverable                                                           2,590    34,801
 Other current assets                                                              13,826     6,060
                                                                                 --------  --------
    Total current assets                                                          425,989   578,512
                                                                                 --------  --------

Equipment on lease, net of accumulated amortization of $3,014 and
    $2,362 in 1998 and 1999, respectively                                          28,354    17,393
                                                                                 --------  --------
Fixed assets, net                                                                  69,744    91,080
                                                                                 --------  --------
Amounts due from related parties                                                    2,204     2,099
                                                                                 --------  --------

OTHER ASSETS:
 Goodwill, net                                                                     56,936    66,994
 Deferred financing costs, net                                                      8,104     7,953
 Other assets                                                                       8,046    14,761
                                                                                 --------  --------
    Total other assets                                                             73,086    89,708
                                                                                 --------  --------
    Total assets                                                                 $599,377  $778,792
                                                                                 ========  ========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
 Accounts payable                                                                $ 50,931  $ 77,101
 Accrued expenses                                                                  26,317    32,937
 Current maturities of notes payable                                                4,908     3,887
 Current maturities of capital lease obligations                                       84        84
 Revolving loan                                                                   174,007   269,580
                                                                                 --------  --------
    Total current liabilities                                                     256,247   383,589
                                                                                 --------  --------

LONG-TERM LIABILITIES:
 Deferred income                                                                    1,371     1,113
 Notes payable, net of current portion                                             18,881     1,066
 Capital lease obligations, net of current portion                                  4,133     4,093
 Senior subordinated notes                                                        164,163   164,254
 Deferred income taxes                                                                284        --
 Other long-term liabilities                                                           --     6,155
                                                                                 --------  --------
    Total long-term liabilities                                                   188,832   176,681
                                                                                 --------  --------
COMMITMENTS AND CONTINGENCIES (NOTES 4, 6, 9 AND 10)

STOCKHOLDERS' EQUITY:
 Preferred stock, $.01 par value, 1,000,000 shares authorized,
   15,000 shares designated, Series A Junior Participating                             --        --
 Common stock, $.001 par value, 30,000,000 shares authorized, 12,515,809 and
   15,015,317 shares outstanding in 1998 and 1999, respectively                        12        15
Additional paid-in capital                                                         64,344   150,288
Retained earnings                                                                  89,942    68,219
                                                                                 --------  --------
    Total stockholders' equity                                                    154,298   218,522
                                                                                 --------  --------
    Total liabilities and stockholders' equity                                   $599,377  $778,792
                                                                                 ========  ========
</TABLE>

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

                                      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,
                                                            ---------------------------------
                                                              1997        1998        1999
                                                            ---------   ---------   ---------
<S>                                                         <C>         <C>         <C>
Operating revenues:
 Sales of products, net                                     $ 244,340   $ 359,245   $ 346,422
 Services and other                                            78,198     141,571     325,092
                                                            ---------   ---------   ---------
                                                              322,538     500,816     671,514
Cost of sales and services                                    244,758     372,728     561,484
                                                            ---------   ---------   ---------
Gross profit                                                   77,780     128,088     110,030
Operating expenses                                             52,782      66,719     105,466
                                                            ---------   ---------   ---------
Income from operations                                         24,998      61,369       4,564
Interest expense                                                8,059      21,343      35,112
Other expense (income)                                          4,696        (196)      6,342
                                                            ---------   ---------   ---------
Income (loss) before income taxes, equity (loss) income of
  affiliate and extraordinary item                             12,243      40,222     (36,890)
Income tax expense (benefit)                                    7,260      15,486     (13,878)
                                                            ---------   ---------   ---------
Income (loss) before equity (loss) income of affiliate and
  extraordinary item                                            4,983      24,736     (23,012)
Equity (loss) income of affiliate                                (139)      1,356       1,289
                                                            ---------   ---------   ---------
Income (loss) before extraordinary item                         4,844      26,092     (21,723)
Extraordinary item, net of income taxes                            --         599          --
                                                            ---------   ---------   ---------
Net income (loss)                                           $   4,844   $  25,493   $ (21,723)
                                                            =========   =========   =========

BASIC EARNINGS (LOSS) PER SHARE:
Income (loss) before extraordinary item                     $    0.40   $    2.13   $   (1.56)
Extraordinary item, net of income taxes                            --        0.05          --
                                                            ---------   ---------   ---------
Net income (loss)                                           $    0.40   $    2.08   $   (1.56)
                                                            =========   =========   =========

DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) before extraordinary item                     $    0.39   $    2.06   $   (1.56)
Extraordinary item, net of income taxes                            --        0.05          --
                                                            ---------   ---------   ---------
Net income (loss)                                           $    0.39   $    2.01   $   (1.56)
                                                            =========   =========   =========
</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>
<CAPTION>
                                         Common Stock       Additional                      Treasury Stock            Total
                                    ---------------------     Paid-In      Retained     -----------------------   Stockholders'
                                      Shares       Amount     Capital      Earnings       Shares        Amount        Equity
                                    -----------    ------   ----------     --------     ----------     --------   -------------
<S>                                  <C>            <C>      <C>           <C>          <C>            <C>          <C>
Balance as of December 31, 1996      13,372,026     $ 13     $  73,455     $ 58,572     (1,111,562)    $(16,145)    $ 115,895

