|                                          | UNITED                STATES                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|-----------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                          | 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 September 30, 2006                                                                                                                                                                                                                                                                                            |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          | 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 0-11720                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          | Air                T, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                          | (Exact                name of registrant as specified in its charter)                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          |                  Delaware                  52-1206400                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                          | (State                or other jurisdiction of (I.R.S. Employer                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                          | incorporation                or organization) Identification No.)                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          | Post                Office Box 488, Denver, North Carolina 28037                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                          | (Address                of principal executive offices, including zip code)                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          | (704)                377-2109                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                          | (Registrant's                telephone number, including area code)                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          | Indicate                by check mark whether the registrant (1) has filed all reports required                to                be filed by Section 13 or 15 (d) of the Securities Exchange Act of                1934                during the preceding 12 months (or for such shorter period that the                registrant was required to file such reports), and (2) has been subject                to                such filing requirements for the past 90 days. |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          | Yes                X                No                ______                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          | Indicate                by check mark whether the registrant is a large accelerated filer,                an                accelerated filer or a non-accelerated filer (see definition of                “accelerated filer and large accelerated filer) in Rule 12b-2 of the                Exchange Act)                                                                                                                                                                |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          | Large                Accelerated Filer____ Accelerated Filer_____ Non-Accelerated                Filer__X__                                                                                                                                                                                                                                                                                                                                                                       |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          | Indicate                by check mark whether the registrant is a shell company (as defined                in                Rule 12b-2 of the Exchange Act)                                                                                                                                                                                                                                                                                                                 |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          | Yes                              No                ___X___                                                                                                                                                                                                                                                                                                                                                  |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          | APPLICABLE                ONLY TO CORPORATE ISSUERS:                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          | Indicate                the number of shares outstanding of each of the issuer's classes                of common                stock, as of the latest practicable date.                                                                                                                                                                                                                                                                                                        |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                          | 2,671,293                shares of Common Stock, par value of $.25 per share were outstanding                as of                October 28, 2006. There is only one class of common stock                outstanding.                                                                                                                                                                                                                                                           |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| This                filing contains 28 pages. |

----

|                                         |                                                                    | AIR                T, INC. AND SUBSIDIARIES                        |   |   |
|----------------------------------------------|-------------------------------------------------------------------------|--------------------------------------------------------------------|--------|--------|
|                                         |                                                                    |                                                               |   |   |
|                                         |                                                                    | INDEX                                                              |   |   |
|                                         |                                                                    |                                                               |   | PAGE   |
| PART                I. FINANCIAL INFORMATION |                                                                    |                                                               |
|                                         |                                                                    |                                                               |   |
|                                         |                                                                    |                                                               |   |   |
|                                         | Item                1. Financial Statements                             |                                                               |   |
|                                         |                                                                    |                                                               |   |   |
|                                         | Condensed                Consolidated Statements of Operations          |                                                               |   |
|                                         | for                the three and six-months ended                       |                                                               |   |
|                                         | September                30, 2006 and 2005 (Unaudited)                  |                                                               | 3      |
|                                         |                                                                    |                                                               |   |   |
|                                         | Condensed                Consolidated Balance Sheets at                 |                                                               |   |
|                                         | September                30, 2006 (Unaudited)                           |                                                               |   |
|                                         | and                March 31, 2006                                       |                                                               | 4      |
|                                         |                                                                    |                                                               |   |   |
|                                         | Condensed                Consolidated Statements of Cash                |                                                               |   |
|                                         | Flows                for the six-months                                 |                                                               |   |
|                                         | ended                September 30, 2006 and 2005 (Unaudited)            |                                                               | 5      |
|                                         |                                                                    |                                                               |   |   |
|                                         | Condensed                Consolidated Statements of Stockholders’ |                                                               |   |
|                                         | Equity                and Other Comprehensive Income for the            |                                                               |   |
|                                         | six-months                ended September 30,                           |                                                               |   |
|                                         | 2006                and 2005(Unaudited)                                 |                                                               | 6      |
|                                         |                                                                    |                                                               |   |   |
|                                         | Notes                to Condensed Consolidated Financial                |                                                               |   |
|                                         | Statements                (Unaudited)                                   |                                                               | 7-13   |
|                                         |                                                                    |                                                               |   |   |
|                                         | Item                2.                                                  | Management’s                Discussion and Analysis          |   |   |
|                                         |                                                                    | of                Financial Condition and Results                  |   |   |
|                                         |                                                                    | of                Operations                                       |   | 13-20  |
|                                         |                                                                    |                                                               |   |   |
|                                         | Item                3.                                                  | Quantitative                and Qualitative Disclosure             |   |   |
|                                         |                                                                    | About                Market Risk                                   |   | 20     |
|                                         |                                                                    |                                                               |   |   |
|                                         | Item                4.                                                  | Controls                and Procedures                             |   | 20-21  |
|                                         |                                                                    |                                                               |   |   |
| PART                II. OTHER INFORMATION    |                                                                    |                                                               |
|                                         |                                                                    |                                                               |   |   |
|                                         | Item                1.                                                  | Legal                Proceedings                                   |   | 21-22  |
|                                         |                                                                    |                                                               |   |   |
|                                         | Item                4.                                                  | Submission                of Matters to a Vote of Security Holders | 22     |
|                                         |                                                                    |                                                               |   |   |
|                                         | Item                6.                                                  | Exhibits                                                           |   | 23     |
|                                         |                                                                    |                                                               |   |   |
|                                         |                                                                    | Signatures                                                         |   | 24     |
|                                         |                                                                    |                                                               |   |   |
|                                         |                                                                    | Exhibit                Index                                       |   | 25     |
|                                         |                                                                    |                                                               |   |   |
|                                         |                                                                    | Officers’                Certifications                      |   | 26-28  |

