|   |      x | Quarterly      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of      1934 for the quarterly period ended September 30,  2008 |
|--------|---------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |       o | Transition      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of      1934 for the transition period from _____to  _____ |
|--------|---------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

   Accelerated Filer 
    Non-AcceleratedFiler     Smaller Reporting Company

  
                                 No  

----

|      | AIR T, INC. ANDSUBSIDIARIES                                                                |   |   |   |
|-----------|--------------------------------------------------------------------------------------------|--------|--------|--------|
|      | QUARTERLY REPORT ON FORM    10-Q                                                           |   |   |   |
|      | TABLE OF CONTENTS                                                                          |   |   |   |
|      |                                                                                       |   | PAGE # |   |
|      | PART I                                                                                     |   |   |   |
|      |                                                                                       |   |   |   |
| Item 1.   | Financial Statements                                                                       |   |   |   |
|      |                                                                                       |   |   |   |
|      | Condensed Consolidated Statements of      Income                                           |   |   | 3      |   |
|      | Three Months and Six Months Ended September 30,      2008 and 2007 (Unaudited)             |   |   |   |   |
|      |                                                                                       |   |   |   |   |
|      | Condensed Consolidated Balance      Sheets                                                 |   |   | 4      |   |
|      | September 30, 2008 (Unaudited) and March 31,      2008                                     |   |   |   |   |
|      |                                                                                       |   |   |   |   |
|      | Condensed Consolidated Statements of Cash      Flows                                       |   |   | 5      |   |
|      | Six Months Ended September 30, 2008 and 2007      (Unaudited)                              |   |   |   |   |
|      |                                                                                       |   |   |   |   |
|      | Condensed Consolidated Statements of Stockholders’      Equity                       |   |   | 6      |   |
|      | Six Months Ended September 30, 2008 and 2007      (Unaudited)                              |   |   |   |   |
|      |                                                                                       |   |   |   |   |
|      | Notes to Condensed Consolidated Financial      Statements (Unaudited)                      |   |   | 7      |   |
|      |                                                                                       |   |   |   |   |
| Item 2.   | Management's Discussion and Analysis of Financial      Condition and Results of Operations |   |   | 12     |   |
| Item 3.   | Quantitative and Qualitative Disclosures About      Market Risk                            |   |   | 18     |   |
| Item 4(T) | Controls and Procedures                                                                    |   |   | 18     |   |
|      |                                                                                       |   |   |   |   |
|      | PART II                                                                                    |   |   |   |   |
|      |                                                                                       |   |   |   |   |
| Item 1.   | Legal Proceedings                                                                          |   |   | 18     |   |
| Item 4.   | Submission of Matters to a Vote of Security      Holders                                   |   |   | 18     |   |
| Item 6    | Exhibits                                                                                   |   |   | 19     |   |
|      | Signatures                                                                                 |   |   | 20     |   |
|      | Exhibit Index                                                                              |   |   | 21     |   |
|      | Exhibits Including      Certifications                                                     |   |   | 22     |   |
|      |                                                                                       |   |   |   |   |