 Impact of immaterial poolings               --       --           583        1,033             --           --         1,616
 Net income                                  --       --            --        4,844             --           --         4,844
 Stock options exercised                 47,542       --           872           --             --           --           872
 Gain on litigation settlement
   with former employee                 (75,000)      --        (2,625)          --             --           --        (2,625)
 Issuance of common stock
   to employees                          18,000       --           677           --             --           --           677
                                    -----------     ----     ---------     --------     ----------     --------     ---------
 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 grant                  (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
                                    ===========     ====     =========     ========     ==========     ========     =========
</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,
                                                                       --------------------------------
                                                                          1997        1998        1999
                                                                       ---------   ---------   ---------
<S>                                                                    <C>         <C>         <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)                                                      $   4,844   $  25,493   $ (21,723)
Adjustments to reconcile net income (loss) to net cash used in
     operating activities:
  Depreciation and amortization                                            5,619      11,350      17,839
  Write-off of fixed assets                                                   --          --       8,383
  Proceeds from sale of equipment on lease, net of gain                    3,797       1,289       2,960
  Gain on sale of fixed assets                                                --         (72)     (1,432)
  Equity (income) loss of affiliate, net of income taxes                     139      (1,356)     (1,289)
  Write-off of preferred stock                                             4,500          --          --
  Reserve for inventory obsolesence                                           --          --      33,181
  Provision for doubtful accounts                                          8,157       1,692      12,560
  Deferred income taxes                                                      279      (1,106)      3,174
  Extraordinary item, net of income taxes                                     --         599          --
  Issuance of common stock to employees                                      677          --          --
  Gain on litigation settlement with former employee                      (2,625)         --          --
  Increase in accounts receivable, net                                   (28,782)     (3,012)    (59,904)
  Increase in inventories                                                (58,523)   (102,224)   (102,909)
  Increase in other current assets                                        (8,458)     (1,147)    (23,577)
  Increase in other assets                                                  (882)     (1,562)     (3,940)
  Increase in accounts payable                                             8,322      10,589      26,169
  Increase (decrease) in accrued expenses                                  8,804     (11,824)      6,620
  Increase (decrease) in deferred income                                      72         409        (257)
  Increase (decrease) in other liabilities                                   322         (72)      1,404
                                                                       ---------   ---------   ---------
      Net cash used in operating activities                              (53,738)    (70,954)   (102,741)
                                                                       ---------   ---------   ---------
CASH FLOW FROM INVESTING ACTIVITIES:
  Cash used in acquisitions, net of cash acquired                        (41,447)    (75,703)    (18,080)
  Purchases of fixed assets                                               (8,133)    (16,618)    (32,033)
  Purchases of equipment on lease                                        (10,528)    (23,410)     (9,087)
  Purchase of facility                                                        --          --      (3,500)
  Proceeds from sale of electronics business                               1,720          --          --
  Proceeds from sale of land held for investment                              --         751      11,556
  Purchase of land held for investment                                        --          --     (10,124)
  Payments from related parties                                               23         687         105
                                                                       ---------   ---------   ---------
      Net cash used in investing activities                              (58,365)   (114,293)    (61,163)
                                                                       ---------   ---------   ---------
CASH FLOW FROM FINANCING ACTIVITIES:
  Borrowings of amounts under senior debt facility                       113,433      77,880     567,815
  Proceeds from sale of common stock                                          --          --      79,862
  Proceeds from issuance of senior subordinated notes                         --     164,002          --
  Repayment of amounts under senior debt facility                         (6,643)    (56,190)   (472,242)
  Proceeds from note to prior owners of Kratz-Wilde                        2,200          --          --
  Proceeds from equipment loans                                            7,200      10,488          --
  Payments on equipment loans                                               (452)       (921)       (627)
  Payments on capital leases                                                  --         (41)       (184)
  Stock options exercised                                                    872       1,806       5,220
  Payment of deferred financing costs                                     (2,188)     (7,478)     (1,573)
  Payments on notes payable                                                   --          --      (3,472)
                                                                       ---------   ---------   ---------
     Net cash provided by financing activities                           114,422     189,546     174,799
                                                                       ---------   ---------   ---------
Net increase in Cash and Cash Equivalents                                  2,319       4,299      10,895
Cash and Cash Equivalents, beginning of period                             3,918       6,237      10,536
                                                                       ---------   ---------   ---------
Cash and Cash Equivalents, end of period                               $   6,237   $  10,536   $  21,431
                                                                       =========   =========   =========
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES:
Promissory notes received for sale of electronics subsidiary           $     864   $      --   $      --
                                                                       =========   =========   =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Interest paid                                                        $   6,655   $  15,684   $  32,817
                                                                       =========   =========   =========
  Income taxes paid                                                    $   6,661   $  18,669   $  18,673
                                                                       =========   =========   =========
</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. ASC is a leading provider of aviation inventory and maintenance,
repair and overhaul services. The Company sells aircraft spare parts and
provides aircraft maintenance, repair and overhaul services to commercial
passenger airlines, air cargo carriers, maintenance and repair facilities and
other redistributors throughout the world. The Company also manufactures various
aircraft parts for sale to original equipment manufacturers, including precision
engine parts.

         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 Whitehall retroactively consolidated are referred to herein as the
operations of the Company.

SECONDARY OFFERING

         On June 16, 1999, the Company closed a public offering of 2,000 shares
of common stock and on June 24, 1999 the Company's underwriters 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. The Company also
filed a separate registration statement with respect to the public offering of
$85,000 of the Company's senior subordinated notes due 2008, and has not sold
any of these new notes to date.

LIQUIDITY

         The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Notes 6
and 10, the Company was not in compliance at December 31, 1999 and April 13,
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. These third parties have agreed to forbear in regards to
these covenant violations and other matters until May 31, 2000. The Company is
currently taking actions designed to reduce its debt through the possible sales
of assets, including the potential sale of its manufacturing operations. The
Company is also continuing its efforts to sell or lease the four A-300 aircraft
which it owns.

ACCOUNTING ESTIMATES

         The preparation of financial statements in conformity with generally
accepted accounting principles 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 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 receivable, the reserve for sales returns,
medical benefit accruals and the allowances for litigation and environmental
costs. In determining the inventory allowance for its aircraft spare parts, the
Company assumes the inventory will be offered for sale in the normal course of
business which assumes inventory could be held for many years.

                                      F-7
<PAGE>

PRINCIPLES OF CONSOLIDATION

         The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.

RECLASSIFICATIONS

         Certain prior year amounts included in the accompanying consolidated
financial statements have been reclassified to conform with the 1999
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,
1998 and 1999, include cash held by the Company in demand deposit accounts.

REVENUE RECOGNITION

         Sales of aircraft parts and repairs are recognized as product sales
when a unit is shipped and title has passed to the customer or when a repaired
unit is returned to the customer. The Company records reserves for estimated
sales returns in the period sales are made. Reserves for returns as of December
31, 1998 and 1999 were $1,399 and $2,230, respectively. 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. The Company also warehouses and sells inventories on behalf of others
under consignment arrangements. The Company records sales of aircraft parts from
consignment inventories as product sales upon shipment of the unit. 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
product sales at the time the unit is shipped.