----

|                                                                     |   | Three                Months Ended  | Six                Months Ended |
|--------------------------------------------------------------------------|--------|-----------------------------------------|---------------------------------|
|                                                                     |   | September                30,       | September                30,    |
|                                                                     |   |                                    | 2006                            |   |   | 2005 |   |   | 2006 |   |   | 2005 |   |
| Operating                Revenues:                                       |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
| Overnight                air cargo                                       |   | $                                       | 8,646,307                       |   | $ | 10,691,256 |   | $ | 17,222,259 |   | $ | 21,919,409 |   |
| Ground                equipment                                          |   |                                    | 6,074,798                       |   |   | 7,444,609 |   |   | 13,582,655 |   |   | 13,432,757 |   |
|                                                                     |   |                                    | 14,721,105                      |   |   | 18,135,865 |   |   | 30,804,914 |   |   | 35,352,166 |   |
|                                                                     |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
| Operating                Expenses:                                       |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
| Flight-air                cargo                                          |   |                                    | 4,313,963                       |   |   | 4,610,615 |   |   | 8,487,824 |   |   | 8,955,815 |   |
| Maintenance-air                cargo                                     |   |                                    | 3,111,313                       |   |   | 4,183,880 |   |   | 6,209,996 |   |   | 9,457,857 |   |
| Ground                equipment                                          |   |                                    | 4,470,339                       |   |   | 6,423,668 |   |   | 9,728,603 |   |   | 11,146,928 |   |
| General                and administrative                                |   |                                    | 2,125,093                       |   |   | 2,285,878 |   |   | 4,396,645 |   |   | 4,558,276 |   |
| Depreciation                and amortization                             |   |                                    | 147,962                         |   |   | 166,879 |   |   | 324,796 |   |   | 321,651 |   |
|                                                                     |   |                                    | 14,168,670                      |   |   | 17,670,920 |   |   | 29,147,864 |   |   | 34,440,527 |   |
|                                                                     |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
| Operating                Income                                          |   |                                    | 552,435                         |   |   | 464,945 |   |   | 1,657,050 |   |   | 911,639 |   |
|                                                                     |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
| Non-operating                Expense (Income) Expense:                   |   |                                    |                            |   |   |   |   |   |   |
| Interest,                net                                             |   |                                    | 27,908                          |   |   | 34,589 |   |   | 32,017 |   |   | 59,815 |   |
| Deferred                retirement expense                               |   |                                    | 5,250                           |   |   | 5,250 |   |   | 10,500 |   |   | 10,500 |   |
| Investment                income and other                               |   |                                    | (58,575                         | ) |   | (34,955 | ) |   | (119,016 | ) |   | (68,175 | ) |
|                                                                     |   |                                    | (25,417                         | ) |   | 4,884 |   |   | (76,499 | ) |   | 2,140 |   |
|                                                                     |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
| Earnings                Before Income Taxes                              |   |                                    | 577,852                         |   |   | 460,061 |   |   | 1,733,549 |   |   | 909,499 |   |
|                                                                     |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
| Income                Tax Expense                                        |   |                                    | 206,785                         |   |   | 196,273 |   |   | 635,687 |   |   | 367,641 |   |
|                                                                     |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
| Net                Earnings                                              |   | $                                       | 371,067                         |   | $ | 263,788 |   | $ | 1,097,862 |   | $ | 541,858 |   |
|                                                                     |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
| Basic                and Diluted Net Earnings Per Share                  |   | $                                       | 0.14                            |   | $ | 0.10 |   | $ | 0.41 |   | $ | 0.20 |   |
|                                                                     |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
| Weighted                Average Shares Outstanding:                      |   |                                    |                            |   |   |   |   |   |   |
|  Basic                                                              |   |                                    | 2,671,293                       |   |   | 2,671,293 |   |   | 2,671,293 |   |   | 2,671,293 |   |
|  Diluted                                                            |   |                                    | 2,671,635                       |   |   | 2,671,770 |   |   | 2,671,684 |   |   | 2,671,833 |   |
|                                                                     |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
| See                notes to condensed consolidated financial statements. |   |                                    |                            |   |   |   |   |   |   |