----

|                                                           |   | Three      Months Ended |       |   | Six Months      Ended |   |
|----------------------------------------------------------------|--------|-------------------------|------------|--------|----------------------------|--------|
|                                                           |   | September      30,      |       |   | September      30,         |   |
|                                                           |   | 2008                    |       |   | 2007                       |   |   | 2008 |   |   | 2007 |   |
| Operating      Revenues:                                       |   |                    |       |   |                       |   |   |   |   |   |   |   |
| Overnight      air cargo                                       |   | $                       | 11,560,980 |   |                       | $      | 9,503,715 |   |   | $ | 21,016,544 |   |   | $ | 18,016,166 |   |
| Ground      equipment sales                                    |   |                    | 10,709,743 |   |                       |   | 7,684,881 |   |   |   | 22,050,748 |   |   |   | 14,968,397 |   |
| Ground      support services                                   |   |                    | 1,741,598  |   |                       |   | 223,221 |   |   |   | 3,361,606 |   |   |   | 223,221 |   |
|                                                           |   |                    | 24,012,321 |   |                       |   | 17,411,817 |   |   |   | 46,428,898 |   |   |   | 33,207,784 |   |
|                                                           |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Expenses:                                       |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Flight-air      cargo                                          |   |                    | 5,302,006  |   |                       |   | 4,910,228 |   |   |   | 10,040,781 |   |   |   | 9,260,290 |   |
| Maintenance-air      cargo                                     |   |                    | 4,531,386  |   |                       |   | 3,171,403 |   |   |   | 7,587,878 |   |   |   | 6,010,564 |   |
| Ground      equipment sales                                    |   |                    | 8,115,827  |   |                       |   | 5,979,271 |   |   |   | 16,159,375 |   |   |   | 11,157,639 |   |
| Ground      support services                                   |   |                    | 1,267,160  |   |                       |   | 131,174 |   |   |   | 2,509,601 |   |   |   | 131,174 |   |
| General      and administrative                                |   |                    | 2,666,232  |   |                       |   | 2,246,464 |   |   |   | 5,809,696 |   |   |   | 4,583,370 |   |
| Depreciation      and amortization                             |   |                    | 111,265    |   |                       |   | 125,048 |   |   |   | 222,603 |   |   |   | 248,922 |   |
|                                                           |   |                    | 21,993,876 |   |                       |   | 16,563,588 |   |   |   | 42,329,934 |   |   |   | 31,391,959 |   |
|                                                           |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Income                                          |   |                    | 2,018,445  |   |                       |   | 848,229 |   |   |   | 4,098,964 |   |   |   | 1,815,825 |   |
|                                                           |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Non-operating      Expense (Income):                           |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense                                          |   |                    | 22,512     |   |                       |   | 64,334 |   |   |   | 35,734 |   |   |   | 121,581 |   |
| Investment      income                                         |   |                    | (40,220    | )      |                       |   | (47,345 | ) |   |   | (58,173 | ) |   |   | (113,882 | ) |
| Other                                                          |   |                    | 339        |   |                       |   | (3,399 | ) |   |   | 339 |   |   |   | 101 |   |
|                                                           |   |                    | (17,369    | )      |                       |   | 13,590 |   |   |   | (22,100 | ) |   |   | 7,800 |   |
|                                                           |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      Before Income Taxes                              |   |                    | 2,035,814  |   |                       |   | 834,639 |   |   |   | 4,121,064 |   |   |   | 1,808,025 |   |
|                                                           |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Income      Taxes                                              |   |                    | 714,000    |   |                       |   | 296,989 |   |   |   | 1,459,000 |   |   |   | 644,007 |   |
|                                                           |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Net      Earnings                                              |   | $                       | 1,321,814  |   |                       | $      | 537,650 |   |   | $ | 2,662,064 |   |   | $ | 1,164,018 |   |
|                                                           |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Basic      and Diluted Net Earnings Per Share                  |   | $                       | 0.55       |   |                       | $      | 0.22 |   |   | $ | 1.10 |   |   | $ | 0.47 |   |
|                                                           |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Dividends      Declared Per Share                              |   | $                       | -          |   |                       | $      | - |   |   | $ | 0.30 |   |   | $ | 0.25 |   |
|                                                           |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      Average Shares Outstanding:                      |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                          |   |                    | 2,424,115  |   |                       |   | 2,432,392 |   |   |   | 2,423,812 |   |   |   | 2,446,949 |   |
| Diluted                                                        |   |                    | 2,437,653  |   |                       |   | 2,432,392 |   |   |   | 2,424,929 |   |   |   | 2,446,949 |   |
|                                                           |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |                    |       |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| See      notes to condensed consolidated financial statements. |   |                    |       |   |                       |   |   |   |   |   |   |   |   |