         Revenues from aircraft maintenance service and design and construction
of specialized parts 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. The Company also
performs inventory repair management and warehouse management services for
customers on a contractual basis. 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 services and other revenue.

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. The Company
enters into consignment arrangements for bulk quantities of inventory items.
Costs to disassemble and warehouse bulk items are included in inventories and
expensed as the consigned items are sold. The Company maintains raw materials
and work in progress inventories in support of its manufacturing and
maintenance, repair and overhaul activities. At December 31, 1998 and 1999,
inventories consisted of the following:

                                          1998      1999
                                        --------  --------
Finished goods, including aircraft
  and aircraft parts                    $248,430  $324,514
Work in progress                           7,626     6,296
Raw materials                             21,075    19,800
                                        --------  --------
                                        $277,131  $350,610
                                        ========  ========

                                      F-8
<PAGE>

         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 offered for sale in
the normal course of business and not on a liquidation basis.

         During 1999, the Company acquired five passenger aircraft, of which
three were reconfigured for cargo use. One of the other two aircraft was sold in
December 1999. The remaining four aircraft are currently offered for sale or
lease.

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. The cost of equipment on lease is amortized, principally on a
straight-line basis, to the estimated remaining net realizable value over the
lease term or the economic life of the equipment.

FIXED ASSETS, NET

         At December 31, 1998 and 1999, fixed assets, net consisted of the
following:

                                      1998       1999
                                   ---------   ---------
Land                               $   1,397   $     406
Buildings                             12,889      11,542
Machinery and equipment               48,782      70,118
Furniture and fixtures                 4,817       6,434
Leasehold improvements                25,440      36,552
                                   ---------   ---------
                                      93,325     125,052
     Accumulated depreciation and
        amortization                 (23,581)    (33,972)
                                   ---------   ---------
                                   $  69,744   $  91,080
                                   =========   =========

         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. Estimated useful lives range from 3 to 29 years
for the Company's fixed assets. 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
expense amounted to $3,120, $6,501 and $10,391 for the years ended December 31,
1997, 1998 and 1999, respectively.

         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.

                                      F-9
<PAGE>

INVESTMENTS

         In November 1996, Whitehall sold substantially all of the assets
related to its ocean systems business in exchange for 818 shares of the buyer's
preferred stock, which carries a liquidation preference of $5.50 per share. The
preferred stock is convertible at the Company's election after December 31, 1997
into shares of the buyer's common stock at a 45% conversion rate. In 1996,
Whitehall considered this investment as one that would be held to maturity and
that its carrying value of $4,500 approximated its fair market value. The
carrying value was the net cost of the assets exchanged for the stock. However,
although the buyer of the ocean systems business provided additional capital and
new management, the continuing decline in defense spending and other concerns
caused Whitehall's management in 1997 to reevaluate the value of this preferred
stock. As a result, other expense (income) in the accompanying 1997 consolidated
statement of operations contains a $4,500 write-off of the value of the
preferred stock.

         In March 1997, Whitehall sold its electronics business for
approximately $2,764, consisting of approximately $1,900 in cash and $864 in 10%
promissory notes.

         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.

         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. In
March 2000, the Company invested an additional $1,700. The Company accounts for
the investment under the equity method.

         The total carrying value of the equity investments, including notes
receivable and accrued interest, at December 31, 1998 and 1999 was $4,419, and
$7,647, 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, 1998 and 1999 is as follows:

                         1998     1999
                        -------  -------
Current assets          $18,294  $14,741
Noncurrent assets         1,351    3,150
Current liabilities       8,150    3,622
Noncurrent liabilities    2,000    2,000

         Summarized results of operations for the equity investments for the
years ended December 31, 1997, 1998 and 1999 are as follows:

                     1997      1998      1999
                   --------   -------  -------
Net sales          $ 17,810   $45,483  $38,338
Gross profit          3,578     7,754    7,341
Net income (loss)      (569)    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 initial terms of the loans to which such costs relate.
Amortization expense for the years ended December 31, 1997, 1998 and 1999 was
$386, $949 and $1,724, respectively. In February 1998, the Company completed the
offering and sale of $165,000 of its senior subordinated notes and used a
portion of the proceeds to retire existing term and revolving indebtedness. In
connection with these transactions, the Company wrote off the deferred financing
costs related to the term loans and recognized an extraordinary item in the
accompanying consolidated statement of operations. See Note 6. The cost and
accumulated amortization of deferred financing costs as of December 31, 1998 and
1999 is as follows:

                            1998      1999
                          -------   --------
Original basis            $ 9,378   $ 10,951
Accumulated amortization   (1,274)    (2,998)
                          -------   --------
                          $ 8,104   $  7,953
                          =======   ========

         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 to goodwill and increase in
inventories of $1,410. Amortization expense for the years ended December 31,
1997, 1998 and 1999 was $190, $1,679 and $3,255, respectively. Goodwill and
accumulated amortization as of December 31, 1998 and 1999 is as follows:

                            1998       1999
                          --------   --------
Original basis            $ 58,805   $ 72,118
Accumulated amortization    (1,869)    (5,124)
                          --------   --------
                          $ 56,936   $ 66,994
                          ========   ========

         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.

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. 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.

                                      F-11
<PAGE>

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 long-term
debt approximates the carrying amount of long-term debt in the accompanying
consolidated balance sheets as the Company's variable rate long-term debt
reprices to market and its fixed rate long-term debt is at what management
believes to be fair market interest rates.

COMPREHENSIVE INCOME

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

RECENTLY ISSUED ACCOUNTING STANDARDS

         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 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" but 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.

         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.

         In April 1998, the ACSEC issued 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


                                      F-12
<PAGE>

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.

         In January 2000, Securities and Exchange Commission Staff Accounting
Bulletin ("SAB") No. 101 regarding revenue recognition was issued. SAB 101
clarifies issues relating to revenue recognition in financial statements
including income statement presentation and disclosure. SAB 101 is effective for
fiscal quarters beginning after March 15, 2000. The Company is currently
assessing the impact of the future adoption of SAB 101.

