UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C.  20549
 
 FORM
10-Q
 
 
 (Mark
one)
 xx
                Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934 for the quarterly period ended December 31,
  2008
 
 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 incorporation or
organization)                          (I.R.S.
Employer Identification No.)
 
 
 3524 Airport
Road, Maiden, North Carolina 28650
 (Address
of principal executive offices, including zip code)
 
 (828)
464-8741
 (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___xx___                              No_______
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  (See the definitions of “large accelerated filer”,
“accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
 
 Large
Accelerated Filer____ Accelerated Filer_____Non-Accelerated
Filer ______    Smaller Reporting
Company___xx___
 (Do not
check if smaller reporting company)
  
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)
  Yes
______                                  No__xx____
 
 
 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.
 
 Common
Stock                                                                                     Outstanding
Shares at January 23, 2009
 Common Shares, par value of $.25 per share    2,424,486
  
  
 AIR T, INC. AND
SUBSIDIARIESQUARTERLY REPORT ON FORM
    10-QTABLE OF CONTENTSPAGE #PART IItem 1.
                                Financial StatementsCondensed Consolidated Statements of
      Income
                                
                                
                                3Three Months and Nine Months Ended December 31,
      2008 and 2007 (Unaudited)Condensed Consolidated Balance
      Sheets
                                
                                
                                4December 31, 2008 (Unaudited) and March 31,
      2008Condensed Consolidated Statements of Cash
      Flows
                                
                                
                                5Nine Months Ended December 31, 2008 and 2007
      (Unaudited)Condensed Consolidated Statements of Stockholders’
      Equity and Comprehensive Income
                                
                                
                                6Nine Months Ended December 31, 2008 and 2007
      (Unaudited)Notes to Condensed Consolidated Financial
      Statements (Unaudited)
                                
                                
                                7Item 2.
                                Management's Discussion and Analysis of Financial
      Condition and Results of Operations
                                
                                
                                12Item 3.
                                Quantitative and Qualitative Disclosures About
      Market Risk
                                
                                
                                18Item 4(T)
                                Controls and Procedures
                                
                                
                                18PART IIItem 1.
                                Legal Proceedings
                                
                                
                                19Item 6
                                Exhibits
                                
                                
                                19Signatures
                                
                                
                                20Exhibit Index
                                
                                
                                21Certifications
                                
                                
                                22
 
  2
  Item
1.  Financial Statements
 
 AIR T, INC. AND
SUBSIDIARIES
 CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (UNAUDITED
 Three
      Months Ended
                            
                            
                            Nine
      Months EndedDecember
      31,
                            
                            
                            
                            
                            
                            December
      31,2008
                            
                            
                            2007
                            
                            
                            2008
                            
                            
                            2007Operating
      Revenues:Overnight
      air cargo
                            
                            $
                            10,846,052
                            
                            
                            $
                            10,114,872
                            
                            
                            $
                            31,862,596
                            
                            
                            $
                            28,131,038Ground
      equipment sales
                            
                            
                            10,649,024
                            
                            
                            
                            10,019,701
                            
                            
                            
                            32,699,772
                            
                            
                            
                            24,988,098Ground
      support services
                            
                            
                            2,042,497
                            
                            
                            
                            1,014,277
                            
                            
                            
                            5,404,103
                            
                            
                            
                            1,237,49823,537,573
                            
                            
                            
                            21,148,850
                            
                            
                            
                            69,966,471
                            
                            
                            
                            54,356,634Operating
      Expenses:Flight-air
      cargo
                            
                            
                            4,942,896
                            
                            
                            
                            4,606,970
                            
                            
                            
                            14,983,677
                            
                            
                            
                            13,867,260Maintenance-air
      cargo
                            
                            
                            4,356,229
                            
                            
                            
                            3,904,042
                            
                            
                            
                            11,944,107
                            
                            
                            
                            9,914,606Ground
      equipment sales
                            
                            
                            8,437,235
                            
                            
                            
                            7,669,852
                            
                            
                            
                            24,596,610
                            
                            
                            
                            18,827,491Ground
      support services
                            
                            
                            1,653,918
                            
                            
                            
                            710,297
                            
                            
                            
                            4,163,519
                            
                            
                            
                            841,471General
      and administrative
                            
                            
                            2,753,136
                            
                            
                            
                            2,709,507
                            
                            
                            
                            8,562,832
                            
                            
                            
                            7,292,877Depreciation
      and amortization
                            
                            
                            107,744
                            
                            
                            
                            115,496
                            
                            
                            
                            330,347
                            
                            
                            
                            364,41822,251,158
                            
                            
                            
                            19,716,164
                            
                            
                            
                            64,581,092
                            
                            
                            
                            51,108,123Operating
      Income
                            
                            
                            1,286,415
                            
                            
                            
                            1,432,686
                            
                            
                            
                            5,385,379
                            
                            
                            
                            3,248,511Non-operating
      Expense (Income):Lawsuit
      settlement income
                            
                            
                            (550,000
                            )
                            
                            
                            -
                            
                            
                            
                            (550,000
                            )
                            
                            
                            -Loss
      on retirement plan settlement
                            
                            
                            195,299
                            
                            
                            
                            -
                            
                            
                            
                            195,299
                            
                            
                            
                            -Interest
      expense
                            
                            
                            45,784
                            
                            
                            
                            29,804
                            
                            
                            
                            81,518
                            
                            
                            
                            151,385Investment
      income
                            
                            
                            (14,994
                            )
                            
                            
                            (44,809
                            )
                            
                            
                            (73,167
                            )
                            
                            
                            (158,691
                            )Other
                            
                            
                            -
                            
                            
                            
                            3,563
                            
                            
                            
                            339
                            
                            
                            
                            3,664(323,911
                            )
                            
                            
                            (11,442
                            )
                            
                            
                            (346,011
                            )
                            
                            
                            (3,642
                            )Earnings
      Before Income Taxes
                            
                            
                            1,610,326
                            
                            
                            
                            1,444,128
                            
                            
                            
                            5,731,390
                            
                            
                            
                            3,252,153Income
      Taxes
                            
                            
                            636,000
                            
                            
                            
                            524,108
                            
                            
                            
                            2,095,000
                            
                            
                            
                            1,168,115Net
      Earnings
                            
                            $
                            974,326
                            
                            
                            $
                            920,020
                            
                            
                            $
                            3,636,390
                            
                            
                            $
                            2,084,038Basic
      and Diluted Net Earnings Per Share
                            
                            $
                            0.40
                            
                            
                            $
                            0.38
                            
                            
                            $
                            1.50
                            
                            
                            $
                            0.85Dividends
      Declared Per Share
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            0.30
                            
                            
                            $
                            0.25Weighted
      Average Shares Outstanding:Basic
      and Diluted
                            
                            
                            2,424,503
                            
                            
                            
                            2,423,506
                            
                            
                            
                            2,424,043
                            
                            
                            
                            2,439,077See
      notes to condensed consolidated financial statements.
    
 3
 
 AIR T, INC. AND
SUBSIDIARIES
 CONDENSED CONSOLIDATED
BALANCE SHEETS
 
 
 December
      31, 2008
                        
                        
                        March
      31, 2008ASSETS
                        
                        (Unaudited)Current
      Assets:Cash
      and cash equivalents
                        
                        $
                        2,412,930
                        
                        
                        $
                        51,858Short-term
      investments
                        
                        
                        2,000,000
                        
                        
                        
                        2,004,761Accounts
      receivable, less allowance fordoubtful
      accounts of $252,500 and $267,700
                        
                        
                        8,936,558
                        
                        
                        
                        12,272,390Notes
      and other non-trade receivables-current
                        
                        
                        382,644
                        
                        
                        
                        48,334Income
      tax receivable
                        
                        
                        121,000
                        
                        
                        
                        -Inventories
                        
                        
                        9,693,126
                        
                        
                        
                        7,961,436Deferred
      income taxes
                        
                        
                        752,000
                        
                        
                        
                        736,000Prepaid
      expenses and other
                        
                        
                        384,781
                        
                        
                        
                        343,906Total
      Current Assets
                        
                        
                        24,683,039
                        
                        
                        
                        23,418,685Property
      and Equipment, net
                        
                        
                        1,677,964
                        
                        
                        
                        1,846,400Deferred
      Income Taxes
                        
                        
                        582,000
                        
                        
                        
                        422,000Cash
      Surrender Value of Life Insurance Policies
                        
                        
                        1,419,445
                        
                        
                        
                        1,368,442Notes
      and Other Non-Trade Receivables-LongTerm
                        
                        
                        322,659
                        
                        
                        
                        165,753Other
      Assets
                        
                        
                        89,432
                        
                        
                        
                        86,330Total
      Assets
                        
                        $
                        28,774,539
                        
                        
                        $
                        27,307,610LIABILITIES AND STOCKHOLDERS'
      EQUITYCurrent
      Liabilities:Accounts
      payable
                        
