SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    Form 10-Q

(Mark one)

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

For the quarterly period ended March 31, 1997

                                       OR

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

For the transition period from ___________ to ____________

Commission file number 0-28428

                              AIRNET SYSTEMS, INC.
           ___________________________________________________________
             (Exact name of registrant as specified in its charter)

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

                3939 International Gateway, Columbus, Ohio 43219
              _____________________________________________________
               (Address of principal executive offices) (Zip Code)

                                 (614) 237-9777
              _____________________________________________________
              (Registrant's telephone number, including area code)

                                 NOT APPLICABLE
              _____________________________________________________
              (Former name, former address and former fiscal year,
                          if changed since last report)


    Indicate  by check mark  whether  the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.    Yes __X__    No _____

Common Shares, $.01 Par Value,
    Outstanding as of   May 9, 1997 - 12,627,781


                          Index to Exhibits at page 16
                               Page 1 of 36 pages.

<PAGE>

                              AIRNET SYSTEMS, INC.

                FORM 10-Q FOR FISCAL QUARTER ENDED MARCH 31, 1997




PART I:  FINANCIAL INFORMATION

Item 1  Financial Statements (Unaudited)

        Condensed Consolidated Balance Sheets as of March 31, 1997 and
        September  30, 1996................................................... 3

        Condensed Consolidated Statements of Operations for the three months
        and six months ended March 31, 1997 and 1996.......................... 4

        Condensed Consolidated Statements of Cash Flows for the six months
        ended March 31, 1997 and 1996......................................... 5

        Notes to Condensed Consolidated Financial Statements.................. 6

Item 2  Management's Discussion and Analysis of Financial Condition
        and Results of Operations............................................. 9

Item 3  Quantitative and Qualitative Disclosures About Market Risk........... 12

PART II:   OTHER INFORMATION

Items 1 through 6............................................................ 13

Signatures................................................................... 15



                                      -2-
<PAGE>
<TABLE>

                         PART I - FINANCIAL INFORMATION
                          ITEM 1 - FINANCIAL STATEMENTS

                              AIRNET SYSTEMS, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                March 31,       September 30,
                                                                  1997              1996
                                                                ---------       -------------
                                                               (Unaudited)
<S>                                                          <C>                <C>         
ASSETS
Current assets:
     Cash and  cash equivalents                              $  9,631,963       $ 11,564,191
     Accounts receivable:
        Trade, less allowances                                  8,146,231          7,392,648
        Shareholder, affiliates, and employees                    245,598            260,220
     Spare parts and supplies                                   5,411,100          5,195,917
     Deposits and prepaids                                      4,529,047          3,039,249
                                                             ------------       ------------
Total current assets                                           27,963,939         27,452,225

Net property and equipment                                     47,364,963         40,821,612

Other assets:
     Intangibles, net of accumulated amortization               1,711,631          1,741,091
     Other                                                      3,046,900             48,103
     Deferred tax asset                                         2,055,057          5,803,057
                                                             ------------       ------------
Total assets                                                 $ 82,142,490       $ 75,866,088
                                                             ============       ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                        $  2,592,194       $  3,959,016
     Salaries and related liabilities                           1,984,806          1,264,338
     Accrued expenses                                             113,367            553,359
     Deferred taxes                                               208,995            208,995
                                                             ------------       ------------
Total current liabilities                                       4,899,362          5,985,708

Notes payable                                                        --              196,579
Deferred tax liability                                          3,397,062          3,397,062

Shareholders' equity:
     Preferred stock, $.01 par value; 10,000,000 shares
       authorized; and no shares issued and outstanding              --                 --
     Common stock, $.01 par value; 40,000,000 shares
       authorized; and 12,623,581 and 12,463,788 shares
       issued and outstanding  at March 31, 1997
      and September 30, 1996, respectively                        126,236            124,638
     Additional paid-in-capital                                78,042,976         76,063,102
     Retained earnings                                         (4,323,146)        (9,901,001)
                                                             ------------       ------------
Total shareholders' equity                                     73,846,066         66,286,739