NOTE 2 - BUSINESS COMBINATIONS

ACQUISITIONS ACCOUNTED FOR UNDER THE PURCHASE METHOD OF ACCOUNTING

         In July 1997, Whitehall completed the acquisition of an aircraft
maintenance facility for approximately $6,700 in cash and assumed liabilities.
This acquisition involved the purchase of inventories, equipment, and certain
intangible assets.

         In October 1997, the Company completed the acquisition of substantially
all of the assets of the business of Kratz-Wilde Machine Company, a Kentucky
corporation ("Kratz-Wilde") for $39,600 in cash and notes and the assumption of
certain liabilities of Kratz-Wilde in the approximate amount of $2,200. (See
Note 6).

         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.

         In September 1998, the Company completed the acquisition of Triad
International Maintenance Corporation ("TIMCO") for $63,300 in cash. (See Note
6). 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 will 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.

         The Company's acquisitions of Kratz-Wilde, 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.

         Unaudited pro forma consolidated results of operations assuming Aero
Corp-Macon, Kratz-Wilde, Caribe, AIDI and TIMCO acquisitions had occurred at
the beginning of the periods presented are as follows:

                                                           December 31,
                                                        ------------------
                                                          1997      1998
                                                        --------  --------
Revenue                                                 $503,100  $614,900
Income before extraordinary item                           3,700    27,700
Net income                                                 3,700    27,100
Diluted earnings per share before extraordinary item        0.29      2.13

                                      F-13
<PAGE>

         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, 1997.

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 September 1997, the Company acquired Aerocell Structures, Inc.
("Aerocell") for consideration of 621 shares of the Company's common stock. In
December 1997, the Company acquired Apex Manufacturing, Inc. ("Apex") for
consideration of 239 shares of the Company's common stock.

         In July 1998, the Company acquired Whitehall for consideration of 2,844
shares of the Company'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.

         Details of the results of operations of ASC and the pooled entities for
the periods before the pooling of interest combinations were consummated are as
follows:

                                 1997        1998
                               ---------   --------
Operating revenues:
         ASC                   $ 230,181   $414,318
         Aerocell and Apex        26,566         --
         Whitehall                65,791     86,498
                               ---------   --------
                               $ 322,538   $500,816
                               =========   ========
Income (loss)
  before extraordinary item:
         ASC                   $  13,653   $ 19,977
         Aerocell and Apex         3,128         --
         Whitehall               (11,937)     6,115
                               ---------   --------
                               $   4,844   $ 26,092
                               =========   ========


                                      F-14
<PAGE>

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,
                            ------------------------------
                              1997       1998       1999
                            --------   --------   --------
Accounts receivable, net    $  7,011   $ 31,874   $     --
Inventories                    8,803     15,057      3,535
Prepaid expenses                  19      1,127         --
Deposits and other               619        483      1,000
Fixed assets                  21,962     22,245      2,322
Goodwill                      17,902     40,903     14,723
Accounts payable              (2,328)    (8,842)        --
Accrued expenses              (2,632)   (16,424)    (3,500)
Deferred income taxes           (557)        --         --
Notes payable                 (3,446)    (5,000)        --
Capital lease obligations     (4,290)        --         --
Common stock issued           (1,616)    (5,720)        --
                            --------   --------   --------
Cash used in acquisitions,
  net of cash acquired      $ 41,447   $ 75,703   $ 18,080
                            ========   ========   ========

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 capitalized costs
previously expended relating to the development of a new software system which
has not been implemented and will not be completed. 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 charges and adjustments, approximately $33,181 and $19,977
is included in cost of sales and services and operating expenses, respectively,
in the accompanying consolidated statement of operations for the year ended
December 31, 1999. The write-down of capitalized costs relating to development
of new software of $7,700 is included in other expense (income).

NOTE 4 - ACCOUNTS RECEIVABLE

         The Company distributes products 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 $23,862 and
$45,074 at December


                                      F-15
<PAGE>

31, 1998 and 1999, respectively, and are included in accounts receivable in the
accompanying consolidated balance sheets.

         The Company's top ten customers combined accounted for approximately
29%, 38% and 45% of operating revenues, for the years ended December 31, 1997,
1998 and 1999, respectively. One customer accounted for 12% of operating
revenues for the year ended December 31, 1999. No customer accounted for greater
than 10% of accounts receivable as of December 31, 1998 or 1999.

NOTE 5 - 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,
                             -------------------
                               1998       1999
                             --------   --------
Equipment on lease, at cost  $ 31,368   $ 19,755
Accumulated amortization       (3,014)    (2,362)
                             --------   --------
                             $ 28,354   $ 17,393
                             ========   ========

         Deposits of $799 and $1,113, as of December 31, 1998 and 1999,
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 $1,923, $2,018 and $2,151 for the years ended December 31,
1997, 1998 and 1999, respectively. Future minimum lease payments receivable
under outstanding leases are as follows:

        Years Ending December 31,
        -------------------------
                  2000                             $ 2,831
                  2001                               2,224
                  2002                               1,199
                  2003                                 269
                                                   -------
                                                   $ 6,523
                                                   =======



                                      F-16
<PAGE>

NOTE 6 - NOTES PAYABLE AND REVOLVING LOAN

         At December 31, 1998 and 1999, notes payable and revolving loan
consisted of the following:

                                                December 31,
                                            ---------------------
                                              1998        1999
                                            ---------   ---------
Revolving loan                              $ 174,007   $ 269,580
Senior subordinated notes, net of discount    164,163     164,254
Term loan - leased assets                      16,589       1,203
Notes payable to prior owners of
  acquired companies                            7,200       3,750
                                            ---------   ---------
                                              361,959     438,787
Less--current maturities                     (178,915)   (273,467)
                                            ---------   ---------
Net long-term notes payable                 $ 183,044   $ 165,320
                                            =========   =========

         Future maturities of notes payable and revolving loan at December 31,
1999 are as follows:

       Years Ending December 31,
       -------------------------
                 2000                             $273,467
                 2001                                  274
                 2002                                  792
                 2008                              164,254
                                                  --------
                                                  $438,787
                                                  ========

SENIOR CREDIT FACILITY

         In July 1996, the Company entered into a new credit facility with a
group of financial institutions (the "Credit Facility"). The Credit Facility
consisted of (a) a term loan facility in an original principal amount of $20,000
and (b) a $50,000 revolving loan, letter of credit and acquisition loan
facility.