                        $
                        3,825,924
                        
                        
                        $
                        5,608,735Accrued
      compensation to executive
                        
                        
                        950,000
                        
                        
                        
                        -Accrued
      expenses
                        
                        
                        2,556,787
                        
                        
                        
                        2,530,945Income
      taxes payable
                        
                        
                        -
                        
                        
                        
                        58,000Current
      portion of long-term obligations
                        
                        
                        491,752
                        
                        
                        
                        121,478Total
      Current Liabilities
                        
                        
                        7,824,463
                        
                        
                        
                        8,319,158Capital
      Lease and Other Obligations
                        
                        
                        23,923
                        
                        
                        
                        59,996Long-term
      Debt (less current portion)
                        
                        
                        -
                        
                        
                        
                        461,384Deferred
      Retirement Obligation
                        
                        
                        -
                        
                        
                        
                        752,515Stockholders'
      Equity:Preferred
      stock, $1.00 par value, 50,000 shares authorized,
                        
                        
                        -
                        
                        
                        
                        -Common
      stock, $.25 par value; 4,000,000 shares authorized,2,424,486
      and 2,423,506 shares issued and outstanding
                        
                        
                        606,121
                        
                        
                        
                        605,876Additional
      paid in capital
                        
                        
                        5,960,500
                        
                        
                        
                        5,700,002Retained
      earnings
                        
                        
                        14,359,532
                        
                        
                        
                        11,450,192Accumulated
      other comprehensive loss, net
                        
                        
                        -
                        
                        
                        
                        (41,513
                        )Total
      Stockholders' Equity
                        
                        
                        20,926,153
                        
                        
                        
                        17,714,557Total
      Liabilities and Stockholders’ Equity
                        
                        $
                        28,774,539
                        
                        
                        $
                        27,307,610See
      notes to condensed consolidated financial statements.
    
 4
 
 
 
 AIR T,
INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
 Nine
      Months Ended December 31,2008
                            
                            
                            2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      earnings
                            
                            $
                            3,636,390
                            
                            
                            $
                            2,084,038Adjustments
      to reconcile net earnings to netcash
      provided by (used in) operating activities:Change
      in accounts receivable and inventory reserves
                            
                            
                            (606
                            )
                            
                            
                            126,747Depreciation
      and amortization
                            
                            
                            330,347
                            
                            
                            
                            364,418Change
      in cash surrender value of life insurance
                            
                            
                            (51,003
                            )
                            
                            
                            (51,004
                            )Gain
      on sale of assets
                            
                            
                            (16,275
                            )
                            
                            
                            -Deferred
      income taxes
                            
                            
                            (176,000
                            )
                            
                            
                            (149,801
                            )Periodic
      pension cost
                            
                            
                            45,829
                            
                            
                            
                            6,912Loss
      on retirement plan settlement
                            
                            
                            195,299
                            
                            
                            
                            -Warranty
      reserve
                            
                            
                            195,528
                            
                            
                            
                            70,000Compensation
      expense related to stock options
                            
                            
                            254,490
                            
                            
                            
                            261,834Change
      in operating assets and liabilities:Accounts
      receivable
                            
                            
                            3,324,492
                            
                            
                            
                            73,163Notes
      receivable and other non-trade receivables
                            
                            
                            (491,216
                            )
                            
                            
                            62,776Inventories
                            
                            
                            (1,746,244
                            )
                            
                            
                            (813,561
                            )Prepaid
      expenses and other
                            
                            
                            (43,977
                            )
                            
                            
                            (90,200
                            )Accounts
      payable
                            
                            
                            (1,782,811
                            )
                            
                            
                            (1,160,986
                            )Accrued
      expenses
                            
                            
                            (171,816
                            )
                            
                            
                            (516,121
                            )Income
      taxes payable
                            
                            
                            (179,000
                            )
                            
                            
                            (74,297
                            )Total
      adjustments
                            
                            
                            (312,963
                            )
                            
                            
                            (1,890,120
                            )Net
      cash provided by (used in) operating activities
                            
                            
                            3,323,427
                            
                            
                            
                            193,918CASH
      FLOWS FROM INVESTING ACTIVITIES:Proceeds
      from sale of investments
                            
                            
                            6,679,235
                            
                            
                            
                            -Purchase
      of investments
                            
                            
                            (6,657,345
                            )
                            
                            
                            -Capital
      expenditures
                            
                            
                            (162,765
                            )
                            
                            
                            (374,655
                            )Net
      cash provided by (used in) investing activities
                            
                            
                            (140,875
                            )
                            
                            
                            (374,655
                            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      aircraft term loan payments
                            
                            
                            (85,264
                            )
                            
                            
                            (92,043
                            )Payment
      of cash dividend
                            
                            
                            (727,050
                            )
                            
                            
                            (610,851
                            )Payment
      on capital leases
                            
                            
                            (15,419
                            )
                            
                            
                            (14,076
                            )Net
      borrowings on line of credit
                            
                            
                            -
                            
                            
                            
                            163,709Proceeds
      from exercise of stock options
                            
                            
                            6,375
                            
                            
                            
                            -Repurchase
      of common stock
                            
                            
                            (122
                            )
                            
                            
                            (712,886
                            )Net
      cash provided by (used in) financing activities
                            
                            
                            (821,480
                            )
                            
                            
                            (1,266,147
                            )NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                            
                            
                            2,361,072
                            
                            
                            
                            (1,446,884
                            )CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
                            
                            
                            51,858
                            
                            
                            
                            2,895,499CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
                            
                            $
                            2,412,930
                            
                            
                            $
                            1,448,615SUPPLEMENTAL
      DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Change
      in fair value of marketable securities
                            
                            $
                            -
                            
                            
                            $
                            5,477Property
      and equipment transferred from inventory
                            
                            
                            -
                            
                            
                            
                            (458,300
                            )SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid during the period for:Interest
                            
                            $
                            70,534
                            
                            
                            $
                            187,541Income
      taxes
                            
                            
                            2,477,644
                            
                            
                            
                            1,393,446See
      notes to condensed consolidated financial statements.
   
 5
 AIR T, INC AND
SUBSIDIARIES
 CONDENSED CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
 (UNAUDITED)
 
 AccumulatedCommon
      Stock
                          
                          
                          Additional
                          
                          
                          
                          
                          
                          Other
                          
                          
                          TotalPaid-In
                          
                          
                          Retained
                          
                          
                          Comprehensive
                          
                          
                          Stockholders'Shares
                          
                          
                          Amount
                          
                          
                          Capital
                          
                          
                          Earnings
                          
                          
                          Income
      (Loss)
                          
                          
                          EquityBalance,
      March 31, 2007
                          
                          
                          2,509,998
                          
                          
                          $
                          627,499
                          
                          
                          $
                          6,058,070
                          
                          
                          $
                          8,658,606
                          
                          
                          $
                          104,558
                          
                          
                          $
                          15,448,733Net
      earnings
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          2,084,038Other
      comprehensive income,net
      of tax
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          5,477Comprehensive
      Income
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          2,089,515Cash
      dividend ($0.25 per share)
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (610,851
                          )
                          
                          
                          
                          
                          
                          
                          (610,851
                          )Compensation
      expense related tostock
      options
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          261,834
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          261,834Stock
      repurchase
                          
                          
                          (86,492
                          )
                          
                          
                          (21,623
                          )
                          
                          
                          (691,263
                          )
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (712,886
                          )Balance,
      December 31, 2007
                          
                          
                          2,423,506
                          
                          
                          $
                          605,876
                          
                          
                          $
                          5,628,641
                          
                          
                          $
                          10,131,793
                          
                          
                          $
                          110,035
                          
                          
                          $
                          16,476,345AccumulatedCommon
      Stock
                          
                          
                          Additional
                          
                          
                          
                          
                          
                          
                          Other
                          
                          
                          TotalPaid-In
                          
                          
                          Retained
                          
                          
                          Comprehensive
                          
                          
                          Stockholders'Shares
                          
                          
                          Amount
                          
                          
                          Capital
                          
                          
                          Earnings
                          
                          
                          Income
      (Loss)
                          
                          
                          EquityBalance,
      March 31, 2008
                          
                          
                          2,423,506
                          
                          
                          $
                          605,876
                          
                          
                          $
                          5,700,002
                          
                          
                          $
                          11,450,192
                          
                          
                          $
                          (41,513
                          )
                          
                          $
                          17,714,557Net
      earnings
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          3,636,390Other
      comprehensive income,net
      of tax
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          41,513Comprehensive
      Income
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          3,677,903Cash
      dividend ($0.30 per share)
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (727,050
                          )
                          
                          
                          
                          
                          
                          
                          (727,050
                          )Exercise
      of stock options
                          
                          
                          1,000
                          
                          
                          
                          250
                          
                          
                          
                          6,125
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          6,375Compensation
      expense related tostock
      options
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          254,490
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          254,490Stock
      repurchase
                          
                          
                          (20
                          )
                          
                          
                          (5
                          )
                          
                          
                          (117
                          )
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (122
                          )Balance,
      December 31, 2008
                          
                          
                          2,424,486
                          
                          
                          $
                          606,121
                          
                          
                          $
                          5,960,500
                          
                          
                          $
                          14,359,532
                          
                          
                          $
                          -
                          
                          
                          $
                          20,926,153See
      notes to condensed consolidated financial statements.
     