                                                             ------------       ------------
Total liabilities and shareholders' equity                   $ 82,142,490       $ 75,866,088
                                                             ============       ============



            See notes to condensed consolidated financial statements

</TABLE>

                                       -3-
<PAGE>
<TABLE>

                              AIRNET SYSTEMS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (unaudited)

                                                         Three months ended                Six months ended
                                                              March 31,                        March 31,
                                                     ---------------------------     ---------------------------
                                                        1997             1996            1997            1996
                                                       ------           ------          ------          ------
<S>                                                  <C>             <C>             <C>             <C>        
Net revenues
   Air transportation                                $21,792,571     $18,980,317     $42,217,597     $37,126,585
   Fixed base operations                                 442,125         227,774         808,557         478,942
                                                     -----------     -----------     -----------     -----------
Total net revenues                                    22,234,696      19,208,091      43,026,154      37,605,527

Costs and expenses
   Air transportation                                 14,703,648      13,341,771      29,086,847      26,188,305
   Fixed base operations                                 282,927         180,838         592,279         390,153
   Selling, general and administrative                 2,094,821       3,445,043       4,010,782       6,592,924
                                                     -----------     -----------     -----------     -----------
Total costs and expenses                              17,081,396      16,967,652      33,689,908      33,171,382
                                                     -----------     -----------     -----------     -----------
Income from operations                                 5,153,300       2,240,439       9,336,246       4,434,145
Interest expense                                             768         368,499          10,391         745,817
                                                     -----------     -----------     -----------     -----------
Income before income taxes                             5,152,532       1,871,940       9,325,855       3,688,328
Provision for income taxes (note 4)                    2,060,000           4,066       3,748,000           1,347
                                                     -----------     -----------     -----------     -----------
Net income                                           $ 3,092,532     $ 1,867,874     $ 5,577,855     $ 3,686,981
                                                     ===========     ===========     ===========     ===========

Net income per common share                          $      0.25                     $      0.44              
                                                     ===========                     ===========

Weighted average common shares outstanding            12,621,470                      12,601,396              

Pro forma information (note 5):
   Historical income before income taxes                             $ 1,871,940                     $ 3,688,328
   Pro forma adjustments other than income taxes                       1,596,691                       3,083,831
                                                                     -----------                     -----------
   Pro forma income before income taxes                                3,468,631                       6,772,159
   Pro forma tax provision on pro forma income                         1,387,452                       2,708,864
                                                                     -----------                     -----------
   Pro forma net income                                              $ 2,081,179                     $ 4,063,295
                                                                     ===========                     ===========

  Pro forma net income per common share                              $      0.24                     $      0.48
                                                                     ===========                     ===========

 Weighted average common shares outstanding                            8,507,312                       8,507,312


</TABLE>

See notes to condensed consolidated financial statements


                                      -4-
<PAGE>
<TABLE>

                              AIRNET SYSTEMS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (unaudited)


                                                                        Six months ended
                                                                            March 31,
                                                                -------------------------------
                                                                     1997             1996
                                                                    ------           ------
<S>                                                             <C>               <C>        
Operating activities
Net income                                                      $  5,577,855      $ 3,686,981
Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation and amortization                                 4,149,621        4,217,401
     Amortization of intangibles                                     134,460          217,951
     Deferred taxes                                                3,748,000             --
     Provision for losses on accounts receivable                      35,267           19,709
     Deferred compensation                                              --            413,072
     Gain on disposition of assets                                  (155,394)          (6,020)
     Change in operating assets and liabilities:
       Accounts receivable                                          (773,928)      (1,439,316)
       Spare parts and supplies                                     (215,183)        (177,666)
       Prepaid expenses                                           (1,489,798)      (1,142,488)
       Accounts payable                                           (1,571,142)       2,241,103
       Accrued expenses                                             (439,992)        (146,646)
       Salaries and related liabilities                              720,468          121,923
       Other, net                                                   (128,757)           8,272
                                                                ------------      -----------
Net cash provided by operating activities                          9,591,477        8,014,276