----

|                                                                   |   | September      30, 2008 |       |   | March      31, 2008 |   |
|------------------------------------------------------------------------|--------|-------------------------|------------|--------|---------------------|--------|
| ASSETS                                                                 |   | (Unaudited)             |       |   |                |   |
| Current      Assets:                                                   |   |                    |       |   |                |   |
| Cash      and cash equivalents                                         |   | $                       | 975,722    |   |                | $      | 51,858 |   |
| Short-term      investments                                            |   |                    | 2,006,250  |   |                |   | 2,004,761 |   |
| Accounts      receivable, less allowance for                           |   |                    |       |   |                |   |   |   |
|   doubtful      accounts of $410,600 and $267,700            |   |                    | 10,281,334 |   |                |   | 12,272,390 |   |
| Notes      and other non-trade receivables-current                     |   |                    | 59,168     |   |                |   | 48,334 |   |
| Inventories                                                            |   |                    | 11,251,359 |   |                |   | 7,961,436 |   |
| Deferred      income taxes                                             |   |                    | 793,000    |   |                |   | 736,000 |   |
| Prepaid      expenses and other                                        |   |                    | 310,739    |   |                |   | 343,906 |   |
|   Total      Current Assets                                  |   |                    | 25,677,572 |   |                |   | 23,418,685 |   |
|                                                                   |   |                    |       |   |                |   |   |   |
| Property      and Equipment, net                                       |   |                    | 1,723,808  |   |                |   | 1,846,400 |   |
|                                                                   |   |                    |       |   |                |   |   |   |
| Deferred      Income Taxes                                             |   |                    | 471,000    |   |                |   | 422,000 |   |
| Cash      Surrender Value of Life Insurance Policies                   |   |                    | 1,402,444  |   |                |   | 1,368,442 |   |
| Notes      and Other Non-Trade Receivables-LongTerm                    |   |                    | 148,343    |   |                |   | 165,753 |   |
| Other      Assets                                                      |   |                    | 89,177     |   |                |   | 86,330 |   |
|   Total      Assets                                          |   | $                       | 29,512,344 |   |                | $      | 27,307,610 |   |
|                                                                   |   |                    |       |   |                |   |   |   |
| LIABILITIES AND STOCKHOLDERS'      EQUITY                              |   |                    |       |   |                |   |   |   |
| Current      Liabilities:                                              |   |                    |       |   |                |   |   |   |
| Accounts      payable                                                  |   | $                       | 5,560,912  |   |                | $      | 5,608,735 |   |
| Accrued      expenses                                                  |   |                    | 2,670,753  |   |                |   | 2,530,945 |   |
| Income      taxes payable                                              |   |                    | 80,669     |   |                |   | 58,000 |   |
| Deferred      Retirement Obligation                                    |   |                    | 787,675    |   |                |   | - |   |
| Current      portion of long-term obligations                          |   |                    | 520,311    |   |                |   | 121,478 |   |
|  Total      Current Liabilities                                   |   |                    | 9,620,320  |   |                |   | 8,319,158 |   |
|                                                                   |   |                    |       |   |                |   |   |   |
| Capital      Lease and Other Obligations                               |   |                    | -          |   |                |   | 59,996 |   |
| Long-term      Debt (less current portion)                             |   |                    | 56,597     |   |                |   | 461,384 |   |
| Deferred      Retirement Obligation                                    |   |                    | -          |   |                |   | 752,515 |   |
|                                                                   |   |                    |       |   |                |   |   |   |
| Stockholders'      Equity:                                             |   |                    |       |   |                |   |   |   |
| Preferred      stock, $1.00 par value, 50,000 shares authorized,       |   |                    | -          |   |                |   | - |   |
| Common      stock, $.25 par value; 4,000,000 shares authorized,        |   |                    |       |   |                |   |   |   |
|   2,424,506      and 2,423,506 shares issued and outstanding |   |                    | 606,126    |   |                |   | 605,876 |   |
| Additional      paid in capital                                        |   |                    | 5,875,787  |   |                |   | 5,700,002 |   |
| Retained      earnings                                                 |   |                    | 13,385,206 |   |                |   | 11,450,192 |   |
| Accumulated      other comprehensive loss, net                         |   |                    | (31,692    | )      |                |   | (41,513 | ) |
|   Total      Stockholders' Equity                            |   |                    | 19,835,427 |   |                |   | 17,714,557 |   |
|   Total      Liabilities and Stockholders’ Equity      |   | $                       | 29,512,344 |   |                | $      | 27,307,610 |   |
|                                                                   |   |                    |       |   |                |   |   |   |
| See      notes to condensed consolidated financial statements.         |   |                    |       |   |                |   |   |   |