 6
 
 AIR T, INC. AND
SUBSIDIARIES
 NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
              Financial Statement
      Presentation
 
 The
condensed consolidated financial statements of Air T, Inc. (the “Company”) have
been prepared, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission.  Certain information and
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the following disclosures are adequate to make the
information presented not misleading.  In the opinion of management,
all adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation of the results for the periods presented have
been made.
 
 It is
suggested that these financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended March 31, 2008.  The
results of operations for the periods ended December 31 are not necessarily
indicative of the operating results for the full year.
 
 Certain
reclassifications have been made to prior period amounts to conform to the
current period presentation.
 
 2.
              Income
      Taxes
 
 The tax
effect of temporary differences, primarily asset reserves and accrued
liabilities, gave rise to the Company's deferred tax asset in the accompanying
December 31, 2008 and March 31, 2008 condensed consolidated balance sheets.
Deferred income taxes are recognized for the tax consequence of such temporary
differences at the enacted tax rate expected to be in effect when the
differences reverse.
 
 The
income tax provisions for the respective three and nine-month periods ended
December 31, 2008 and 2007 differ from the federal statutory rate primarily as a
result of state income taxes offset by permanent tax differences, including the
federal production deduction.
 
 3.
              Comprehensive
      Income
 
 The
following table provides a reconciliation of net earnings reported in our
financial statements to total comprehensive income:
 
 Three
      Months Ended December 31,
                    
                    
                    Nine
      Months Ended December 31,2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007Net
      earnings
                    
                    $
                    974,326
                    
                    
                    $
                    920,020
                    
                    
                    $
                    3,636,390
                    
                    
                    $
                    2,084,038Other
      Comprehensive Income:Change
      in Fair Value of MarketableSecurities
      (Net of tax)
                    
                    
                    -
                    
                    
                    
                    (13,267
                    )
                    
                    
                    -
                    
                    
                    
                    5,477Amortization
      of Net Actuarial Losses (Netof
      tax)
                    
                    
                    37,741
                    
                    
                    
                    -
                    
                    
                    
                    41,513
                    
                    
                    
                    -Total
      Comprehensive Income
                    
                    $
                    1,012,067
                    
                    
                    $
                    906,753
                    
                    
                    $
                    3,677,903
                    
                    
                    $
                    2,089,515
 
 4.
              Net Earnings Per
      Share
 
 Basic
earnings per share has been calculated by dividing net earnings by the weighted
average number of common shares outstanding during each period.  For
purposes of calculating diluted earnings per share, shares issuable under
employee stock options were considered potential common shares and were included
in the weighted average common shares unless they were
anti-dilutive.
 
    7
 The
computation of basic and diluted earnings per common share is as
follows:
 
 Three
      Months Ended December 31,
                    
                    
                    Nine
      Months Ended December 31,2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007Net
      earnings
                    
                    $
                    974,326
                    
                    
                    $
                    920,020
                    
                    
                    $
                    3,636,390
                    
                    
                    $
                    2,084,038Basic
      and Diluted Net Earnings Per Share
                    
                    $
                    0.40
                    
                    
                    $
                    0.38
                    
                    
                    $
                    1.50
                    
                    
                    $
                    0.85Weighted
      Average Shares Outstanding:Basic
      and Diluted
                    
                    
                    2,424,503
                    
                    
                    
                    2,423,506
                    
                    
                    
                    2,424,043
                    
                    
                    
                    2,439,077
 
 At
December 31, 2008 and 2007, respectively, options to acquire 234,000 and 241,000
shares of common stock were not included in computing diluted earnings per
common share because their effects were anti-dilutive.
 
 5.
              Inventories
 
 Inventories
consisted of the following:
 
 December
      31,
                      
                      
                      March
      31,2008
                      
                      
                      2008Aircraft
      parts and supplies
                      
                      $
                      477,916
                      
                      
                      $
                      481,913Ground
      equipment manufacturing:Raw
      materials
                      
                      
                      7,585,875
                      
                      
                      
                      5,548,635Work
      in process
                      
                      
                      1,681,405
                      
                      
                      
                      1,724,522Finished
      goods
                      
                      
                      870,178
                      
                      
                      
                      1,114,059Total
      inventories
                      
                      
                      10,615,374
                      
                      
                      
                      8,869,129Reserves
                      
                      
                      (922,248
                      )
                      
                      
                      (907,693
                      )Total,
      net of reserves
                      
                      $
                      9,693,126
                      
                      
                      $
                      7,961,436
 
 
 6.
              Stock Based
      Compensation
 
 The
Company maintains stock based compensation plans which allow for the issuance of
stock options to officers, other key employees of the Company, and to members of
the Board of Directors.  The Company accounts for stock compensation
using the fair value recognition provisions of FASB Statement No. 123(R) (“SFAS
123(R)”), Share-Based
Payment.
 
 No
options were granted during the nine months ended December 31, 2008 and
2007.  During the nine months ended December 31, 2008, options were
exercised for 1,000 shares at $6.375 per share.  No options were
exercised during the nine months ended December 31, 2007.  Stock based
compensation expense has been recognized in the amount of $84,830 and $87,278
for the three months and $254,490 and $261,834 for the nine months ended
December 31, 2008 and 2007, respectively.  As of December 31, 2008,
there was $219,000 of unrecognized compensation expense to be recognized through
December 31, 2009.
 
 7.
              Recent Accounting
      Pronouncements
 
 In
September 2006, the Financial Accounting Standards Board, (“FASB”), issued
Statement of Financial Accounting Standards No. 157 (“SFAS 157”),Fair Value Measurements.
SFAS 157 defines fair value, establishes a framework for measuring fair value in
accordance with generally accepted accounting principles, and expands
disclosures about fair value measurements. This statement does not require any
new fair value measurements; rather, it applies under other accounting
pronouncements that require or permit fair value measurements. The provisions of
this statement are to be applied prospectively as of the beginning of the fiscal
year in which this statement is initially applied, with any transition
adjustment recognized as a cumulative-effect adjustment to the opening balance
of retained earnings. The provisions of SFAS 157 were to be effective for the
fiscal years beginning after November 15, 2007. However, on
February 12, 2008, the FASB issued Staff Position Financial Accounting
Standard No. 157-2 (“FSP FAS 157-2”), Effective Date of FASB Statement
No. 157, that amends SFAS 157 to delay the effective date of SFAS
157 for all non-financial assets and non-financial liabilities, except those
that are recognized or disclosed at fair value in the financial statements on a
recurring basis (that is, at least annually) to fiscal years beginning after
November 15, 2008, and interim periods within those fiscal
years.  We adopted the required provisions of SFAS 157 as of
April 1, 2008. The required provisions did not have a material impact on
our Condensed Consolidated Financial Statements. See Note 8 for additional
information.
 
 8
 In
February 2007, the FASB issued Statement of Financial Accounting Standards No.
159(“SFAS 159”),
The Fair Value Option for
Financial Assets and Liabilities.  SFAS 159 is effective as of
the beginning of the first fiscal year beginning after November 15, 2007, and is
effective for the Company April 1, 2008.  SFAS 159 provides companies
with an option to report selected financial assets and liabilities at fair
value. Accordingly, companies would then be required to report unrealized gains
and losses on these items in earnings at each subsequent reporting date. The
objective is to improve financial reporting by providing companies with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently. SFAS 159 also establishes
presentation and disclosure requirements designed to facilitate comparisons
between companies that choose different measurement attributes for similar types
of assets and liabilities. Although the Company has adopted SFAS 159 as of April
1, 2008, we have not elected the fair value option for any items permitted under
SFAS 159.
 
 In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141 (revised 2007) (“SFAS 141R”),Business
Combinations.  SFAS 141R will significantly change the
accounting for business combinations in a number of areas including the
treatment of contingent consideration, contingencies, acquisition costs and
restructuring costs. In addition, under SFAS 141R, changes in deferred tax
asset valuation allowances and acquired income tax uncertainties in a business
combination after the measurement period will impact income tax expense.
SFAS 141R is effective for fiscal years beginning after December 15,
2008 (our 2010 fiscal year).  The impact of our adoption of SFAS 141R
will depend upon the nature and terms of business combinations, if any, that we
consummate on or after April 1, 2009.
 