Investing activities
Acquisition of Float Control, Inc., net of cash acquired
   (Note 3)                                                         (719,519)            --
Purchases of property and equipment                              (13,194,871)      (5,475,620)
Payments for covenants not  to compete                              (105,000)            --
Proceeds from sales of property and equipment                      2,657,293             --
                                                                ------------      -----------
Net cash used in investing activities                            (11,362,097)      (5,475,620)

Financing activities
Proceeds from shareholder notes receivable                              --             39,240
Repayment of borrowings under the revolving credit facility             --           (850,000)
Repayment of long-term debt                                         (196,579)      (3,608,130)
Proceeds from the issuance of long-term debt                            --          2,760,000
Proceeds from the issuance of Common Shares - net                     34,971             --
Distributions to shareholders                                           --         (1,165,495)
                                                                ------------      -----------
Net cash used in financing activities                               (161,608)      (2,824,385)
                                                                ------------      -----------

Net decrease in cash                                              (1,932,228)        (285,729)
Cash and cash equivalents at beginning of period                  11,564,191          317,803

                                                                ------------      -----------
Cash and cash equivalents at end of period                      $  9,631,963      $    32,074
                                                                ============      ===========



See notes to condensed consolidated financial statements

</TABLE>

                                      -5-
<PAGE>

                              AIRNET SYSTEMS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.   Basis of Presentation

AirNet Systems,  Inc. (the "Company")  operates a fully integrated  national air
transportation   network  which  provides  delivery  service  for  time-critical
shipments for customers in the U.S. banking industry and other  industries.  The
Company also offers retail  aviation fuel sales and related ground  services for
customers in Columbus, Ohio.

The accompanying  unaudited condensed  consolidated financial statements include
the accounts of AirNet  Systems,  Inc.  and its  subsidiaries.  These  financial
statements have been prepared in accordance with generally  accepted  accounting
principles for interim financial  information and with the instructions for Form
10-Q and  Article 10 of  Regulation  S-X.  Accordingly,  they do not include all
information and footnotes required by generally accepted  accounting  principles
for complete financial statements.  These financial statements should be read in
conjunction with the fiscal year ended September 30, 1996 consolidated financial
statements of AirNet Systems,  Inc.  contained in the Annual Report on Form 10-K
(File No.  0-28428)  for  additional  disclosures  including  a  summary  of the
Company's accounting policies, which have not changed.

The financial  information included herein reflects all adjustments  (consisting
of normal  recurring  adjustments)  which are,  in the  opinion  of  management,
necessary for a fair  presentation of the results of interim periods.  Operating
results for the six months ended March 31, 1997 are not  necessarily  indicative
of the results to be expected for the year ending September 30, 1997.

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


2.   Initial Public Offering

On May 31,  1996,  the  Company  completed  its  initial  public  offering  (the
"Offering") which raised approximately $82.7 million, net of expenses.  Proceeds
were used to repay outstanding debt,  repurchase an outstanding warrant and make
distributions  to former  shareholders and to provide working capital to finance
future acquisitions and internal growth.


3.  Acquisitions

Effective  January 30, 1997, the Company  acquired Express  Convenience  Center,
Inc. d/b/a ECC Worldwide  Services ("ECC") in a business  combination  accounted
for as a pooling of interests.  ECC's primary  services  included  small package
delivery  services within the United States and certain other countries.  All of
the stock of ECC was  exchanged for 145,953  Common  Shares of the Company.  The
financial  statements  of the Company have been  restated to include ECC for all
periods  presented.  Revenues and net loss for ECC for the periods presented are
as follows:


                                      -6-
<PAGE>



                       Three months ended                 Six months ended
                           March 31,                          March 31,
                      1997           1996              1997             1996
                    --------       --------          --------         --------

Revenues           $ 995,744      $ 1,040,390      $ 2,028,268      $ 2,096,596
Net loss             (56,524)          (8,296)        (103,638)          (6,305)


Effective  October 24, 1997, the Company  acquired Float Control,  Inc.  ("Float
Control")  through the merger of a  wholly-owned  subsidiary of the Company into
Float  Control.  Float  Control was owned by certain  executive  officers of the
Company and two other individuals and holds a 19% interest in The Check Exchange
System Co. (the "CHEXS Partnership").  The CHEXS Partnership operates a national
net  settlement  switch  utilized  by  members  of  the  National  Clearinghouse
Association  pursuant to which such member banks are able to settle transactions
with other members rather than maintaining individual accounts with each member.