----

|                                                                                                                   |   |   | September                30, 2006  |   |   | March                31, 2006 |   |
|------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------|--------|--------|-------------------------------|--------|
| ASSETS                                                                                                                 |   |   | (Unaudited                              | )      |   | (Note                         | )      |
| Current                Assets:                                                                                         |   |   |                                    |   |   |                          |   |
|  Cash                and cash equivalents                                                                         |   | $      | 4,204,820                               |   | $      | 2,702,424                     |   |
|  Marketable                securities                                                                             |   |   | 826,364                                 |   |   | 807,818                       |   |
|  Accounts                receivable, less allowance                                                               |   |   |                                    |   |   |                          |   |
|  for                doubtful accounts of $489,531 at September                                                    |   |   |                                    |   |   |                          |   |
|  30,                2006 and $481,837 at March 31, 2006                                                           |   |   | 5,292,351                               |   |   | 8,692,971                     |   |
|  Income                taxes receivable                                                                           |   |   | 366,991                                 |   |   | 108,553                       |   |
|  Notes                and other non-trade receivables-current                                                     |   |   | 86,326                                  |   |   | 104,086                       |   |
|  Inventories,                net                                                                                  |   |   | 10,841,773                              |   |   | 5,705,591                     |   |
|  Deferred                tax assets                                                                               |   |   | 771,099                                 |   |   | 576,640                       |   |
|  Prepaid                expenses and other                                                                        |   |   | 262,662                                 |   |   | 334,064                       |   |
|  Total                Current Assets                                                                              |   |   | 22,652,386                              |   |   | 19,032,147                    |   |
|                                                                                                                   |   |   |                                    |   |   |                          |   |
| Property                and Equipment                                                                                  |   |   | 7,626,915                               |   |   | 9,076,063                     |   |
|  Less                accumulated depreciation                                                                     |   |   | (5,644,202                              | )      |   | (5,907,520                    | )      |
|  Property                and Equipment, net                                                                       |   |   | 1,982,713                               |   |   | 3,168,543                     |   |
|                                                                                                                   |   |   |                                    |   |   |                          |   |
| Deferred                Tax Assets                                                                                     |   |   | 119,531                                 |   |   | 194,996                       |   |
| Cash                Surrender Value of Life Insurance Policies                                                         |   |   | 1,265,482                               |   |   | 1,231,481                     |   |
| Notes                and Other Non-Trade Receivables-Long Term                                                         |   |   | 225,657                                 |   |   | 214,653                       |   |
| Other                Assets                                                                                            |   |   | 50,407                                  |   |   | 81,537                        |   |
|  Total                Assets                                                                                      |   | $      | 26,296,176                              |   | $      | 23,923,357                    |   |
|                                                                                                                   |   |   |                                    |   |   |                          |   |
| LIABILITIES                AND STOCKHOLDERS' EQUITY                                                                    |   |   |                                    |   |   |                          |   |
| Current                Liabilities:                                                                                    |   |   |                                    |   |   |                          |   |
|  Accounts                payable                                                                                  |   | $      | 5,760,682                               |   | $      | 5,354,713                     |   |
|  Accrued                expenses                                                                                  |   |   | 2,051,173                               |   |   | 2,411,262                     |   |
|  Current                portion of long-term debt and obligations                                                 |   |   | 182,355                                 |   |   | 186,492                       |   |
|  Total                Current Liabilities                                                                         |   |   | 7,994,210                               |   |   | 7,952,467                     |   |
|                                                                                                                   |   |   |                                    |   |   |                          |   |
| Capital                Lease Obligations (less current portion)                                                        |   |   | 41,735                                  |   |   | 50,577                        |   |
| Long-Term                Debt (less current portion)                                                                   |   |   | 2,539,459                               |   |   | 712,883                       |   |
| Deferred                Retirement Obligations (less current portion)                                                  |   |   | 683,038                                 |   |   | 707,388                       |   |
|                                                                                                                   |   |   |                                    |   |   |                          |   |
| Stockholders'                Equity:                                                                                   |   |   |                                    |   |   |                          |   |
|  Preferred                stock, $1 par value, authorized 50,000 shares,                                          |   |   |                                    |   |   |                          |   |
|  none                issued                                                                                       |   |   | -                                       |   |   | -                             |   |
|  Common                stock, par value $.25; authorized 4,000,000 shares;                                        |   |   |                                    |   |   |                          |   |
|  2,671,293                shares issued and outstanding                                                           |   |   | 667,823                                 |   |   | 667,823                       |   |
|  Additional                paid in capital                                                                        |   |   | 7,028,465                               |   |   | 6,939,357                     |   |
|  Retained                earnings                                                                                 |   |   | 7,270,422                               |   |   | 6,840,383                     |   |
|  Accumulated                other comprehensive income, net                                                       |   |   | 71,024                                  |   |   | 52,479                        |   |
|  Total                Stockholders' Equity                                                                        |   |   | 15,037,734                              |   |   | 14,500,042                    |   |
|  Total                Liabilities and Stockholders’ Equity                                                  |   | $      | 26,296,176                              |   | $      | 23,923,357                    |   |
|                                                                                                                   |   |   |                                    |   |   |                          |   |
| Note:                The balance sheet at March 31, 2006 has been derived from the audited                consolidated |
| financial                statements included in the Company's Annual Report on Form 10-K for                the        |
| fiscal                year ended March 31, 2006.                                                                       |   |   |                                    |   |   |                          |   |
|                                                                                                                   |   |   |                                    |   |   |                          |   |
| See                notes to condensed consolidated financial statements.                                               |   |   |                                    |