 In May
2008, the FASB issued Statement of Financial Accounting Standards No. 162 (“SFAS
162”), The Hierarchy of
Generally Accepted Accounting Principles. The new standard is intended to
improve financial reporting by identifying a consistent framework, or hierarchy,
for selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. generally accepted accounting
principles (GAAP) for non-governmental entities. The Company does not expect
SFAS 162 to have a material impact on its consolidated financial
statements.
 
 8.
              Fair Value of
      Financial Instruments
 
 The
Company adopted SFAS 157 effective April 1, 2008 for financial assets and
liabilities measured on a recurring basis. SFAS 157 applies to all
financial assets and financial liabilities that are being measured and reported
on a fair value basis. There was no impact for adoption of SFAS No. 157 to
the condensed consolidated financial statements as of December 31, 2008.
SFAS 157 requires disclosure that establishes a framework for measuring
fair value and expands disclosure about fair value measurements. SFAS 157
requires fair value measurement to be classified and disclosed in one of the
following three categories:
 
 Level 1:
Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities.
 
 Level 2:
Quoted prices in markets that are not active or inputs which are observable,
either directly or indirectly, for substantially the full term of the asset or
liability.
 
 Level 3:
Prices or valuation techniques that require inputs that are both significant to
the fair value measurement and unobservable (i.e., supported by little or
no market activity).
 
 The
Company has periodically entered into short-term investments in Variable Rate
Demand Notes (“VRDN”) which are measured at fair value on a recurring
basis.  The VRDN’s fall into the Level 2 category under the
guidance of SFAS 157.  The VRDN’s are traded at par value and
have a market value equal to cost at December 31, 2008.  There were no
gains or losses (realized or unrealized) during the three and nine months ended
December 31, 2008 related to these investments. The Company’s assets and
liabilities measured at fair value on a recurring basis subject to the
disclosure requirements of SFAS No. 157 at December 31, 2008, were as
follows:
 
 Fair
      Value Measurements at December 31, 2008Total
                    
                    
                    Level
      1
                    
                    
                    Level
      2
                    
                    
                    Level
      3Variable
      rate demand notes
                    
                    $
                    2,000,000
                    
                    
                    
                    -
                    
                    
                    $
                    2,000,000
                    
                    
                    
                    -
         9
 The
Company monitors its investments for impairment by considering current factors,
including the economic environment, market conditions, operational performance
and other specific factors relating to the business underlying the investment,
and records reductions in carrying values when necessary. Any impairment loss
would be reported under "Investment income (expense)" in the Condensed
Consolidated Statement of Income.
 
 9.
              Financing
      Arrangements
 
 In August
2008, the expiration date of the Company’s $7,000,000 secured long-term
revolving credit line was extended to August 31, 2010.  The revolving
credit line contains customary events of default, a subjective acceleration
clause and restrictive covenants that, among other matters, require the Company
to maintain certain financial ratios.  There is no requirement for the
Company to maintain a lock-box arrangement under this agreement.  As
of December 31, 2008, the Company was in compliance with all of the restrictive
covenants.  The credit facility is secured by substantially all of the
Company’s assets.  The amount of credit available to the Company under
the agreement at any given time is determined by an availability calculation,
based on the eligible borrowing base, as defined in the credit agreement, which
includes the Company’s outstanding receivables, inventories and equipment, with
certain exclusions.  At December 31, 2008, $7,000,000 was available
under the terms of the credit facility and no amounts were
outstanding.  Amounts advanced under the credit facility bear interest
at the 30-day “LIBOR” rate plus 137 basis points.  The LIBOR rate at
December 31, 2008 was .436%.
 
 The
Company assumes various financial obligations and commitments in the normal
course of its operations and financing activities.  Financial
obligations are considered to represent known future cash payments that the
Company is required to make under existing contractual arrangements such as debt
and lease agreements.
 
 10.
              Segment
      Information
 
 The
Company operates in three business segments.  The overnight air cargo
segment, comprised of its Mountain Air Cargo, Inc. (“MAC”) and CSA Air, Inc.
(“CSA”) subsidiaries, operates in the air express delivery services
industry.  The ground equipment sales segment, comprised of its Global
Ground Support, LLC (“GGS”) subsidiary, manufactures and provides mobile deicers
and other specialized equipment products to passenger and cargo airlines,
airports, the military and industrial customers.  The ground support
services segment, comprised of its Global Aviation Services, LLC (“GAS”)
subsidiary, provides ground support equipment maintenance and facilities
maintenance services to domestic airlines.  Each business segment has
separate management teams and infrastructures that offer different products and
services.  The Company evaluates the performance of its operating
segments based on operating income.  Prior to the quarter ended
September 30, 2008, the Company had determined that the operations of GAS were
not significant enough to justify separate segment reporting and had only
reported two operating segments, previously combining GGS and GAS into a single
segment.  The Company has modified the prior periods segment
information to conform to the current period presentation.
  
 
 
 
     
 
 
 
  
 10
 
  Segment
data is summarized as follows:
 
 Three
      Months Ended December 31,
                                      
                                      
                                      Nine
      Months Ended December 31,2008
                                      
                                      
                                      2007
                                      
                                      
                                      2008
                                      
                                      
                                      2007Operating
      Revenues:Overnight
      Air Cargo
                                      
                                      $
                                      10,846,052
                                      
                                      
                                      $
                                      10,114,872
                                      
                                      
                                      $
                                      31,862,596
                                      
                                      
                                      $
                                      28,131,038Ground
      Equipment Sales:Domestic
                                      
                                      
                                      8,793,398
                                      
                                      
                                      
                                      8,585,511
                                      
                                      
                                      
                                      27,946,479
                                      
                                      
                                      
                                      23,039,348International
                                      
                                      
                                      1,855,626
                                      
                                      
                                      
                                      1,434,190
                                      
                                      
                                      
                                      4,753,293
                                      
                                      
                                      
                                      1,948,750Total
      Ground Equipment Sales
                                      
                                      
                                      10,649,024
                                      
                                      
                                      
                                      10,019,701
                                      
                                      
                                      
                                      32,699,772
                                      
                                      
                                      
                                      24,988,098Ground
      Support Services
                                      
                                      
                                      2,042,497
                                      
                                      
                                      
                                      1,014,277
                                      
                                      
                                      
                                      5,404,103
                                      
                                      
                                      
                                      1,237,498Total
                                      
                                      $
                                      23,537,573
                                      
                                      
                                      $
                                      21,148,850
                                      
                                      
                                      $
                                      69,966,471
                                      
                                      
                                      $
                                      54,356,634Operating
      IncomeOvernight
      Air Cargo
                                      
                                      $
                                      795,412
                                      
                                      
                                      $
                                      860,661
                                      
                                      
                                      $
                                      2,573,238
                                      
                                      
                                      $
                                      1,719,615Ground
      Equipment Sales
                                      
                                      
                                      1,096,170
                                      
                                      
                                      
                                      1,316,734
                                      
                                      
                                      
                                      4,770,227
                                      
                                      
                                      
                                      3,350,688Ground
      Support Services
                                      
                                      
                                      114,051
                                      
                                      
                                      
                                      107,582
                                      
                                      
                                      
                                      243,185
                                      
                                      
                                      
                                      127,895Corporate
                                      
                                      
                                      (719,218
                                      )
                                      
                                      
                                      (852,291
                                      )
                                      
                                      
                                      (2,201,271
                                      )
                                      
                                      
                                      (1,949,687
                                      )Total
                                      
                                      $
                                      1,286,415
                                      
                                      
                                      $
                                      1,432,686
                                      
                                      
                                      $
                                      5,385,379
                                      
                                      
                                      $
                                      3,248,511Capital
      Expenditures:Overnight
      Air Cargo
                                      
                                      $
                                      7,285
                                      
                                      
                                      $
                                      8,909
                                      
                                      
                                      $
                                      22,905
                                      
                                      
                                      $
                                      56,539Ground
      Equipment Sales
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      7,185
                                      
                                      
                                      
                                      43,816Ground
      Support Services
                                      
                                      
                                      36,575
                                      
                                      
                                      
                                      142,679
                                      
                                      
                                      
                                      76,623
                                      
                                      
                                      
                                      209,604Corporate
                                      
                                      
                                      18,040
                                      
                                      
                                      
                                      (1,541
                                      )
                                      
                                      
                                      56,052
                                      
                                      
                                      
                                      64,696Total
                                      
                                      $
                                      61,900
                                      
                                      
                                      $
                                      150,047
                                      
                                      
                                      $
                                      162,765
                                      
                                      
                                      $
                                      374,655Depreciation
      and Amortization:Overnight
      Air Cargo
                                      
                                      $
                                      62,172
                                      
                                      
                                      $
                                      90,123
                                      
                                      
                                      $
                                      199,586
                                      
                                      
                                      $
                                      306,451Ground
      Equipment Sales
                                      
                                      
                                      10,442
                                      
                                      
                                      