Pursuant to the Plan and Agreement of Reorganization  and the Plan and Agreement
of Merger,  both effective September 30, 1996, the Company issued 157,293 Common
Shares and paid approximately  $725,000. The acquisition was accounted for under
the purchase method of accounting.


4.   Income Taxes

Prior to the Offering,  the Company's  income was taxed under the  provisions of
Subchapter S of the Internal  Revenue Code of 1986,  which provides that in lieu
of corporate  income taxes,  the  shareholders of the S Corporation are taxed on
their proportionate share of the Company's taxable income. Therefore,  provision
for federal and certain  state income taxes has been  included in net income for
the three  months and six months  ended  March 31,  1996 only for the portion of
operations related to ECC operations.

Upon  completion  of  the  Offering,  the  Company  ceased  to  qualify  as an S
Corporation and was subject to corporate  income taxes. The Company has recorded
tax expense of $2,060,000 and $3,748,000 related to its operations for the three
months and six months ended March 31, 1997, respectively. The income tax rate is
based on statutory  federal and state rates,  and an estimate of annual earnings
adjusted for the permanent  differences  between  reported  earnings and taxable
income.


                                      -7-
<PAGE>




5.   Pro Forma Information

The pro forma  statement of operations for the three months and six months ended
March 31,  1996  presents  the pro forma  effects  on the  historical  financial
information  reflecting  certain  Offering  related  transactions as if they had
occurred  on  October  1,  1995.  The  following  is a summary of such pro forma
adjustments:
<TABLE>
                                                          Three months      Six months
                                                             ended            ended
                                                         March 31, 1996   March 31, 1996
                                                        ---------------- ----------------
<S>                                                        <C>             <C>       
The elimination of interest expense related to the
    debt repaid                                            $  363,840      $  736,167
The elimination of the Wright Agreement not to compete        343,840         727,378
The elimination of deferred compensation and employee
    stock purchase agreement expense for certain key
    employees                                                 706,205       1,400,792
The reduction of compensation expense for executive
    officers based on new employment agreements               182,806         219,494
                                                           ----------      ----------
 Total pro forma adjustments other than income taxes       $1,596,691      $3,083,831
                                                           ==========      ==========
</TABLE>

The pro forma section of the  statement of operations  also includes an estimate
of taxes as if the Company were a C Corporation  during the three months and six
months ended March 31, 1996.

Pro forma earnings per share for the three months and six months ended March 31,
1996 are based on the  weighted  average  number of  Common  Shares  outstanding
during the periods,  including the effect of the 2,650,764 Common Shares subject
to certain  warrants  which  were  outstanding  during the three  months and six
months ended March 31, 1996. One of the warrants was  subsequently  purchased by
the Company and a second warrant was exercised in conjunction with the Offering.

6.   Earnings Per Share

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards No. 128,  "Earnings Per Share" ("FAS 128"). FAS
128  establishes  standards  for  computing  and  presenting  earnings per share
("EPS"). FAS 128 replaces the presentation of primary EPS with a presentation of
basic EPS which excludes  dilution and is computed by dividing income  available
to  common  shareholders  by  the  weighted  average  number  of  common  shares
outstanding during the period. This statement also requires dual presentation of
basic EPS and  diluted EPS on the face of the income  statement  for all periods
presented. FASB 128 is effective for periods ending after December 31, 1997. The
Company plans to adopt FAS 128 in the period  ending  December 31, 1997 and does
not expect the impact on EPS to be significant.




                                      -8-
<PAGE>



                              AIRNET SYSTEMS, INC.

           ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


Forward-Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q, including,  but
not limited to, information  regarding future economic performance and plans and
objectives of the Company's  management  are  forward-looking  statements  which
involve risks and  uncertainties.  The  following  risks and  uncertainties,  in
addition to the other risks previously  disclosed in the Company's  filings with
the Securities and Exchange  Commission and press  releases,  could cause actual
results to differ materially from those contemplated in any such forward looking
statement:  potential regulatory changes by the Federal Aviation Administration,
the Federal  Reserve or foreign  governments,  which could increase the level of
regulation of the Company's business; adverse weather conditions;  technological
advances and other economic,  competitive and governmental factors affecting the
Company's markets, prices and other facets of its operations.


Results of Operations

SIX  MONTHS  ENDED MARCH 31, 1997 COMPARED TO SIX MONTHS ENDED MARCH 31, 1996

Revenues were $43.0 million for the six months ended March 31, 1997, an increase
of $5.4 million,  or 14.4%,  over the same period of fiscal 1996.  Revenues from
check  delivery  increased $4.3 million,  or 14.1%.  Of the increase in revenues
from check delivery,  $1.3 million is attributable to price increases  effective
January 1, 1997 and 1996,  and  approximately  $1.4 million can be attributed to
the Midway  Aviation  acquisition,  which was completed in September,  1996. The
balance is due to  increased  business  activity  and  increases in total weight
shipped,  despite a  decrease  in the  number of flying  days from 98 in the six
months  ended March 31, 1996 to 95 for the same  period in 1997.  Small  package
delivery revenues  increased $0.8 million,  or 11.7%, due primarily to increased
activity  from both new and existing  customers.  These results and results from
comparable   periods  in  fiscal  1996  include  Express   Convenience   Center,
Inc.("ECC"), which was acquired in January, 1997 through a pooling of interests.
Revenues from fixed base operations  increased $0.3 million, or 68.8%, due to an
increase in the retail sale of aviation parts.

Total costs and expenses were $33.7 million for the three months ended March 31,
1997, an increase of $0.5 million, or 1.6%, over the same period in fiscal 1996,
resulting  in income from  operations  of $9.3  million for the six months ended
March 31, 1997 compared to $4.4 million for the same period of fiscal 1996.  Air
transportation  expenses were up $2.9 million, or 11.1%, while selling,  general
and administrative  expenses decreased $2.6 million, or 39.2%, for the six month
period.

Payroll costs associated with air  transportation  increased $0.4 million due to
the addition of air and ground  personnel  required to service a larger fleet of
aircraft and the  increased  volume of activity.  A rise in fuel prices  coupled
with increased flight hours contributed to a $0.9 million, or 23.5%, increase in
aircraft fuel expense, net of the effects of fuel rebates and surcharges. In the
six months ended March 31, 1996,  the Company  began to pass on the rise in fuel
prices to its customers through its fuel  rebate/surcharge  program. For the six
months ended March 31, 1997, the Company  surcharged its customers $0.2 million,
compared  to  rebates  totaling  $0.1  million in the same  period of 1996.  The
increased  fleet size,  from 70 owned  aircraft at March 31, 1996 to 89 at March
31, 1997,  and  increased  flight hours  resulted in a $0.4  million,  or 12.8%,
increase  in  maintenance  expense.  The  fleet  growth  resulted  in  increased
insurance costs,  hangar rentals and landing fees of $0.2 million.  In addition,
travel costs  associated with the integration of the Midway and ECC acquisitions
increased $0.2 million.


                                      -9-
<PAGE>


Selling,  general and  administrative  expenses  decreased  primarily due to the
restructuring of executive  compensation plans (which resulted in a $0.2 million
decrease),  the  termination of stock purchase  agreements  (which resulted in a
$1.4 million  decrease) and the  termination of a covenant not to compete (which
resulted in a $0.7 million decrease). All were effective in conjunction with the
Company's  initial  public  offering  (the  "Offering")  in May 1996.  The stock
purchase  agreements were with certain  executive  officers and had been tied to
appreciation in the book value of the Common Shares of the Company. The covenant
not to compete  required  payments  based on the Company's cash flow and debt to
equity ratio.

Interest  costs  decreased  $0.7  million  as a result of the  repayment  of all
outstanding debt in June 1996 with proceeds from the Offering.