         In October 1997, in connection with the acquisition of Kratz-Wilde, the
Company amended its Credit Facility (the "Amended Credit Facility"). The Amended
Credit Facility consisted of: (a) term loans of $55,600, and (b) a revolving
loan and letter of credit facility of $91,400. The term loan portion of the
Amended Credit Facility was repayable in quarterly installments through July 31,
2002 and the revolving loan portion of the Amended Credit Facility was due and
payable on July 31, 2002.

         In February 1998, the Company repaid all amounts then outstanding under
the Amended Credit Facility with the net proceeds from the Company's sale of
$165,000 of its senior subordinated notes (see Senior Subordinated Notes below).
The Company wrote off deferred financing costs of $981 in connection with the
repayment of the term loan portion of the Amended Credit Facility, resulting in
an extraordinary item, net of taxes, of $599.

         In September 1998, in connection with the acquisition of TIMCO, the
Company further amended its Amended Credit Facility to increase the revolving
loan and letter of credit facility to $200,000, up to $30,000 of which may be
outstanding letters of credit. In November 1998 and May 1999, the Amended Credit
Facility was further amended to increase the revolving loan and letter of credit
facility to $250,000 and $300,000, respectively.

         Borrowings under the Amended Credit Facility are secured by a lien on
substantially all of the Company's assets and the borrowing base consists of
substantially all of the Company's receivables and inventory. Interest under the
Amended Credit Facility is, at the option of the Company, (a) prime plus a
margin, or (b) LIBOR plus a margin, where the respective margin determination is
made based upon the Company's financial performance over a 12 month period
(ranging from 0.0% to 1.0% in the event prime is utilized, or


                                      F-17
<PAGE>

1.125% to 2.5% in the event LIBOR is utilized). At December 31, 1999, the margin
was 0.75% for prime rate loans and 2.25% for LIBOR rate loans.

         The Amended 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. A default under the Amended 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 Amended
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. At
December 31, 1999, the Company was not in compliance with certain of the
financial covenants contained in the Amended Credit Facility. The financial
institutions which are party to the Amended Credit Facility have agreed to
forbear in regards to these covenant violations and other matters until May 31,
2000 and they have increased the interest rate on the Amended Credit Facility by
2%. During this period, the Company intends to pursue a new credit facility
with its lenders. There can be no assurance that the Company will successfully
execute a new credit facility during this period and failure of this to occur
would likely have a material adverse effect upon the Company. At December 31,
1999, $6,828 was available for borrowing under the Amended Credit Facility and
outstanding letters of credit aggregated $23,592.

         In February 2000, the Company executed a $15,500 term loan with the
financial institution which is the agent to the Amended Credit Facility. The
term loan matures in February 2001, bears interest at 12% and contains financial
covenants which are consistent with the Amended Credit Facility. Under the term
loan agreement, the Company also granted warrants to purchase 129 shares of
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 pursuant
to the warrants.

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 Company's Amended
Credit Facility and to fund the cash requirements related to the acquisition of
Caribe and AIDI. The senior subordinated notes mature on February 15, 2008.
Interest is payable on February 15 and August 15 of each year, commencing August
15, 1998. 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 Amended Credit Facility and
under facilities which may replace the Amended 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 Amended Credit Facility.

         The indenture pursuant to which the senior subordinated notes have been
issued permits the Company and its subsidiaries to incur substantial 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 of
2.0 to 1 until February 15, 2000 and 2.25 to 1 thereafter. 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 senior subordinated notes are also
effectively subordinated in right of payment to all existing and future
liabilities of any of the Company's 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


                                      F-18
<PAGE>

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%. In addition, on or prior to
February 15, 2001, the Company may redeem up to 35% of the aggregate principal
amount of the senior subordinated notes at a redemption price of 108.125% of the
principal amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, thereon to the redemption date with the net proceeds of a
public offering of common stock of the Company; provided, that at least 65% of
the aggregate principal amount of the senior subordinated notes originally
issued remains outstanding immediately after the occurrence of this redemption.

         Upon the occurrence of a change of 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 of control or that such repurchase will then be permitted under
the facility.

         The indenture contains certain 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, dispose of assets, 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 the Company's assets.

OTHER LOANS

         The Company has a term loan agreement in the aggregate principal amount
of $1,600 to finance certain equipment and rotable parts on long-term lease
which secure the loan. The loan bears interest of 8.21% and is payable monthly
through August 2002. The loan contains financial and other covenants and
mandatory prepayment events, as defined. At December 31, 1999, the Company was
in compliance with all covenants of this loan.

         In connection with the acquisition of Kratz-Wilde (see Note 2), 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
$2,200. The final payment of $1,250 was made on January 1, 2000. Interest on
this note has been imputed at 8%. In connection with the acquisition of Caribe
and AIDI (see Note 2), 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 is payable over a two year period with an interest rate
of 8% per annum. The final payment of $2,500 was made in March 2000.

NOTE 7 - RELATED PARTY TRANSACTIONS

         The Company leases its current corporate headquarters and warehouse in
Miami, Florida (the "Miami Property") from an entity controlled by certain
shareholders of the Company. The lease on the Miami Property calls 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 is being repaid in monthly installments with any remaining
outstanding principal and interest due on December 2, 2004. The remaining
outstanding balance of $2,099 as of December 31, 1999 is reflected as amounts
due from related parties in the accompanying consolidated balance sheets. As
discussed in Note 10, the Company intends to move to a new corporate
headquarters and warehouse facility during April 2000. Management believes that
it will be relieved of its remaining obligations under the lease agreement
relating to its current corporate headquarters.