----

|                                                                                                 |   | Six                Months Ended  |
|------------------------------------------------------------------------------------------------------|--------|---------------------------------------|
|                                                                                                 |   | September                30,     |
|                                                                                                 |   |                                  | 2006 |   |   | 2005 |   |
| Cash                flows from operating activities:                                                 |   |                                  |   |   |   |   |   |
| Net                earnings                                                                          |   | $                                     | 1,097,862 |   | $ | 541,858 |   |
| Adjustments                to reconcile net earnings to net                                          |   |                                  |   |   |   |   |   |
| cash                provided by (used in) operating activities:                                      |   |                                  |   |   |   |   |   |
| Change                in accounts receivable and inventory reserves                                  |   |                                  | 238,169 |   |   | (141,026 | ) |
| Depreciation                and amortization                                                         |   |                                  | 324,796 |   |   | 321,651 |   |
| Increase                in cash surrender value of life insurance                                    |   |                                  | (34,001 | ) |   | - |   |
| Deferred                tax provision                                                                |   |                                  | (118,994 | ) |   | (33,501 | ) |
| Net                periodic pension cost                                                             |   |                                  | 4,606 |   |   | 35,998 |   |
| Warranty                reserve                                                                      |   |                                  | (67,464 | ) |   | (11,770 | ) |
| Vesting                of stock option expense                                                       |   |                                  | 89,108 |   |   | - |   |
| Change                in assets and liabilities which provided (used) cash:                          |   |                                  |   |   |   |   |   |
| Accounts                receivable                                                                   |   |                                  | 3,392,926 |   |   | (875,344 | ) |
| Notes                receivable                                                                      |   |                                  | 6,756 |   |   | 64,363 |   |
| Income                taxes receivable/payable                                                       |   |                                  | (258,438 | ) |   | 342,937 |   |
| Inventories                                                                                          |   |                                  | (4,442,843 | ) |   | (1,822,499 | ) |
| Prepaid                expenses and other                                                            |   |                                  | 102,532 |   |   | (750,545 | ) |
| Accounts                payable                                                                      |   |                                  | 405,969 |   |   | 98,618 |   |
| Accrued                expenses and other current liabilities                                        |   |                                  | (317,226 | ) |   | (171,794 | ) |
| Total                adjustments                                                                     |   |                                  | (674,104 | ) |   | (2,942,912 | ) |
| Net                cash provided by (used in) operating activities                                   |   |                                  | 423,758 |   |   | (2,401,054 | ) |
| Cash                flows from investing activities:                                                 |   |                                  |   |   |   |   |   |
| Capital                expenditures                                                                  |   |                                  | (67,136 | ) |   | (193,905 | ) |
| Net                cash used in investing activities                                                 |   |                                  | (67,136 | ) |   | (193,905 | ) |
| Cash                flows from financing activities:                                                 |   |                                  |   |   |   |   |   |
| Payments                on aircraft term loan                                                        |   |                                  | (51,568 | ) |   | (49,369 | ) |
| Net                borrowings on line of credit                                                      |   |                                  | 1,906,161 |   |   | 1,989,372 |   |
| Payments                on capital leases                                                            |   |                                  | (40,996 | ) |   | - |   |
| Payment                of cash dividend                                                              |   |                                  | (667,823 | ) |   | (667,633 | ) |
| Net                cash provided by financing activities                                             |   |                                  | 1,145,774 |   |   | 1,272,370 |   |
| Net                increase (decrease) in cash & cash equivalents                                |   |                                  | 1,502,396 |   |   | (1,322,589 | ) |
| Cash                and cash equivalents at beginning of period                                      |   |                                  | 2,702,424 |   |   | 3,497,659 |   |
| Cash                and cash equivalents at end of period                                            |   | $                                     | 4,204,820 |   | $ | 2,175,070 |   |
|                                                                                                 |   |                                  |   |   |   |   |   |
| Supplemental                disclosure of cash flow information:                                     |   |                                  |   |   |   |   |   |
| Cash                paid during the period for:                                                      |   |                                  |   |   |   |   |   |
| Interest                                                                                             |   | $                                     | 37,317 |   | $ | 84,942 |   |
| Income                taxes                                                                          |   |                                  | 1,011,155 |   |   | 54,924 |   |
|                                                                                                 |   |                                  |   |   |   |   |   |
| Summary                of significant non-cash information:                                          |   |                                  |   |   |   |   |   |
| Increase                (decrease) in fair value of marketable securities, net of                tax |   | $                                     | 18,545 |   | $ | 10,920 |   |
| Leased                equipment transferred to inventory                                             |   |                                  | 1,476,708 |   |   | 355,463 |   |
|                                                                                                 |   |                                  |   |   |   |   |   |
|                                                                                                 |   |                                  |   |   |   |   |   |
| See                notes to condensed consolidated financial statements.                             |   |                                  |   |   |   |   |   |