The Company  operated as an S Corporation  under the Internal  Revenue Code from
1988 until it elected to terminate its S Corporation  status in conjunction with
the Offering. Under its Subchapter S election,  shareholders of the Company were
taxed directly on the Company's  income and,  consequently,  the Company was not
subject to federal and certain state income taxes at the corporate level for the
six months ended March 31, 1996, except for the portion of business that related
to the ECC acquisition, which was taxed as a C Corporation. The Company recorded
net deferred tax expense of $3.7 million for the six months ended March 31, 1997
related to the income tax expense on income for the period.

Pro  forma  information   reflects  the  effects  of  certain  Offering  related
transactions  on the statement of operations  for the six months ended March 31,
1996 as if they  occurred  on  October  1,  1995.  See  Note 5 to the  Condensed
Consolidated Financial Statements included herein.

Adjusted pro forma net income per share was $0.33 for the six months ended March
31, 1996 with the assumption  that the Common Shares issued in the Offering were
outstanding for the entire period.


THREE MONTHS  ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996

Revenues  were $22.2  million  for the three  months  ended March 31,  1997,  an
increase  of $3.0  million,  or 15.8%,  over the same  period  of  fiscal  1996.
Revenues from check delivery  increased $2.4 million,  or 15.3%. Of the increase
in revenues from check delivery, $0.8 million is attributable to price increases
effective  January 1, 1997 and  approximately  $0.7 million can be attributed to
the Midway  Aviation  acquisition  in  September,  1996.  The  balance is due to
increased  business activity and increases in total weight shipped,  despite one
less flying day in the three  months  ended March 31, 1997  compared to the same
period in 1996.  Small package  delivery  revenues  increased  $0.4 million,  or
12.6%, due primarily to increased activity from both new and existing customers.
These results and results from comparable periods in fiscal 1996 include ECC.

Total costs and expenses were $17.1 million for the three months ended March 31,
1997, an increase of $0.1 million, or 0.7%, over the same period in fiscal 1996,
resulting in income from  operations  of $5.2 million for the three months ended
March 31, 1997 compared to $2.2 million for the same period of fiscal 1996.  Air
transportation  expenses were up $1.4 million, or 10.2%, while selling,  general
and  administrative  expenses  decreased $1.4 million,  or 39.2%,  for the three
month period.



                                      -10-
<PAGE>



Payroll costs associated with air  transportation  increased $0.2 million due to
the addition of air and ground  personnel  required to service a larger fleet of
aircraft  and the  increased  volume of activity.  In  addition,  a rise in fuel
prices coupled with  increased  flight hours  contributed to a $0.5 million,  or
26.2%, increase in aircraft fuel expense. The Company has continued to pass on a
portion  of  the  rise  in  fuel  prices  to  its  customers  through  its  fuel
rebate/surcharge  program.  The increased  fleet size, from 70 owned aircraft at
March 31, 1996 compared to 89 at March 31, 1997, and increased flight hours also
resulted in a $0.2 million, or 12.1%, increase in maintenance expense.  Aircraft
insurance also increased $0.1 million due to the increased size of the fleet.

Selling,  general and  administrative  expenses  decreased  primarily due to the
restructuring  of  executive  compensation  (which  resulted  in a $0.1  million
decrease),  termination of stock purchase  agreements  (which resulted in a $0.7
million  decrease)  and the  termination  of a covenant  not to  compete  (which
resulted in a $0.3 million decrease). All were effective in conjunction with the
Company's Offering in May 1996.

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

The Company  operated as an S Corporation  under the Internal  Revenue Code from
1988 until it elected to terminate its S Corporation  status in conjunction with
the Offering. Under its Subchapter S election,  shareholders of the Company were
taxed directly on the Company's  income and,  consequently,  the Company was not
subject to federal and certain state income taxes at the corporate level for the
three  months  ended March 31,  1996,  except for the  portion of business  that
related to the ECC acquisition,  which was taxed as a C Corporation. The Company
recorded  net  deferred  tax expense of $2.1  million for the three months ended
March 31, 1997 related to the income tax expense on income for the period.

Pro  forma  information   reflects  the  effects  of  certain  Offering  related
transactions on the statement of operations for the three months ended March 31,
1996 as if they  occurred  on  October  1,  1995.  See  Note 5 to the  Condensed
Consolidated Financial Statements included herein.