                                      F-19
<PAGE>

         The Company previously leased a warehouse in Pearland, Texas, from a
related party. The lease required annual payments of $114 and was to expire on
December 2, 2000. On March 31, 1998, the Company purchased the Pearland property
from the related party for $1,800 in cash and through the reduction of an
accounts receivable due from the related party at the date of the sale.

         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. The fair value
of these shares on the date of issuance, $677, has been included in general and
administrative expenses in the accompanying 1997 consolidated statement of
operations. 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 8 - 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 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.

         In March 2000, the Company amended the rights agreement to allow a
stockholder 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.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

LITIGATION AND CLAIMS

         On November 26, 1997, the Company settled an outstanding legal claim
against a former employee and shareholder of the Company. As part of this
settlement, the employee agreed to leave the Company and transfer 75 shares of
the Company's common stock back to the Company, which shares were immediately
retired. The fair value of the shares at the date of the settlement, $2,625, is
included in the accompanying 1997 statement of operations, as a gain on
litigation settlement with former employee.

         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. Paine Webber alleges that it is due a fee in
connection with the Company's acquisition of TIMCO, based upon a 1997 agreement
between Whitehall and Paine Webber relating to a then proposed acquisition of
TIMCO by Whitehall which did not occur. Paine Webber is seeking approximately
$1,000, plus costs and an unstated amount of punitive damages. Paine Webber is
also seeking approximately $250 allegedly due relating to the failure of
Whitehall to honor an alleged right of first refusal provision in the 1997
agreement.

         The Company believes that its acquisition of TIMCO was not within the
scope of the 1997 Paine Webber/Whitehall agreement and that claims brought under
this agreement against the Company and Whitehall are without merit. The Company
is vigorously defending these claims. Although the Company can give no
assurance, based upon the available facts, the Company believes that the
ultimate outcome of this matter will not have a material adverse effect upon its
financial condition.

         On June 24, 1998, Zantop International Airlines, Inc. Aero 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
seeks 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 involves a contractual dispute relative to certain
purchase price adjustments and inventory purchases. The Company is vigorously
defending this action. Although


                                      F-20
<PAGE>

the Company can give no assurance, based upon the available facts, the Company
believes that the ultimate outcome of this matter will not have a material
adverse effect upon its financial condition.

         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 has now been consolidated into a
single lawsuit. The complaint, as amended in March 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 complaint alleges that the Company's 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 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 March 26, 1998 and January 28, 2000.

         The Company intends to file a motion to dismiss the claims in the
consolidated lawsuit. The Company believes that the allegations contained in the
complaints 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 informal
inquiry into the Company's accounting for certain transactions. The Company
intends to cooperate with the SEC in its inquiry.

         The Company is 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 the financial position 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 remaining 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
remediation strategies. To comply with the financial assurances required by the
FDEP, the Company has issued a $1,700 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, and 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, 1998 and 1999
consolidated balance sheets include $3,148 and $2,028, 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 estimate, given the inherent
uncertainties in evaluating environmental exposures. These uncertainties include

                                      F-21
<PAGE>

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 purchase commitments to various airlines and
manufacturers, whereby pursuant to such agreements, the Company is committed to
purchase a minimum amount of inventory from such airlines and manufacturers.
Such commitments, which total approximately $75,540 at December 31, 1999 are to
be fulfilled over the next four years. In the opinion of management, the
Company's commitments will be realized through future sales of inventory owned
by such vendors.

         The Company has a commitment with a vendor to convert two Airbus
Aircraft from passenger configuration to cargo configuration. The terms of
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 10 - 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 its 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.

         The development of the new facility has been financed by the trust
through a $43,000 loan facility provided by a syndicate of financial
institutions. Pursuant to the agreements entered into in connection with this
financing, the Company is obligated to develop the new facility on behalf of the
trust and is 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 new facility and on the
fixtures therein. Further, the Company has posted an irrevocable letter of
credit in favor of the trust in the amount of approximately $12,000 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 or April 13,
2000 with certain of the financial covenants contained in the lease agreement.
The lessor and its lenders have agreed to forbear in regards to these covenant
violations and other matters until May 31, 2000. During this period, the Company
intends to pursue a replacement of the Amended Credit Facility with its senior
lenders. Upon execution of a new credit facility, the covenants and other terms
of the lease agreement may be amended.

         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 7). For the years ended December 31, 1997, 1998 and
1999, rent expense under leases amounted to $2,582, $2,423 and $8,112,
respectively. Minimum


                                      F-22
<PAGE>

rental commitments under all leases (excluding the operating lease for the new
facility discussed above) are as follows:

                               Operating leases
                            ---------------------
                            To related   To third     Capital
Years Ending December 31,     parties     parties      Leases
-------------------------     -------     -------     -------
             2000             $   941     $ 7,632     $   432
             2001                 893       7,042         432
             2002                 893       6,434         432
             2003                 893       6,329         432
             2004                 893       5,956         432
             Thereafter         8,930      42,957       5,796
             Amount related
               to interest         --          --      (3,779)
                              -------     -------     -------
                              $13,443     $76,350     $ 4,177
                              =======     =======     =======

NOTE 11 - SEGMENT INFORMATION

         The Company operates in one business segment, airline services.
However, the Company has determined to provide information regarding the
following components of its business segment: Distribution ("Distribution"),
Maintenance, Repair and Overhaul ("MR&O") and Manufacturing ("Manufacturing").
The Company's businesses are managed together and sell primarily to the same
customers.

         Distribution's operations encompass inventory sales, brokering and
exchanging of aircraft spare parts. In addition, Distribution provides inventory
management services, including consignment, repair management, aircraft
disassembly, warehouse management, purchasing services and leasing. MR&O
provides heavy airframe maintenance, modification and repair services for
commercial, military and freighter aircraft and for a wide range of aircraft
components. Manufacturing manufactures various aircraft parts for sale to
original equipment manufacturers, including precision engine parts.

         The Company's business is conducted on a global basis with
manufacturing, service and sales undertaken in various locations throughout the
world. Substantially all of the Company's operating profits and identifiable
assets are sourced from or located in the United States. Segment operating
income is total segment revenue reduced by operating expenses identifiable with
that business segment. Corporate includes general corporate administrative
costs.