----

|                                                                     |   |                              |    |       |   |    |     |   |          |   |   |      |   |   | Accumulated            |   |   |          |   |
|--------------------------------------------------------------------------|--------|-----------------------------------|--------------|------------|--------|---------|----------|--------|---------------|--------|--------|-----------|--------|--------|-----------------------------|--------|--------|---------------|--------|
|                                                                     |   | Common                Stock  |         | Additional |   |    | Retained |   |          | Other  |   |      | Total  |   |
|                                                                     |   |                              |         |       |   |    |     |   | Paid-In  |   |   | Earnings  |   |   | Comprehensive               |   |   | Stockholders' |   |
|                                                                     |   |                              | Shares  |       |   | Amount  |     |   | Capital       |   |   |           |   |   | Income                      |   |   | Equity        |   |
|                                                                     |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| Balance,                March 31, 2005                                   |   |                              | 2,671,293    |       | $      | 667,823 |     | $      | 6,939,357     |   | $      | 5,453,105 |   | $      | 25,268                      |   | $      | 13,085,553    |   |
|                                                                     |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| Comprehensive                Income:                                     |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| Net                earnings                                              |   |                              |         |       |   |    |     |   |          |   |   | 541,858   |   |   |                        |   |   |          |   |
| Change                in investment value,                               |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| net                of tax                                                |   |                              |         |       |   |    |     |   |          |   |   |      |   |   | 10,920                      |   |   |          |   |
| Change                in fair value of                                   |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| derivative                instruments, net of tax                        |   |                              |         |       |   |    |     |   |          |   |   |           |   |   | 22,160                      |   |   |               |   |
| Total                Comprehensive Income                                |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   | 574,938       |   |
| Cash                dividend                                             |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| ($0.25                per share)                                         |   |                              |         |       |   |    |     |   |          |   |   | (667,633  | )      |   |                        |   |   | (667,633      | )      |
|                                                                     |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| Balance,                September 30, 2005                               |   |                              | 2,671,293    |       | $      | 667,823 |     | $      | 6,939,357     |   | $      | 5,327,330 |   | $      | 58,348                      |   | $      | 12,992,858    |   |
|                                                                     |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
|                                                                     |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
|                                                                     |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
|                                                                     |   |                              |         |       |   |    |     |   |          |   |   |      |   |   | Accumulated                 |   |   |          |   |
|                                                                     |   | Common                Stock  |         | Additional |   |    | Retained |   |          | Other  |   |      | Total  |   |
|                                                                     |   |                              |         |       |   |    |     |   | Paid-In  |   |   | Earnings  |   |   | Comprehensive               |   |   | Stockholders' |   |
|                                                                     |   |                              | Shares  |       |   | Amount  |     |   | Capital       |   |   |           |   |   | Income                (Loss | )      |   | Equity        |   |
|                                                                     |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| Balance,                March 31, 2006                                   |   |                              | 2,671,293    |       | $      | 667,823 |     | $      | 6,939,357     |   | $      | 6,840,383 |   | $      | 52,479                      |   | $      | 14,500,042    |   |
|                                                                     |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| Comprehensive                Income:                                     |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| Net                earnings                                              |   |                              |         |       |   |    |     |   |          |   |   | 1,097,862 |   |   |                        |   |   |          |   |
| Change                in investment value,                               |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| net                of tax                                                |   |                              |         |       |   |    |     |   |          |   |   |      |   |   | 18,545                      |   |   |          |   |
| Total                Comprehensive Income                                |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   | 1,116,407     |   |
| -                                                                        |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| -                                                                        |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| Cash                dividend                                             |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| ($0.25                per share)                                         |   |                              |         |       |   |    |     |   |          |   |   | (667,823  | )      |   |                        |   |   | (667,823      | )      |
| Vesting                of stock options                                  |   |                              |         |       |   |    |     |   | 89,108        |   |   |      |   |   |                        |   |   | 89,108        |   |
|                                                                     |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| Balance,                September 30, 2006                               |   |                              | 2,671,293    |       | $      | 667,823 |     | $      | 7,028,465     |   | $      | 7,270,422 |   | $      | 71,024                      |   | $      | 15,037,734    |   |
|                                                                     |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
|                                                                     |   |                              |         |       |   |    |     |   |          |   |   |      |   |   |                        |   |   |          |   |
| See                notes to condensed consolidated financial statements. |   |                              |         |       |   |    |     |   |          |

----

|                                                       |   | Three                Months Ended   | Six                Months Ended |
|------------------------------------------------------------|--------|-----------------------------------------------|---------------------------------|
|                                                       |   | September                30,             | September                30,    |
|                                                       |   |                                          | 2006                            |   |   | 2005 |   |   | 2006 |   |   | 2005 |   |
|                                                       |   |                                          |                            |   |   |   |   |   |   |   |   |   |   |
| Net                earnings                                |   | $                                             | 371,067                         |   | $ | 263,788 |   | $ | 1,097,862 |   | $ | 541,858 |   |
|                                                       |   |                                          |                            |   |   |   |   |   |   |   |   |   |   |
| Basic                and Diluted Net Earnings Per Share    |   | $                                             | 0.14                            |   | $ | 0.10 |   | $ | 0.41 |   | $ | 0.20 |   |
|                                                       |   |                                          |                            |   |   |   |   |   |   |   |   |   |   |
| Weighted                Average Shares Outstanding:        |   |                                          |                            |   |   |   |   |   |   |   |   |   |   |
| Basic                                                      |   |                                          | 2,671,293                       |   |   | 2,671,293 |   |   | 2,671,293 |   |   | 2,671,293 |   |
| Plus:                Incremental shares from stock options |   |                                          | 342                             |   |   | 477 |   |   | 391 |   |   | 540 |   |
| Diluted                                                    |   |                                          | 2,671,635                       |   |   | 2,671,770 |   |   | 2,671,684 |   |   | 2,671,833 |   |