----

|                                                                         |   | Six      Months Ended September 30, |       |
|------------------------------------------------------------------------------|--------|-------------------------------------|------------|
|                                                                         |   | 2008                                |       |   | 2007 |   |
| CASH      FLOWS FROM OPERATING ACTIVITIES:                                   |   |                                |       |   |   |   |
| Net      earnings                                                            |   | $                                   | 2,662,064  |   |   | $ | 1,164,018 |   |
| Adjustments      to reconcile net earnings to net                            |   |                                |       |   |   |   |   |   |
| cash      provided by (used in) operating activities:                        |   |                                |       |   |   |   |   |   |
| Change      in accounts receivable and inventory reserves                    |   |                                | (118,425   | ) |   |   | (133,106 | ) |
| Depreciation      and amortization                                           |   |                                | 222,603    |   |   |   | 248,922 |   |
| Change      in cash surrender value of life insurance                        |   |                                | (34,002    | ) |   |   | (34,003 | ) |
| Gain      on sale of assets                                                  |   |                                | (16,275    | ) |   |   | - |   |
| Deferred      income taxes                                                   |   |                                | (112,277   | ) |   |   | (34,034 | ) |
| Periodic      pension cost                                                   |   |                                | 51,258     |   |   |   | 4,608 |   |
| Warranty      reserve                                                        |   |                                | 63,000     |   |   |   | (89,000 | ) |
| Compensation      expense related to stock options                           |   |                                | 169,660    |   |   |   | 174,556 |   |
| Change      in operating assets and liabilities:                             |   |                                |       |   |   |   |   |   |
|   Accounts      receivable                                         |   |                                | 2,147,926  |   |   |   | (913,171 | ) |
|   Notes      receivable and other non-trade receivables            |   |                                | 6,576      |   |   |   | 53,528 |   |
|   Inventories                                                      |   |                                | (3,328,368 | ) |   |   | (686,297 | ) |
|   Prepaid      expenses and other                                  |   |                                | 30,320     |   |   |   | 124,168 |   |
|   Accounts      payable                                            |   |                                | (47,823    | ) |   |   | (642,716 | ) |
|   Accrued      expenses                                            |   |                                | 76,808     |   |   |   | (157,224 | ) |
|   Income      taxes payable                                        |   |                                | 22,669     |   |   |   | (433,724 | ) |
| Total      adjustments                                                       |   |                                | (866,350   | ) |   |   | (2,517,493 | ) |
|  Net      cash provided by (used in) operating activities               |   |                                | 1,795,714  |   |   |   | (1,353,475 | ) |
| CASH      FLOWS FROM INVESTING ACTIVITIES:                                   |   |                                |       |   |   |   |   |   |
| Proceeds      from sale of investments                                       |   |                                | 6,679,235  |   |   |   | - |   |
| Purchase      of investments                                                 |   |                                | (6,663,595 | ) |   |   | - |   |
| Capital      expenditures                                                    |   |                                | (100,865   | ) |   |   | (224,608 | ) |
|  Net      cash provided by (used in) investing activities               |   |                                | (85,225    | ) |   |   | (224,608 | ) |
| CASH      FLOWS FROM FINANCING ACTIVITIES:                                   |   |                                |       |   |   |   |   |   |
| Net      aircraft term loan payments                                         |   |                                | (56,533    | ) |   |   | (64,532 | ) |
| Payment      of cash dividend                                                |   |                                | (727,050   | ) |   |   | (610,851 | ) |
| Payment      on capital leases                                               |   |                                | (9,417     | ) |   |   | (6,259 | ) |
| Net      borrowings on line of credit                                        |   |                                | -          |   |   |   | 1,946,606 |   |
| Proceeds      from exercise of stock options                                 |   |                                | 6,375      |   |   |   | - |   |
| Repurchase      of common stock                                              |   |                                | -          |   |   |   | (712,886 | ) |
|  Net      cash provided by (used in) financing activities               |   |                                | (786,625   | ) |   |   | 552,078 |   |
| NET      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                    |   |                                | 923,864    |   |   |   | (1,026,005 | ) |
| CASH      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                        |   |                                | 51,858     |   |   |   | 2,895,499 |   |
| CASH      AND CASH EQUIVALENTS AT END OF PERIOD                              |   | $                                   | 975,722    |   |   | $ | 1,869,494 |   |
|                                                                         |   |                                |       |   |   |   |   |   |
| SUPPLEMENTAL      DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |   |                                |       |   |   |
|                                                                         |   |                                |       |   |   |   |   |   |
| Amortization      of net actuarial losses                                    |   | $                                   | 9,821      |   |   | $ | - |   |
| Change      in fair value of marketable securities                           |   |                                | -          |   |   |   | 18,744 |   |
| Property      and equipment transferred to inventory                         |   |                                | -          |   |   |   | (458,300 | ) |
|                                                                         |   |                                |       |   |   |   |   |   |
| SUPPLEMENTAL      DISCLOSURE OF CASH FLOW INFORMATION:                       |   |                                |       |   |   |   |   |   |
| Cash      paid during the period for:                                        |   |                                |       |   |   |   |   |   |
| Interest                                                                     |   | $                                   | 29,985     |   |   | $ | 134,469 |   |
| Income      taxes                                                            |   |                                | 1,548,416  |   |   |   | 1,113,354 |   |
|                                                                         |   |                                |       |   |   |   |   |   |
| See      notes to condensed consolidated financial statements.               |   |                                |       |   |   |   |   |   |