                                      F-23
<PAGE>
         The Company evaluates performance and allocates resources based on
operating income. The accounting policies of each component of the Company's
business segment are the same as those described in the summary of significant
accounting policies (see Note 2).

                                    As of or for the Year Ended December 31,
                                    ----------------------------------------
                                        1997         1998         1999
                                      ---------    ---------    ---------
Operating Revenues:
   Distribution                       $ 223,956    $ 274,385    $ 289,754
   MR&O                                  85,079      182,291      369,329
   Manufacturing                         13,788       49,992       44,066
   Accounting eliminations                 (285)      (5,852)     (31,635)
                                      ---------    ---------    ---------
Total Operating Revenues              $ 322,538    $ 500,816    $ 671,514
                                      =========    =========    =========
Income from Operations:
   Distribution                       $  30,890    $  36,520    $ (23,776)
   MR&O                                  (5,959)      21,122       37,279
   Manufacturing                          3,183       10,288        5,085
   Accounting eliminations                  (46)        (455)        (334)
   Corporate general &
     administrative expenses             (3,070)      (6,106)     (13,690)
                                      ---------    ---------    ---------
Total Income from Operations          $  24,998    $  61,369    $   4,564
                                      =========    =========    =========

Assets:
   Distribution                       $ 230,508    $ 341,850    $ 376,005
   MR&O                                  56,396      183,920      300,019
   Manufacturing                         52,424       64,108       65,825
   Corporate                              2,004        9,499       36,943
                                      ---------    ---------    ---------
Total assets                          $ 341,332    $ 599,377    $ 778,792
                                      =========    =========    =========
Capital Expenditures:
   Distribution                       $   2,852    $   8,024    $   8,630
   MR&O                                   3,941        4,793       17,663
   Manufacturing                          1,340        3,801        5,740
                                      ---------    ---------    ---------
Total capital expenditures            $   8,133    $  16,618    $  32,033
                                      =========    =========    =========
Depreciation and Amortization:
   Distribution                       $   2,881    $   4,380    $   5,872
   MR&O                                   1,871        3,476        7,579
   Manufacturing                            867        3,064        3,879
   Corporate                                 --          430          509
                                      ---------    ---------    ---------
Total depreciation and amortization   $   5,619    $  11,350    $  17,839
                                      =========    =========    =========

Operating Revenues by
  Geographical Areas:
   United States                      $ 245,515    $ 409,611    $ 571,130
   Export Sales:
                  Europe                 43,318       62,144       73,949
                  Far East               13,852       10,925       12,265
                  Latin America          19,853       18,136       14,170
                                      ---------    ---------    ---------
Total Operating Revenues              $ 322,538    $ 500,816    $ 671,514
                                      =========    =========    =========

                                      F-24
<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. 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:

                                       Year Ended December 31,
                                      ------------------------
                                       1997     1998     1999
                                      ------   ------   ------
Weighted average shares outstanding
  used in calculating basic
  earnings per share                  12,261   12,277   13,906
Effect of dilutive options               189      419       --
                                      ------   ------   ------
Weighted average common and
  common equivalent shares
  used in calculating diluted
  earnings per share                  12,450   12,696   13,906
                                      ======   ======   ======
Options outstanding which
  are not included in the
  calculation of diluted
  earnings per share because
  their impact is antidilutive           204       55    1,942
                                      ======   ======   ======

         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) for the years ended December 31, 1997,
1998 and 1999 consists of the following:

                                          Year Ended December 31,
                                     --------------------------------
                                       1997        1998        1999
                                     --------    --------    --------
Current
         Federal                     $  6,544    $ 15,099    $(15,398)
         State                            437       1,493      (1,654)
                                     --------    --------    --------
                                        6,981      16,592     (17,052)
                                     --------    --------    --------
Deferred
         Federal                          142      (1,006)      3,964
         State                            137        (100)       (790)
                                     --------    --------    --------
                                          279      (1,106)      3,174
                                     --------    --------    --------
Total income tax expense (benefit)   $  7,260    $ 15,486    $(13,878)
                                     ========    ========    ========

                                      F-25
<PAGE>
         The tax effects of temporary differences that give rise to significant
portions of deferred tax assets as of December 31, 1998 and 1999 are as follows:

                                               December 31,
                                           -------------------
                                            1998        1999
                                           -------    --------
Deferred tax assets, net:
         Allowance for doubtful accounts   $ 3,827    $  1,891
         Accruals                            1,197      (3,491)
         Writedown of investment             1,800       1,800
         Inventories                         3,151      13,723
         Property and equipment                655        (318)
         Equipment on lease                 (1,161)     (1,161)
         Other                              (1,415)     (7,564)
                                           -------    --------
                                             8,054       4,880
         Less:  valuation allowance         (2,406)     (2,406)
                                           -------    --------
         Net deferred tax assets           $ 5,648    $  2,474
                                           =======    ========

         The Company has established a valuation allowance to offset the
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 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, 1997, 1998 and
1999:

                                          Year Ended December 31,
                                          ----------------------
                                          1997     1998     1999
                                          ----     ----     ----
Federal income tax statutory rate         35.0%    35.0%    35.0%
Increases (reductions) in tax rate
  resulting from:
     Change in deferred tax allowance     20.2     (1.4)      --
     State income taxes, net of
       federal tax benefit                 4.9      4.4      4.3
     Other                                (0.8)     0.5     (1.7)
                                          ----     ----     ----
Effective income tax rate                 59.3%    38.5%    37.6%
                                          ====     ====     ====

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.

                                      F-26
<PAGE>

         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.

         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.