----

|                                           |   |   | September                30, 2006  |   |   | March                31, 2006 |   |
|------------------------------------------------|--------|--------|-----------------------------------------|--------|--------|-------------------------------|--------|
| Aircraft                parts and supplies     |   | $      | 637,259                                 |   | $      | 621,111                       |   |
| Ground                equipment manufacturing: |   |   |                                    |   |   |                          |   |
| Raw                materials                   |   |   | 9,210,182                               |   |   | 4,178,451                     |   |
| Work                in process                 |   |   | 853,243                                 |   |   | 1,270,944                     |   |
| Finished                goods                  |   |   | 822,151                                 |   |   | 85,672                        |   |
| Total                inventory                 |   |   | 11,522,835                              |   |   | 6,156,178                     |   |
| Reserves                                       |   |   | (681,062                                | )      |   | (450,587                      | )      |
|                                           |   |   |                                    |   |   |                          |   |
| Total,                net of reserves          |   | $      | 10,841,773                              |   | $      | 5,705,591                     |   |

*Accounting      for Stock Issued to Employees*
*Accounting      for Stock-Based Compensation*
*Share-Based      Payment*

----

|                                    |   |   | Six                Months Ended    |   |
|-----------------------------------------|--------|--------|-----------------------------------------|--------|
|                                    |   |   | September                30, 2006  |   |
| Expected                volatility      |   |   | 73.79                                   | %      |
| Expected                dividends       |   |   | 1.10                                    | %      |
| Expected                term (in years) |   |   | 2.50-5.00                               |   |
| Risk-free                rate           |   |   | 4.74                                    | %      |
|                                    |   |   |                                    |   |

|                                             |   |   |         |   |   |     |   |   | Weighted                 |   |   |      |   |
|--------------------------------------------------|--------|--------|--------------|--------|--------|----------|--------|--------|--------------------------|--------|--------|-----------|--------|
|                                             |   |   |         |   |   | Weighted |   |   | Average                  |   |   |      |   |
|                                             |   |   |         |   |   | Average  |   |   | Remaining                |   |   | Aggregate |   |
|                                             |   |   |         |   |   | Exercise |   |   | Contractual              |   |   | Intrinsic |   |
|                                             |   |   | Shares  |   |   | Price    |   |   | Term                (yrs | )      |   | Value     |   |
| Options                                          |   |   |         |   |   |     |   |   |                     |   |   |      |   |
| Outstanding                at April 1, 2006      |   |   | 17,000       |   | $      | 11.02    |   |   | 8.51                     |   | $      | 1,130     |   |
| Granted                                          |   |   | 209,000      |   |   | 8.30     |   |   | 9.61                     |   |   | 392,250   |   |
| Exercised                                        |   |   | -            |   |   | -        |   |   |                     |   |   | -         |   |
| Forfeited                                        |   |   | -            |   |   | -        |   |   |                     |   |   | -         |   |
| Expired                                          |   |   | -            |   |   | -        |   |   |                          |   |   | -         |   |
| Outstanding                at September 30, 2006 |   |   | 226,000      |   | $      | 8.51     |   |   | 9.53                     |   | $      | 393,380   |   |
| Vested                or expected to vest        |   |   |         |   |   |     |   |   |                     |   |   |      |   |
| at                September 30, 2006             |   |   | 17,000       |   |   | 11.02    |   |   | 8.51                     |   |   | (14,340   | )      |
|                                             |   |   |              |   |   |          |   |   |                          |   |   |           |   |
| Exercisable                at September 30, 2006 |   |   | 17,000       |   | $      | 11.02    |   |   | 8.51                     |   | $      | (14,340   | )      |
|                                             |   |   |         |   |   |     |   |   |                     |   |   |      |   |