                                      14,748
                                      
                                      
                                      
                                      32,839
                                      
                                      
                                      
                                      42,033Ground
      Support Services
                                      
                                      
                                      24,597
                                      
                                      
                                      
                                      10,974
                                      
                                      
                                      
                                      67,749
                                      
                                      
                                      
                                      10,974Corporate
                                      
                                      
                                      10,533
                                      
                                      
                                      
                                      (349
                                      )
                                      
                                      
                                      30,173
                                      
                                      
                                      
                                      4,960Total
                                      
                                      $
                                      107,744
                                      
                                      
                                      $
                                      115,496
                                      
                                      
                                      $
                                      330,347
                                      
                                      
                                      $
                                      364,418As
      of:31-Dec-08
                                      
                                      
                                      31-Mar-08Identifiable
      Assets:Overnight
      Air Cargo
                                      
                                      $
                                      3,961,243
                                      
                                      
                                      $
                                      5,456,968Ground
      Equipment Sales
                                      
                                      
                                      16,071,199
                                      
                                      
                                      
                                      16,868,328Ground
      Support Services
                                      
                                      
                                      2,336,296
                                      
                                      
                                      
                                      1,422,112Corporate
                                      
                                      
                                      6,405,801
                                      
                                      
                                      
                                      3,560,202Total
                                      
                                      $
                                      28,774,539
                                      
                                      
                                      $
                                      27,307,610
 
 11.
              Commitments and
      Contingencies
 
 We had
previously included summaries of litigation pending in various courts in
Pennsylvania arising out of the February 28, 2005 collapse of a fixed pedestal
deicing boom at the Philadelphia International Airport.  We are able
to report that three of the four lawsuits have now been resolved, with one claim
still outstanding.
 
 The claim
on behalf of the injured operator of the deicing equipment has been settled, as
has been the claim asserted by US Airways for the damage to its
aircraft.  Global Ground Support's ("GGS") share of those settlements
was fully paid by our liability insurer, and there are no out-of-pocket costs or
charges incurred by GGS in either of those cases.
 
 The claim
asserted by GGS against Elliott Equipment relating to the remediation of the
other deicing booms at the Philadelphia Airport has been settled, with Elliott
agreeing to pay a total of $550,000 to GGS, which payments will be made in
installments over a two and one-half year period.  This settlement
enables GGS to recover a substantial portion of funds it has expended in the
remediation and return to service
    11
 of the
eleven remaining booms and to also avoid the additional cost and uncertainty of
continued litigation.  The $550,000 settlement has been recorded as
other income in the quarter ended December 31, 2008 and is included in notes and
other non-trade receivables in the December 31, 2008 condensed consolidated
balance sheet.
 
 The only
remaining claim arising out of the February 28, 2005 incident involves a lawsuit
by the City of Philadelphia to recover for the loss of the collapsed deicing
boom.  GGS is one of five parties named as a defendant in that
proceeding.  The parties have made a joint proposal to the City for
the fabrication and installation of a replacement deicing boom and Court
supervised negotiations are ongoing.  If the City elects to seek
recovery of monetary damages rather than a replacement deicing boom, and is
successful in that claim, it is believed that the bulk of that responsibility
will be assigned to the other defendants in the proceeding or would be
apportioned among all the defendants so that the claim would not be expected to
have a material adverse financial impact on GGS.
 
 The
Company is currently involved in certain personal injury matters, which involve
pending or threatened lawsuits.  Those claims are subject to defense
under the Company's liability insurance program and management believes that the
results of these threatened or pending lawsuits will not have a material adverse
effect on the Company's results of operations or financial
position.
 
 12.
              Deferred Retirement
      Obligation
 
 The
Company had previously entered into supplemental retirement agreements with
certain key executives in January 1996.  On December 19, 2008 the
Company amended the employment agreement of William H. Simpson, the Company’s
Executive Vice President and the sole executive still covered under a
supplemental retirement agreement.  The amendment deleted all
provisions providing for certain payments to be made to Mr. Simpson upon his
retirement and replaces them with an obligation for the Company to pay Mr.
Simpson in July 2009 an amount designed to equal the amount that he would have
been entitled to receive had he retired at that time and elected to receive a
lump sum.   The actual amount of that liability will be dependent
upon existing interest rates at the time, but has been estimated at $950,000
based upon current information and rates.
 
 In the
accompanying financial statements this liability is reported at March 31, 2008
as a long term Deferred Retirement Obligation in the amount of
$752,515.  At December 31, 2008 it is reported as a current Accrued
Compensation balance of $950,000.  During the quarter ended December
31, 2008, the Company has recorded a loss on settlement of the retirement plan
of $195,000, to expense the remaining unrecognized actuarial loss that had been
included in accumulated other comprehensive income and to adjust the Accrued
Compensation balance to the expected liability at July 31, 2009.
 
 Item
2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations.
 
 Overview
 
 The
Company operates in three business segments.  The overnight air cargo
segment, comprised of its Mountain Air Cargo, Inc. (“MAC”) and CSA Air, Inc.
(“CSA”) subsidiaries, operates in the air express delivery services
industry.  The ground equipment sales segment, comprised of its Global
Ground Support, LLC (“GGS”) subsidiary, manufactures and provides mobile deicers
and other specialized equipment products to passenger and cargo airlines,
airports, the military and industrial customers.  The ground support
services segment, comprised of its Global Aviation Services, LLC (“GAS”)
subsidiary, provides ground support equipment maintenance and facilities
maintenance services to domestic airlines and aviation service
providers.  Each business segment has separate management teams and
infrastructures that offer different products and services.  The
Company evaluates the performance of its operating segments based on operating
income.  Prior to the quarter ended September 30, 2008, the Company
had reported two operating segments, previously combining GGS and GAS into a
single segment.  The Company has modified the prior periods segment
information to conform to the current period presentation.
  12
 Following
is a table detailing revenues by segment and by major customer
category:
  (In
      thousands)Three
      Months Ended December 31,
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      Nine Months Ended December 31,2008
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      2007
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      2008
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      2007Overnight
      Air Cargo Segment:FedEx
                                                      
                                                      $
                                                      10,846
                                                      
                                                      
                                                      
                                                      46
                                                      %
                                                      
                                                      $
                                                      9,693
                                                      
                                                      
                                                      
                                                      46
                                                      %
                                                      
                                                      $
                                                      31,863
                                                      
                                                      
                                                      
                                                      45
                                                      %
                                                      
                                                      $
                                                      27,709
                                                      
                                                      
                                                      
                                                      51
                                                      %Other
      Maintenance
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      422
                                                      
                                                      
                                                      
                                                      2
                                                      %
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      422
                                                      
                                                      
                                                      
                                                      1
                                                      %10,846
                                                      
                                                      
                                                      
                                                      46
                                                      %
                                                      
                                                      
                                                      10,115
                                                      
                                                      
                                                      
                                                      48
                                                      %
                                                      
                                                      
                                                      31,863
                                                      
                                                      
                                                      
                                                      45
                                                      %
                                                      
                                                      
                                                      28,131
                                                      
                                                      
                                                      
                                                      52
                                                      %Ground
      Equipment Sales Segment:Military
                                                      
                                                      
                                                      2,935
                                                      
                                                      
                                                      
                                                      12
                                                      %
                                                      
                                                      
                                                      2,626
                                                      
                                                      
                                                      
                                                      12
                                                      %
                                                      
                                                      
                                                      14,193
                                                      
                                                      
                                                      
                                                      20
                                                      %
                                                      
                                                      
                                                      9,253
                                                      
                                                      
                                                      
                                                      17
                                                      %Commercial
      - Domestic
                                                      
                                                      
                                                      5,858
                                                      
                                                      
                                                      
                                                      25
                                                      %
                                                      
                                                      
                                                      5,960
                                                      
                                                      
                                                      
                                                      28
                                                      %
                                                      
                                                      
                                                      13,754
                                                      
                                                      
                                                      
                                                      20
                                                      %
                                                      
                                                      
                                                      13,786
                                                      
                                                      
                                                      
                                                      25
                                                      %Commercial
      - International
                                                      
                                                      
                                                      1,856
                                                      
                                                      
                                                      
                                                      8
                                                      %
                                                      
                                                      
                                                      1,434
                                                      
                                                      
                                                      
                                                      7
                                                      %
                                                      
                                                      
                                                      4,753
                                                      
                                                      
                                                      
                                                      7
                                                      %
                                                      
                                                      
                                                      1,949
                                                      
                                                      
                                                      
                                                      4
                                                      %10,649
                                                      
                                                      
                                                      
                                                      45
                                                      %
                                                      
                                                      
                                                      10,020
                                                      
                                                      
                                                      
                                                      47
                                                      %
                                                      
                                                      
                                                      32,700
                                                      
                                                      
                                                      