         The following summarizes outstanding stock options:

                                                         Weighted
                                                          Average
                                           Total       Exercise Price
                                           -----       --------------
Options outstanding at
  December 31, 1996                          456           $19.38
         Granted                             381            25.47
         Cancelled                           (43)           23.01
         Exercised                           (48)           16.51
                                           -----           ------
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
                                           =====           ======
Options exercisable:
At December 31, 1999                         864           $26.30
Available to grant under Plans
  at December 31, 1999                     1,008


                                      F-27
<PAGE>

         The following table summarizes information about outstanding and
exercisable stock options at December 31, 1999:

                                Outstanding               Exercisable
                          ------------------------  ------------------------
                                   Weighted average         Weighted average
                                      remaining                 exercise
Range of exercise prices   Shares  contractual life  Shares       price
------------------------   ------  ----------------  ------  ----------------
$ 11.00  -  $ 19.00          239         7.6          223         $  15.24
  19.01  -    27.00          500         8.8          243            24.71
  27.01  -    35.00          290         8.4          232            30.47
  35.01  -    44.00          913         8.9          166            37.62
-------------------        -----         ---          ---         --------
$ 11.00  -  $ 44.00        1,942         8.6          864         $  26.30
===================        =====         ===          ===         ========

         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. 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 per share would have decreased 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:

                                           Year Ended December 31,
                                    --------------------------------------
                                        1997          1998          1999
                                    ----------    ----------    ----------
Pro forma net income (loss)            $ 3,346      $ 19,887     $ (26,934)
Pro forma basic earnings (loss)
  per share                               0.27          1.62         (1.94)
Pro forma diluted earnings (loss)
  per share                               0.27          1.57         (1.94)
Risk free interest rates                     7%            5%            6%
Expected lives                      7-10 years    7-10 years    7-10 years
Expected volatility                         40%           40%           62%
Weighted average grant date
  fair value                           $ 16.35      $  16.43     $   26.80

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
$296, $810 and $3,629 to the Plan in 1997, 1998 and 1999, respectively. The
Company does not provide retired employees with health or life insurance
benefits.

         Whitehall had a voluntary 401(k) savings plan for eligible employees.
At its discretion, Whitehall contributed 50% of employee contributions, up to
1.5% of the employee's base salary. Contributions totaled approximately $86 in
1997.

                                      F-28
<PAGE>

NOTE 16 - QUARTERLY FINANCIAL DATA (UNAUDITED)

         Results for the quarterly periods in the year ended December 31, 1998
have been restated for pooling transactions. See Note 2.

                                 First       Second        Third       Fourth
                                Quarter      Quarter      Quarter      Quarter
                               ---------    ---------    ---------    ---------
Year Ended December 31, 1998:
-----------------------------
Operating revenues             $ 102,174    $ 109,135    $ 127,469    $ 162,038
Income from operations            10,436       13,420       17,732       19,781
Net income                         3,748        5,600        7,921        8,224
Diluted income before
  extraordinary item per share      0.35         0.44         0.63         0.64
Diluted net income per share        0.30         0.44         0.63         0.64


                                 First       Second        Third       Fourth
                                Quarter      Quarter      Quarter      Quarter
                               ---------    ---------    ---------    ---------
Year Ended December 31, 1999:
-----------------------------
Operating revenues             $ 177,958    $ 179,289    $ 169,213    $ 145,054
Income (loss) from operations     20,919       23,401       20,143      (59,899)
Net income (loss)                  7,917        9,503        7,345      (46,488)
Diluted net income (loss)
  before extraordinary item
  per share                         0.61         0.71         0.48        (3.10)
Diluted net income  (loss)
  per share                         0.61         0.71         0.48        (3.10)

         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 has now been concluded.

         The Company has concluded that seven 1999 transactions and one 1998
transaction 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
and $7,269 of gross margin, representing approximately 4.8% and 6.5% of the
revenues and gross margin for the 1999 fiscal year, respectively. The 1998
transaction represented an aggregate of $12,780 of revenue and $3,110 of gross
margin, or approximately 2.6% and 2.5% of the fiscal 1998 revenue and gross
margin, respectively. The Company has determined that this transaction was not
material to the previously reported 1998 financial results. The Company is
currently evaluating whether to restate its previously filed 1999 quarterly
financial statements as a result of these 1999 transactions.

         The operating results for the quarterly periods in the year ended
December 31, 1999 including the potential effects of the adjustments for these
transactions would be as follows:

                                      F-29
<PAGE>


                                         Year Ended December 31, 1999
                               ------------------------------------------------
                                 First       Second        Third       Fourth
                                Quarter      Quarter      Quarter      Quarter
                               ---------    ---------    ---------    ---------
Operating revenues             $ 171,358    $ 169,040    $ 161,942    $ 169,174
Income (loss) from operations     19,219       21,196       19,067      (54,918)
Net income (loss)                  6,897        8,180        6,699      (43,499)
Diluted income (loss)
  before extraordinary item
  per share                         0.53         0.61         0.44        (2.90)
Diluted net income (loss)
  per share                         0.53         0.61         0.44        (2.90)


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


                                      F-30
<PAGE>
                                   SCHEDULE II

                     AVIATION SALES COMPANY AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS
                       THREE YEARS ENDED DECEMBER 31, 1999
                                 (In thousands)
<TABLE>
<CAPTION>

                                            Additions
                            Balance at      Charged to
                           Beginning of      Cost and                                           Balance at
                               Year          Expenses         Other (A)     Deductions (B)      End of Year
                           ------------     ----------        ---------     --------------      -----------
<S>                          <C>              <C>              <C>              <C>               <C>
Allowance for doubtful
  accounts receivable:

Year Ended December 31,
                  1997       $ 4,298          $ 8,157          $   --           $5,133            $ 7,322
                             =======          =======          ======           ======            =======
                  1998       $ 7,322          $ 1,692          $5,304           $1,829            $12,489
                             =======          =======          ======           ======            =======
                  1999       $12,489          $12,560          $   --           $5,807            $19,242
                             =======          =======          ======           ======            =======
</TABLE>
------------
(A)      Represents allowance for doubtful accounts acquired in purchase
         accounting.
(B)      Represents accounts receivable written-off.

                                      F-31


<PAGE>

                                 EXHIBIT INDEX

   EXHIBIT      DESCRIPTION
   -------      -----------

    10.40   Amendment No. 9, Standstill and Waiver, dated March 31, 2000,
            to Third Amended and Restated Credit Agreement

    10.41   Standstill Agreement, dated March 31, 2000 with First Security Bank
            and NationsBank

     21.1   List of Subsidiaries of Registrant

     23.1   Consent of Arthur Andersen LLP

     27.1   Financial Data Schedule