----

|                                           |   |   |         |   |   | Weighted             |   |
|------------------------------------------------|--------|--------|--------------|--------|--------|---------------------------|--------|
|                                           |   |   |         |   |   | Average              |   |
|                                           |   |   |         |   |   | Grant-Date                |   |
|                                           |   |   | Shares  |   |   | Fair                Value |   |
|                                           |   |   |         |   |   |                      |   |
| Nonvested                at April 1, 2006      |   |   | 15,000       |   | $      | 84,915                    |   |
| Granted                                        |   |   | 209,000      |   |   | 1,016,972                 |   |
| Vested                                         |   |   | (15,000      | )      |   | (84,915                   | )      |
| Forfeited                                      |   |   | -            |   |   | -                         |   |
| Nonvested                at September 30, 2006 |   |   | 209,000      |   |   | 1,016,972                 |   |

|                                                |   | Three                Months Ended  | Six                Months Ended |
|-----------------------------------------------------|--------|-----------------------------------------|---------------------------------|
|                                                |   | September                30,       | September                30,    |
|                                                |   |                                    | 2006                            |   |   | 2005 |   |   | 2006 |   |   | 2005 |   |
|                                                |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
| Beginning                balance                    |   | $                                       | 237,000                         |   | $ | 177,000 |   | $ | 285,000 |   | $ | 198,000 |   |
| Additions                and adjustments to reserve |   |                                    | 24,000                          |   |   | 62,000 |   |   | (5,000 | ) |   | 55,000 |   |
| Use                of reserve                       |   |                                    | (44,000                         | ) |   | (29,000 | ) |   | (63,000 | ) |   | (43,000 | ) |
| Ending                balance                       |   | $                                       | 217,000                         |   | $ | 210,000 |   | $ | 217,000 |   | $ | 210,000 |   |

----

|                                                                |   | Three                Months Ended September 30,  | Six                Months Ended September 30, |
|---------------------------------------------------------------------|--------|-------------------------------------------------------|-----------------------------------------------|
|                                                                |   |                                                  | 2006                                          |   |   | 2005 |   |   | 2006 |   |   | 2005 |   |
|                                                                |   |                                                  |                                          |   |   |   |   |   |   |   |   |   |   |
| Operating                Revenues                                   |   |                                                  |                                          |   |   |   |   |   |   |   |   |   |   |
| Overnight                Air Cargo                                  |   | $                                                     | 8,646,307                                     |   | $ | 10,691,256 |   | $ | 17,222,259 |   | $ | 21,919,409 |   |
| Ground                Equipment:                                    |   |                                                  |                                          |   |   |   |   |   |   |   |   |   |   |
| Domestic                                                            |   |                                                  | 5,509,884                                     |   |   | 6,266,201 |   |   | 12,980,241 |   |   | 12,171,599 |   |
| International                                                       |   |                                                  | 564,914                                       |   |   | 1,178,408 |   |   | 602,414 |   |   | 1,261,158 |   |
| Total                Ground Equipment                               |   |                                                  | 6,074,798                                     |   |   | 7,444,609 |   |   | 13,582,655 |   |   | 13,432,757 |   |
| Total                                                               |   | $                                                     | 14,721,105                                    |   | $ | 18,135,865 |   | $ | 30,804,914 |   | $ | 35,352,166 |   |
|                                                                |   |                                                  |                                          |   |   |   |   |   |   |   |   |   |   |
| Operating                Income (Loss)                              |   |                                                  |                                          |   |   |   |   |   |   |   |   |   |   |
| Overnight                Air Cargo                                  |   | $                                                     | 360,102                                       |   | $ | 869,655 |   | $ | 822,640 |   | $ | 1,500,070 |   |
| Ground                Equipment                                     |   |                                                  | 643,578                                       |   |   | 91,486 |   |   | 2,001,333 |   |   | 496,823 |   |
| Corporate                (1)                                        |   |                                                  | (451,245                                      | ) |   | (496,196 | ) |   | (1,166,923 | ) |   | (1,085,254 | ) |
| Total                                                               |   | $                                                     | 552,435                                       |   | $ | 464,945 |   | $ | 1,657,050 |   | $ | 911,639 |   |
|                                                                |   |                                                  |                                          |   |   |   |   |   |   |   |   |   |   |
| Depreciation                and Amortization                        |   |                                                  |                                          |   |   |   |   |   |   |
| Overnight                Air Cargo                                  |   | $                                                     | 123,395                                       |   | $ | 119,701 |   | $ | 249,352 |   | $ | 223,398 |   |
| Ground                Equipment                                     |   |                                                  | 9,773                                         |   |   | 33,054 |   |   | 48,813 |   |   | 67,550 |   |
| Corporate                                                           |   |                                                  | 14,794                                        |   |   | 14,124 |   |   | 26,631 |   |   | 30,703 |   |
| Total                                                               |   | $                                                     | 147,962                                       |   | $ | 166,879 |   | $ | 324,796 |   | $ | 321,651 |   |
|                                                                |   |                                                  |                                          |   |   |   |   |   |   |   |   |   |   |
| Capital                Expenditures, net                            |   |                                                  |                                          |   |   |   |   |   |   |   |   |   |   |
| Overnight                Air Cargo                                  |   | $                                                     | 26,775                                        |   | $ | 81,891 |   | $ | 31,775 |   | $ | 145,520 |   |
| Ground                Equipment                                     |   |                                                  | -                                             |   |   | 2,670 |   |   | - |   |   | 12,889 |   |
| Corporate                                                           |   |                                                  | 6,329                                         |   |   | 2,337 |   |   | 35,361 |   |   | 35,496 |   |
| Total                                                               |   | $                                                     | 33,104                                        |   | $ | 86,898 |   | $ | 67,136 |   | $ | 193,905 |   |
|                                                                |   |                                                  |                                          |   |   |   |   |   |   |   |   |   |   |
|                                                                |   |                                                  |                                          |   |   |   |   |   |   |   |   |   |   |
|                                                                |   | As                of                             |                                          |   |   |   |   |   |
|                                                                |   |                                                  | September                30, 2006        |   |   | March                31, 2006 |   |   |   |   |   |   |   |
| Identifiable                Assets                                  |   |                                                  |                                          |   |   |   |   |   |   |   |   |   |   |
| Overnight                Air Cargo                                  |   | $                                                     | 4,727,060                                     |   | $ | 6,298,618 |   |   |   |   |   |   |   |
| Ground                Equipment                                     |   |                                                  | 15,091,329                                    |   |   | 12,620,815 |   |   |   |   |   |   |   |
| Corporate                                                           |   |                                                  | 6,477,787                                     |   |   | 5,003,924 |   |   |   |   |   |   |   |
|                                                                |   |                                                  |                                          |   |   |   |   |   |   |   |   |   |   |
| Total                                                               |   | $                                                     | 26,296,176                                    |   | $ | 23,923,357 |   |   |   |   |   |   |   |
|                                                                |   |                                                  |                                          |   |   |   |   |   |   |   |   |   |   |
| (1)                Includes income from inter-segment transactions. |   |                                                  |                                          |   |   |   |