Adjusted  pro forma net  income per share was $0.17 for the three  months  ended
March 31, 1996 with the assumption that the Common Shares issued in the Offering
were outstanding for the entire period.


Liquidity and Capital Resources

CASH FLOW FROM OPERATING ACTIVITIES. Net cash flow from operating activities was
$9.6 million for the six months  ended March 31, 1997,  compared to $8.0 million
for the first six months of fiscal  1996.  To  support  its  expanding  aircraft
fleet,  the Company acquired spare parts inventory and a spare jet engine from a
former Learjet service center for approximately $0.7 million.

CURRENT CREDIT  ARRANGEMENTS.  The Company  maintains a credit  agreement with a
bank that  provides a $50.0  million,  five  year,  unsecured  revolving  credit
facility.  The  credit  agreement  limits the  availability  of funds to certain
specified percentages of accounts receivable,  inventory and the wholesale value
of aircraft  and  equipment.  In  addition,  the credit  agreement  requires the
maintenance of certain  minimum net worth and cash flow levels,  imposes certain
limitations  on payments of dividends,  restricts the amount of additional  debt
and  requires  prior  bank  approval  for  certain  acquisitions.  There were no
borrowings under the credit agreement at March 31, 1997.


                                      -11-
<PAGE>



INVESTING  ACTIVITIES.  Capital  expenditures  totaled $13.2 million for the six
months  ended  March 31, 1997  compared  to $5.5  million for the same period in
fiscal 1996.  Approximately  $8.5 million was  incurred in  connection  with the
purchase of nine new  aircraft and the  remainder  was  incurred  primarily  for
flight equipment and delivery  vehicles.  The $8.5 million spent on aircraft was
offset by proceeds of $2.6 million received on the sale of three aircraft during
the six month period. The Company  anticipates it will spend an additional $13.0
million on capital items through  December 31, 1997,  excluding any acquisitions
of new businesses.  The Company anticipates it will continue to acquire aircraft
and flight  equipment  as necessary  to maintain  growth and  continue  offering
quality service to its customers.  The Company is also currently  considering an
expansion of its facilities.  However, no definitive  arrangements or agreements
have been reached.

On January 30, 1997, the Company closed the  acquisition of ECC, a small package
air freight  forwarder,  in exchange for 145,953 Common Shares.  The acquisition
has  added  over  1,800  new  small  package  customers  to  the  Company's  air
transportation  system. In addition,  upon consummation of the acquisition,  the
Company repaid the outstanding balance due on ECC's notes payable, totaling $0.2
million.

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


Seasonality and Variability in Quarterly Results

The Company's  operations  historically have been somewhat seasonal and somewhat
dependent on the number of banking  holidays  falling  during the week.  Because
financial  institutions  are currently the Company's  principal  customers,  the
Company's  air system is  scheduled  around the needs of  financial  institution
customers.  When  financial  institutions  are closed,  there is no need for the
Company to operate a full system.  The Company's  fiscal quarter ending December
31, is often the most  impacted by bank  holidays  (including  Thanksgiving  and
Christmas)  recognized  by its primary  customers.  When these  holidays fall on
Monday  through  Thursday,  the  Company's  revenue and net income are adversely
affected.  For example,  the three months ended March 31, 1997 contained only 48
days of full  operation for the Company,  while the quarter ended March 31, 1996
contained 49 days. The Company's annual results fluctuate as well.

Operating  results are also  affected  by the  weather.  The  Company  generally
experiences  higher maintenance costs during its fiscal quarter ending March 31.
Winter weather requires  additional costs for de-icing,  hangar rental and other
aircraft  services.  The Company's cash flows are also  influenced by the budget
cycles of its primary customers.  Many financial institutions have calendar year
budget  cycles and desire to pay for December  services  prior to year end. This
results in increased cash flows for the Company's fiscal quarter ending December
31, but decreased cash flows in January and February.



Item 3. Qualitative and Quantitative Disclosures About Market Risk.

Not Applicable.



                                      -12-
<PAGE>


                              AIRNET SYSTEMS, INC.