                                                      47
                                                      %
                                                      
                                                      
                                                      24,988
                                                      
                                                      
                                                      
                                                      46
                                                      %Ground
      Support Services Segment
                                                      
                                                      
                                                      2,043
                                                      
                                                      
                                                      
                                                      9
                                                      %
                                                      
                                                      
                                                      1,014
                                                      
                                                      
                                                      
                                                      5
                                                      %
                                                      
                                                      
                                                      5,404
                                                      
                                                      
                                                      
                                                      8
                                                      %
                                                      
                                                      
                                                      1,238
                                                      
                                                      
                                                      
                                                      2
                                                      %$
                                                      23,538
                                                      
                                                      
                                                      
                                                      100
                                                      %
                                                      
                                                      $
                                                      21,149
                                                      
                                                      
                                                      
                                                      100
                                                      %
                                                      
                                                      $
                                                      69,967
                                                      
                                                      
                                                      
                                                      100
                                                      %
                                                      
                                                      $
                                                      54,357
                                                      
                                                      
                                                      
                                                      100
                                                      %
 
 MAC and
CSA are short-haul express airfreight carriers and provide air cargo services to
one primary customer, FedEx Corporation (“FedEx”).  MAC will also on
occasion provide maintenance services to other airline customers and the
military.  Under the terms of dry-lease service agreements, which
currently cover all of the 87 revenue aircraft, the Company receives a monthly
administrative fee based on the number of aircraft operated and passes through
to its customer certain cost components of its operations without
markup.  The cost of fuel, flight crews, landing fees, outside
maintenance, parts and certain other direct operating costs are included in
operating expenses and billed to the customer as cargo and maintenance revenue,
at cost.  As a result, the fluctuating cost of fuel has not had any
direct impact on our air cargo operating results.  Pursuant to such
agreements, FedEx determines the type of aircraft and schedule of routes to be
flown by MAC and CSA, with all other operational decisions made by the
Company.  These agreements are renewable on two to five-year terms and
may be terminated by FedEx at any time upon 30 days’ notice.  The
Company believes that the short term and other provisions of its agreements with
FedEx are standard within the airfreight contract delivery service
industry.  FedEx has been a customer of the Company since
1980.  Loss of its contracts with FedEx would have a material adverse
effect on the Company.
  MAC and
CSA combined contributed approximately $31,863,000 and $28,131,000 to the
Company’s revenues for the nine-month periods ended December 31, 2008 and 2007,
respectively, a current year increase of $3,732,000 (13%).
 
 GGS
manufactures and supports aircraft deicers and other specialized industrial
equipment on a worldwide basis.  GGS manufactures five basic models of
mobile deicing equipment with capacities ranging from 700 to 2,800
gallons.  GGS also provides fixed-pedestal-mounted
deicers.  Each model can be customized as requested by the customer,
including single operator configuration, fire suppressant equipment, open basket
or enclosed cab, a patented forced-air deicing nozzle and on-board glycol
blending system to substantially reduce glycol usage, color and style of the
exterior finish.  GGS also manufactures four models of scissor-lift
equipment, for catering, cabin service and maintenance service of aircraft, and
has developed a line of decontamination equipment and other special purpose
mobile equipment.  GGS competes primarily on the basis of the quality,
performance and reliability of its products, prompt delivery, customer service
and price.  In June 1999, GGS was awarded a four-year contract to
supply deicing equipment to the United States Air Force.  In June 2003
GGS was awarded a three-year extension of that contract and a further three-year
extension was awarded in June 2006.
 
 GGS
contributed approximately $32,700,000 and $24,988,000 to the Company’s revenues
for the nine-month periods ended December 31, 2008 and 2007,
respectively.  The $7,712,000 (31%) increase in revenues was due to an
increase in the number of military deicing units delivered, an increase in the
number of commercial catering trucks and an increase in the number of
international commercial orders completed during the current
period.  At December 31, 2008, GGS’s order backlog was $12.2 million
compared to $16.0 million at December 31, 2007.
 
 GAS was
formed in September 2007 to operate the aircraft ground support equipment and
airport facility maintenance services business of the Company.  GAS is
providing aircraft ground support equipment and airport facility maintenance
services at a number of locations.  Currently, GAS supports 52
customers with aircraft ground support equipment and airport maintenance
facilities at 17 domestic airports and supports 24 additional airports through
traveling technicians.
   
 13
 GAS
contributed approximately $5,404,000 and $1,238,000 to the Company’s revenues
for the nine-month periods ended December 31, 2008 and 2007,
respectively.  The $4,167,000 increase in revenues was due to GAS
commencing operations in September 2007 and not including a full nine months of
operations in the prior year period.  GAS has grown to 8% of
consolidated revenues for the nine-month period ended December 31,
2008.
 
 Third Quarter
Highlights
  The
Company has produced solid third quarter results following an excellent first
half of this fiscal year.  Overall, we are pleased with the quarterly
and year to date results, but the general economic and industry conditions
continue to be a major concern and as a result we remain cautious going
forward.  In these difficult times, we remain dedicated to conserving
cash, watching costs, tightening our credit policies and maintaining our
customer and vendor relationships.
 
 During
the quarter ended December 31, 2008, revenues from our GAS subsidiary totaled
$2,043,000.  This new line of business continues to expand its
customer base.  GAS’s main challenges continue to be its ability to
add additional customers and develop existing ones to optimally utilize our
staffing capacity at existing locations, to selectively add new stations, and to
manage accounts receivable in a difficult operating environment and
industry.  We also continue to monitor the Northwest Airlines and
Delta Airlines merger as Northwest Airlines comprises a substantial portion of
GAS’s business.
 
 Two
additional lawsuits in connection with the 2005 Philadelphia boom incident were
settled during the quarter.  A settlement of the U. S. Airways suit
was reached with all parties, with no additional financial impact to the
Company.  In addition, the suit in which the Company was seeking to
recover approximately $905,000 in costs incurred by the Company, was settled for
$550,000, which the Company will receive over two and a half
years.  The $550,000 settlement has been recognized in other income
and as a receivable in the quarter ended December 31, 2008.  For a
complete discussion of these settlements and the ongoing status of the related
matters, refer to Note 11 of the Notes to Consolidated Financial Statements
(Unaudited), included in Part I, Item 1 of this report.
 
 During
the quarter ended December 31, 2008, the Company amended the employment
agreement of William H. Simpson, the Company’s Executive Vice President and the
sole executive still covered under a supplemental retirement
agreement.  The amendment deleted all provisions providing for certain
payments to be made to Mr. Simpson upon his retirement and replaces them with an
obligation for the Company to pay Mr. Simpson in July 2009, an amount designed
to equal the amount that he would have been entitled to receive had he retired
at that time and elected to receive a lump sum.   The actual
amount of that liability will be dependent upon existing interest rates at the
time, but has been estimated at $950,000, based upon current information and
rates.  The settlement resulted in an estimated loss of $195,000,
which has been expensed in the quarter ended December 31, 2008.
 
 
 Critical Accounting Policies
and Estimates
 
 The
preparation of the Company’s financial statements in conformity with accounting
principles generally accepted in the U.S. requires the use of estimates and
assumptions to determine certain assets, liabilities, revenues and
expenses.  Management bases these estimates and assumptions upon the
best information available at the time of the estimates or
assumptions.  The Company’s estimates and assumptions could change
materially as conditions within and beyond our control
change.  Accordingly, actual results could differ materially from
estimates.  The most significant estimates made by management include
allowance for doubtful accounts receivable, reserves for excess and obsolete
inventories, warranty reserves, deferred tax asset valuation, stock based
compensation and retirement benefit obligations.
 
 Following
is a discussion of critical accounting policies and related management estimates
and assumptions.
 
 Allowance
for Doubtful Accounts.  An allowance for doubtful accounts receivable
in the amount of $252,500 and $267,700, respectively, as of December 31, 2008
and March 31, 2008, was established based on management’s estimates of the
collectability of accounts receivable.  The required allowance is
determined using information such as customer credit history, industry
information, credit reports, customer financial condition and the collectability
of outstanding accounts receivables associated with a discontinued business
segment.  The estimates can be affected by changes in the financial
strength of the aviation industry, customer credit issues or general economic
conditions.
 
 Inventories.  The
Company’s inventories are valued at the lower of cost or
market.  Reserves for excess and obsolete inventories in the amount of
$922,000 and $908,000, respectively, as of December 31, 2008 and March 31, 2008,
are based on assessment of the marketability of slow-moving and obsolete
inventories.  Estimates are subject to volatility and can be affected
by reduced equipment utilization, existing supplies of used inventory available
for sale, the retirement of aircraft or ground equipment and changes in the
financial strength of the aviation industry.
   