----

*U.S.        Airways vs. Elliott Equipment Company, et al.*
*Emerson        vs. Elliott Equipment Company, et al.*

----

* *

----

----

|                                                |   | Three                Months Ended  | Six                Months Ended |
|-----------------------------------------------------|--------|-----------------------------------------|---------------------------------|
|                                                |   | September                30,       | September                30,    |
|                                                |   |                                    | 2006                            |   |   | 2005 |   |   | 2006 |   |   | 2005 |   |
|                                                |   |                                    |                            |   |   |   |   |   |   |   |   |   |   |
| Beginning                balance                    |   | $                                       | 237,000                         |   | $ | 177,000 |   | $ | 285,000 |   | $ | 198,000 |   |
| Additions                and adjustments to reserve |   |                                    | 24,000                          |   |   | 62,000 |   |   | (5,000 | ) |   | 55,000 |   |
| Use                of reserve                       |   |                                    | (44,000                         | ) |   | (29,000 | ) |   | (63,000 | ) |   | (43,000 | ) |
| Ending                balance                       |   | $                                       | 217,000                         |   | $ | 210,000 |   | $ | 217,000 |   | $ | 210,000 |   |

----

*Accounting      for Stock Issued to Employees*
*Accounting      for Stock-Based Compensation*
*Share-Based      Payment*

----

----

----

----

----

*U.S.        Airways vs. Elliott Equipment Company, et al.*
*Emerson        vs. Elliott Equipment Company, et al.*

* *

----

| Nominee                                 |   |   | Shares                Voted "For" |   |   | Shares                Voted "Withheld" |   |
|-----------------------------------------|--------|--------|-----------------------------------|--------|--------|----------------------------------------|--------|
|                                    |   |   |                              |   |   |                                   |   |
|                                    |   |   |                              |   |   |                                   |   |
| Claude                S. Abernethy, Jr. |   |   | 2,455,441                         |   |   | 121,970                                |   |
| Sam                Chesnutt             |   |   | 2,548,170                         |   |   | 29,241                                 |   |
| Allison                T. Clark         |   |   | 2,479,845                         |   |   | 97,566                                 |   |
| Walter                Clark             |   |   | 2,484,326                         |   |   | 93,085                                 |   |
| John                J. Gioffre          |   |   | 2,391,609                         |   |   | 185,802                                |   |
| George                C. Prill          |   |   | 2,548,620                         |   |   | 28,791                                 |   |
| William                H. Simpson       |   |   | 2,484,288                         |   |   | 93,123                                 |   |
| Dennis                A. Wicker         |   |   | 2,455,371                         |   |   | 122,040                                |   |
| J.                Bradley Wilson        |   |   | 2,548,120                         |   |   | 29,291                                 |   |

| Votes                Cast For |   | Votes                Cast Against |   | Votes                Cast to Abstain |
|-------------------------------|--------|-----------------------------------|--------|--------------------------------------|
| 2,569,870                     |   | 7,316                             |   | 225                                  |

----

| 3.1   | Restated                Certificate of Incorporation, incorporated by reference to                Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the                period ended September 30, 2001 |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.2   | By-laws                of the Company, as amended, incorporated by reference to Exhibit 3.2                of the Company’s Annual Report on Form 10-K for the fiscal year ended                March 31, 1996 |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.1   | Specimen                Common Stock Certificate, incorporated by reference to Exhibit 4.1 of                the Company’s Annual Report on Form 10-K for the fiscal year ended                March 31, 1994 |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.1   | Certification                of Walter Clark |
|------------------|----------------------------------------------|

| 31.2   | Certification                of John J. Gioffre |
|------------------|-------------------------------------------------|

| 32.1   | Section                1350 Certification |
|------------------|-------------------------------------------|

----

----