                           PART II - OTHER INFORMATION


Item 1.    Legal Proceedings. Not Applicable

Item 2.    Changes in Securities.

           On January 30, 1997, the Company acquired Express Convenience Center,
           Inc.  through a merger of Express  Convenience  Center,  Inc.  into a
           wholly-owned  subsidiary  of the  Company.  In  connection  with this
           transaction,  the  Company  issued  145,953  Common  Shares to former
           shareholders of Express  Convenience  Center,  Inc. The Common Shares
           issued  were  valued at  $14.217  per  share,  or  $2,075,000  in the
           aggregate.  The Common  Shares issued to former  Express  Convenience
           Center,  Inc.  shareholders  were not registered under the Securities
           Act of 1933 in reliance upon the exemption from registration provided
           by Section 4(6) for sales to accredited investors.

Item 3.    Defaults Upon Senior Securities. Not Applicable

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

           (a) The Annual  Meeting of  Shareholders  of the Company (the "Annual
           Meeting")  was held on March 6, 1997. At the close of business on the
           record  date  [January  17,  1997],  12,475,128  common  shares  were
           outstanding and entitled to vote at the Annual Meeting. At the Annual
           Meeting  10,324,773,  or  82.5%  of  the  outstanding  common  shares
           entitled to vote, were represented in person or by proxy.

           (b) Directors elected at the Annual Meeting:

                                    Gerald G. Mercer
                For:              10,286,573
                Withheld:             38,200      Broker non-vote:        -0-

                                       Eric P. Roy
                For:              10,286,673
                Withheld:             38,100      Broker non-vote:        -0-

                                   Roger D. Blackwell
                For:              10,286,673
                Withheld:             38,100      Broker non-vote:        -0-

                                  Tony C. Canonie, Jr.
                For:              10,286,673
                Withheld:             38,100      Broker non-vote:        -0-

                                  Russell M. Gertmenian
                For:              10,286,673
                Withheld:             38,100      Broker non-vote:        -0-

                                    J. F. Keeler, Jr.
                For:              10,286,673
                Withheld:             38,100      Broker non-vote:        -0-

           (c) See Item 4(b) for voting results for directors.

           (d) Not applicable.


                                      -13-
<PAGE>


Item 5.    Other Information.

           On May 14, 1997,  the Board of  Directors  of the Company  approved a
           change in the fiscal year end of the  Company  from  September  30 to
           December  31. The Company  filed a Quarterly  Report on Form 10-Q for
           the fiscal quarter ended December 31, 1996,  which is the same period
           as the  transition  period  for  purposes  of Rule  13a-10  under the
           Securities  and Exchange Act of 1934,  as amended.  Accordingly,  the
           Company is not  required to file a separate  transition  report.  The
           Company will file any audited financial  statements  required by Rule
           13a-10(C)  with the  Company's  Annual  Report  on Form  10-K for the
           fiscal year ended December 31, 1997.

Item 6.    Exhibits and Reports on Form 8-K.

           (a)  Exhibits:

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

                Exhibit 10        AirNet Systems, Inc. 1996 Incentive Stock Plan
                                  (reflects amendments  through March 31, 1997).
                                  See pages 17 through 35.

                Exhibit 27        Financial Data Schedule.  See page 36.


           (b) Reports on Form 8-K:

               No reports on Form 8-K were filed  during the three  months ended
               March 31, 1997.



                                      -14-
<PAGE>


                              AIRNET SYSTEMS, INC.

                                   SIGNATURES




Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.







Dated:  May 15, 1997                       By: /s/ Eric P. Roy
                                               ________________________________
                                                   Eric P. Roy,
                                                   Executive Vice President
                                                   (Duly Authorized Officer)
                                                   (Principal Financial Officer)



                                      -15-
<PAGE>



                              AIRNET SYSTEMS, INC.

                                INDEX TO EXHIBITS



Exhibit No.                            Description                    Page

    10          AirNet Systems, Inc. 1996 Incentive Stock Plan         17
                (reflects amendments through March 31, 1997)

    27          Financial Data Schedule                                36




                                      -16-