 14
 Warranty
Reserves.  The Company warranties its ground equipment products for up
to a two-year period from date of sale.  Product warranty reserves are
recorded at time of sale based on the historical average warranty cost and are
adjusted quarterly as actual warranty cost becomes known.  Warranty
reserves were $188,000 and $144,000 at December 31, 2008 and March 31, 2008
respectively.
 
 Deferred
Taxes.  Company judgment of the recoverability of certain of these
deferred tax assets is based primarily on estimates of current and expected
future earnings and tax planning.
 
 Stock
Based Compensation. The Company adopted Statement of Financial Accounting
Standards No. 123(R),Accounting for Stock-Based Compensation (“SFAS 123(R)”) as of April 1,
2006, using the modified prospective method of adoption, which requires all
share-based payments, including grants of stock options, to be recognized in the
income statement as an operating expense, based on their fair values over the
requisite service period. The compensation cost we record for these awards is
based on their fair value on the date of grant. The Company continues to use the
Black Scholes option-pricing model as its method for valuing stock options. The
key assumptions for this valuation method include the expected term of the
option, stock price volatility, risk-free interest rate and dividend
yield.
  Retirement
Benefits Obligation.  The Company determined the value of retirement
benefits assets and liabilities on an actuarial basis using a 4.0% discount
rate.  Values are affected by current independent indices, which
estimate the expected return on insurance policies and the discount rates
used.  The retirement benefit obligation was settled in December
2008.
 
 Revenue
Recognition.  Cargo revenue is recognized upon completion of contract
terms and maintenance revenue is recognized when the service has been
performed.  Revenue from product sales is recognized when contract
terms are completed and title has passed to customers.
 
 Seasonality
 
 GGS’s
business has historically been seasonal.  The Company has continued
its efforts to reduce GGS’s seasonal fluctuation in revenues and earnings by
increasing military and international sales and broadening its product line to
increase revenues and earnings throughout the year.  In June 1999, GGS
was awarded a four-year contract to supply deicing equipment to the United
States Air Force, and GGS has been awarded two three-year extensions on the
contract.  Although sales remain somewhat seasonal, this
diversification has lessened the seasonal impacts and allowed the Company to be
more efficient in its planning and production.  The overnight air
cargo and ground support services segments are not susceptible to seasonal
trends.
 
 Results of
Operations
 
 Third
Quarter 2009 Compared to Third Quarter 2008
 
 Consolidated
revenue increased $2,389,000 (11%) to $23,538,000 for the three-month period
ended December 31, 2008 compared to its equivalent 2007 period. The increase in
revenues resulted from a number of factors.  Revenues in the air cargo
segment were up $731,000 (7%) primarily as a result of increased flight and
maintenance department costs passed through to its customer at cost and
increases in the maintenance labor rate, quarter over quarter.  As
noted in previous filings, the Company received approval from its customer for
an 8.5% increase in its maintenance billable hour rate in June 2007 and an
additional 4% increase in January 2008.  Revenues in the ground
equipment segment increased $629,000 (6%) to $10,649,000 as a result of a small
increase in military revenues during the third quarter of fiscal 2009, as well
as a small increase in international sales in the three-month period ended
December 31, 2008.  In addition, GAS provided revenues of $2,043,000
during the three-month period ended December 31, 2008, compared to revenue of
$1,014,000 in the prior year at its inception, as it continues to add new
customers and new service locations.
 
 Operating
expenses increased $2,535,000 (13%) to $22,251,000 for the three-month period
ended December 31, 2008 compared to its equivalent 2007 period.  The
increase was due to a number of factors.  Operating expenses in the
air cargo segment were up $788,000 (9%) primarily as a result of increased
flight and maintenance departments costs passed through to its customer at
cost.  Ground equipment segment operating costs increased $767,000
(10%) driven primarily by the current quarter’s increase in
revenues.  Operating costs in this segment grew faster than revenues
this quarter as a result
        15
 of
increased material and freight costs, as well as increased royalty and
commission costs dictated by the product mix this quarter.  The ground
support services segment reported a $944,000 increase in operating expenses
directly related to the increased revenue provided by GAS this
quarter.  General and administrative expenses increased $44,000 (2%)
to  $2,753,000 for the three-month period ended December 31, 2008
compared to its equivalent 2007 period.  The increase was comprised of
additional expenses associated with the GAS operations in the current
year.
 
 Operating
income for the quarter ended December 31, 2008 was  $1,286,000, a
$146,000 (10%) decrease from the same quarter of the prior year.  All
segments played a part in this operating income decrease for the
quarter.  The overnight air cargo segment saw a decrease in its
operating income due to having completed a heavy maintenance contract for a
third party in the prior year which had increased the operating margin for that
quarter.  The ground equipment segment experienced a decrease in its
operating margin from the same quarter a year ago due to increased material and
freight costs as well as increased royalty and commission costs dictated by the
product mix this quarter as previously noted.  The ground support
services segment saw a slight increase in operating income but a significant
decrease in its operating margin on a percentage basis.  The new
segment has been focusing on adding customers and locations and has had
difficulty maintaining operating margins as the new locations have not been as
quick to achieve full billing capacity.
 
 Non-operating
income was a net income amount of $324,000 for the three-month period ended
December 31, 2008 compared to $11,000 in the equivalent 2007
period.  The $550,000 lawsuit settlement in December 2008 was a
principal component of this increase.  This income was partially
offset by the $195,000 retirement plan settlement expense recorded in December
2008, relating to the executive employment agreement amendment and
settlement.  Interest expense increased by $16,000, relating to an
increase in the chassis inventory flooring in the current
period.  Investment income declined by $30,000, due to lesser rates of
return on cash investments in the current period.
 
 Pretax
earnings increased $166,000 for the three-month period ended December 31, 2008
compared to 2007, primarily due to the non-operating income items discussed
above, which offset a $146,000 decrease in operating income.
 
 During
the three-month period ended December 31, 2008, the Company recorded $636,000
income tax expense, which resulted in an estimated annual tax rate of 39.5%,
compared to 36.3% for the comparable quarter in 2007.  The estimated
annual effective tax rates for both periods differ from the U. S. federal
statutory rate of 34% primarily due to the effect of state income taxes offset
by permanent tax differences, including the federal production
deduction.
 
 First
Nine Months of 2009 Compared to First Nine Months of 2008
 
 Consolidated
revenue increased $15,610,000 (29%) to $69,966,000 for the nine-month period
ended December 31, 2008 compared to its equivalent prior year period. The
increase in revenues resulted from a number of factors.  Revenues in
the air cargo segment were up $3,732,000 (13%) primarily as a result of
increased flight and maintenance department costs passed through to its customer
at cost, increases in the number of maintenance labor hours as well as the
maintenance labor rate, quarter over quarter.  As noted in previous
filings, the Company received approval from its customer for an 8.5% increase in
its maintenance billable hour rate in June 2007 and an additional 4% increase in
January 2008.  Revenues in the ground equipment segment increased
$7,712,000 (31%) to $32,700,000 as a result of a significant increase in the
number of deicing units delivered to the military during the first nine months
of fiscal 2009, as well as a significant order and delivery of commercial
catering trucks and international orders in the nine-month period ended December
31, 2008.  In addition, GAS provided revenues of $5,404,000 during the
nine-month period ended December 31, 2008, compared to revenue of $1,238,000 in
the prior year at its inception, reflecting its growth in customers and
locations in the past year.
 
 Operating
expenses increased $13,473,000  (26%) to $64,581,000 for the
nine-month period ended December 31, 2008 compared to its equivalent prior year
period.  The increase was also due to a number of
factors.  Operating expenses in the air cargo segment were up
$3,146,000 (13%) primarily as a result of increased flight and maintenance
departments costs passed through to its customer at cost.  Ground
equipment segment operating costs increased $5,769,000 (31%) driven primarily by
the current period’s increase in units sold.  The ground support
services segment reported a $3,322,000 increase in operating expenses directly
related to the increased revenue provided by GAS over the first three
quarters.  General and administrative expenses increased $1,270,000 to
$8,563,000 for the nine-month period ended December 31, 2008 compared to its
equivalent prior year period, largely comprised of additional expenses
associated with the GAS operations in the current year.
 
 Operating
income for the nine-month period ended December 31, 2008 was $5,385,000, a
$2,137,000 (66%) increase over the same period of the prior year.  The
overnight air cargo segment saw an $853,000 increase in its operating income due
to previously discussed increases in maintenance labor hours and
rates.  The ground equipment segment experienced a $1,419,000 increase
in its operating income from the
     16
 same
period a year ago due to increased sales and changes in the product sales mix,
with a significant increase in the number of units delivered to the military in
the nine-month period ended December 31, 2008.  The ground support
services segment saw a near doubling of its operating income from the prior year
period, but also a decrease in its operating margin from 10% to
5%.  This new segment has been focusing on adding customers and
locations and has had difficulty maintaining operating margins as the new
locations have not been as quick to achieve full billing capacity.
 
 Non-operating
income was a net income amount of $346,000 for the nine-month period ended
December 31, 2008 compared to $4,000 in the equivalent prior year period. The
$550,000 lawsuit settlement in December 2008 was a principal component of this
increase.  This income was partially offset by the $195,000 retirement
plan settlement expense recorded in December 2008, relating to the executive
employment agreement amendment and settlement. Interest expense decreased by
$70,000 as the Company elected to utilize its available cash to pay off the
chassis inventory flooring in the first half of the current
year.  Investment income also declined by $86,000, as a result of
lesser rates of return on cash investments in the current year.
 
 Pretax
earnings increased $2,479,000 for the nine-month period ended December 31, 2008
compared to the prior year, due to the above-stated increase in revenues in all
segments and the resulting margins generated.  The Company has been
able to add the additional revenue with lesser increases in overhead and
administrative costs, so that a significant portion of the additional operating
income has resulted in bottom line profit to the Company.  The lawsuit
settlement was also a positive factor.
 
 During
the nine-month period ended December 31, 2008, the Company recorded $2,095,000
income tax expense, which resulted in an estimated annual tax rate of 36.6%,
which approximates the rate of 35.9% for the comparable nine month period in the
prior year.  The estimated annual effective tax rates for both periods
differ from the U. S. federal statutory rate of 34% primarily due to the effect
of state income taxes offset by permanent tax differences, including the federal
production deduction.
 
 Liquidity and Capital
Resources
 
 As of
December 31, 2008 the Company's working capital amounted to $16,859,000, an
increase of $1,759,000 compared to March 31, 2008. The change was due to a
combination of factors including net earnings, an increase in inventories, a
decrease in accounts receivable, the classification of the aircraft term loan
from long-term to current, as it matures in April 2009 and the classification of
the deferred retirement obligation from long-term to current as it will be paid
out in July 2009.  The increase in inventories is the result of the
increased production levels in the ground equipment segment.  We
believe these increased inventory levels are appropriate for the current and
planned levels of production.
 
 In August
2008, the expiration date of the Company’s $7,000,000 secured long-term
revolving credit line was extended to August 31, 2010.  The revolving
credit line contains customary events of default, a subjective acceleration
clause and restrictive covenants that, among other matters, require the Company
to maintain certain financial ratios.  The credit facility is secured
by substantially all of the Company’s assets.  There is no requirement
for the Company to maintain a lock-box arrangement under this
agreement.  As of December 31, 2008, the Company was in compliance
with all of the restrictive covenants.  The amount of credit available
to the Company under the agreement at any given time is determined by an
availability calculation, based on the eligible borrowing base, as defined in
the credit agreement, which includes the Company’s outstanding receivables,
inventories and equipment, with certain exclusions. At December 31, 2008,
$7,000,000 was available under the terms of the credit facility and no amounts
were outstanding.
 
 Amounts
advanced under the credit facility bear interest at the 30-day “LIBOR” rate plus
137 basis points.  The LIBOR rate at December 31, 2008 was .436%. The
Company is exposed to changes in interest rates on its line of credit with
respect to any borrowings outstanding under the line of
credit.  However, because the Company’s outstanding balance under the
line of credit was minimal during the quarter ended December 31, 2008, changes
in the LIBOR rate during that period would have had a minimal affect on its
interest expense for the quarter.
 
 The
Company assumes various financial obligations and commitments in the normal
course of its operations and financing activities.  Financial
obligations are considered to represent known future cash payments that the
Company is required to make under existing contractual arrangements such as debt
and lease agreements.
 
 The
respective nine-month periods ended December 31, 2008 and 2007 resulted in the
following changes in cash flow: operating activities provided $3,323,000 and
$194,000 in 2008 and 2007, respectively, investing activities used $141,000 and
$375,000 in 2008 and 2007, respectively, and financing activities used $822,000
and $1,266,000 in 2008 and 2007, respectively.  Net cash increased
$2,361,000 and decreased $1,447,000 during the nine-month periods ended December
31, 2008 and 2007, respectively.
 
   17
 Cash
provided by operating activities was $3,130,000 more for the nine-month period
ended December 31, 2008 compared to the similar prior year period, resulting
from a significant increase in net earnings and increased accounts receivable
collections, offset by increased inventory levels in the current nine-month
period.
 
 Cash used
by investing activities for the nine-month period ended December 31, 2008 was
$234,000 less than the comparable prior year period primarily due to a reduced
amount of capital expenditures in the current nine-month period.
 
 Cash used
by financing activities was $445,000 less in the 2008 nine-month period than in
the corresponding prior year period principally due to the Company using
$713,000 to fund the stock repurchase program in the prior period, with no
similar program in the current period, the Company borrowing $164,000 under the
line of credit in the prior period, with no borrowings in the current period,
and an increased dividend payout in the current period.
 
 There are
currently no commitments for significant capital expenditures. The Company’s
Board of Directors on August 7, 1998 adopted the policy to pay an annual cash
dividend, based on profitability and other factors, in the first quarter of each
fiscal year, in an amount to be determined by the Board.  The Company
paid a $0.30 per share cash dividend in June 2008.
 
 Contingencies
 
 The
Company has been subject to significant contingencies associated with the
February 28, 2005 de-icing boom collapse in Philadelphia and resulting
litigation.  The majority of these contingencies have now been
resolved as of December 31, 2008.  These matters are described in Note
11 to the Notes to Condensed Consolidated Financial Statements (Unaudited),
included in Part I, Item 1 of this report, which is incorporated herein by
reference.
 
 Impact of
Inflation
 
 The
Company believes that inflation has not had a material effect on its operations,
because increased costs to date have been passed on to its customers. Under the
terms of its air cargo business contracts the major cost components of its
operations, consisting principally of fuel, crew and other direct operating
costs, and certain maintenance costs are reimbursed, without markup by its
customer.  Significant increases in inflation rates could, however,
have a material impact on future revenue and operating income.
  Item
3.  Quantitative and Qualitative Disclosures About Market
Risk.
 
 Not
applicable.
 
 Item 4(T). Controls and
Procedures
 
 Our
management carried out an evaluation, with the participation of our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December
31, 2008. Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures
including the accumulation and communication of disclosures to the Company’s
Chief Executive Officer and Chief Financial Officer as appropriate to allow
timely decision regarding required disclosure, were effective to provide
reasonable assurance that information required to be disclosed by us in reports
that we file or submit under the Exchange Act are recorded, processed,
summarized and reported, within the time periods specified in the rules and
forms of the SEC. It should be noted that the design of any system of controls
is based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving the
stated goals under all potential future conditions, regardless of how
remote.
  There has
not been any change in our internal control over financial reporting in
connection with the evaluation required by Rule 13a-15(d) under the Exchange Act
that occurred during the quarter ended December 31, 2008 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
      
 18
 
  PART II
-- OTHER INFORMATION
 
 Item
1.  Legal
Proceedings
 
 The
Company and its subsidiaries are subject to legal proceedings and
claims.  For a description of material pending legal proceedings, see
Note 11 of Notes to Condensed Consolidated Financial Statements included in Part
I, Item 1 of this report, which is incorporated by reference into this
item.
 
 
 Item
6.  Exhibits
 
 (a)  Exhibits
 
 No.           Description
 
 3.1
              Restated
      Certificate of Incorporation and Certificate of Amendment to Certificate
      of Incorporation dated September 25, 2008, incorporated by reference to
      Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the fiscal
      period ended September 30, 2008 (Commission file No.
    0-11720)
 
 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 (Commission file No.
  0-11720)
 
 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 (Commission file No.
  0-11720)
 
 10.1
              Amendment
      to Employment Agreement dated December 19, 2008 between William H. Simpson
      and Air T, Inc., Mountain Air Cargo, Inc. and MAC Aviation Services, LLC,
      incorporated by reference to Exhibit 10.1 of the Company’s Current Report
      on Form 8-K dated December 24, 2008 (Commission file No.
      0-11720)
 
 10.2
              Amendment
      to Employment and Non-compete Agreement dated December 19, 2008 between
      John Parry and Air T, Inc., incorporated by reference to Exhibit 10.2 of
      the Company’s Current Report on Form 8-K dated December 24, 2008
      (Commission file No. 0-11720)
 
 31.1
              Section
      302 Certification of Chief Executive
Officer
 
 31.2
              Section
      302 Certification of Chief Financial
Officer
 
 32.1
              Section
      1350 Certifications
 __________________
                19
  SIGNATURES
 
 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
 
 AIR T, INC.
 
 
 Date:  January
30, 2009
 /s/ Walter
Clark
 Walter
Clark, Chief Executive Officer
 (Principal Executive
Officer)
 
 
 
 /s/ John
Parry
 John
Parry, Chief Financial Officer
 (Principal Financial and Accounting
Officer)