----

|                                                           |   |              |      |   |       |   |    |    |   |    |      |   |     | Accumulated        |       |          |          |        |
|----------------------------------------------------------------|--------|-------------------|-----------|--------|------------|--------|---------|---------|--------|---------|-----------|--------|----------|--------------------|------------|---------------|---------------|-------------|
|                                                           |   | Common      Stock |      |   | Additional |   |    |    |   |    | Other     |   |     | Total              |       |
|                                                           |   |              |      |   |       |   |    | Paid-In |   |    | Retained  |   |     | Comprehensive      |       |          | Stockholders' |        |
|                                                           |   | Shares            |      |   | Amount     |   |    | Capital |   |    | Earnings  |   |     | Income      (Loss) |       |          | Equity        |        |
| Balance,      March 31, 2007                                   |   |              | 2,509,998 |   |       | $      | 627,499 |    |   | $       | 6,058,070 |   |     | $                  | 8,658,606  |          |          | $           | 104,558 |   |   | $ | 15,448,733 |   |
|                                                           |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |        |   |   |   |   |   |   |
| Net      earnings                                              |   |              |      |   |       |   |    |    |   |    |      |   |     |               | 1,164,018  |          |          |        |   |   |   |   |   |   |
| Other      comprehensive income,                               |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |        |   |   |   |   |   |   |
|     net      of tax                        |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |        | 18,744 |   |   |   |   |   |
| Comprehensive      Income                                      |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |        |   |   |   |   | 1,182,762 |   |
| Cash      dividend ($0.25 per share)                           |   |              |      |   |       |   |    |    |   |    |      |   |     |               | (610,851   | )             |          |        |   |   |   |   | (610,851 | ) |
| Compensation      expense related to                           |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |        |   |   |   |   |   |   |
|     stock      options                     |   |              |      |   |       |   |    |    |   |    | 174,556   |   |     |               |       |          |          |        |   |   |   |   | 174,556 |   |
| Stock      repurchase                                          |   |              | (86,492   | )      |       |   | (21,623 | )       |   |    | (691,263  | )      |     |               |       |          |          |        |   |   |   |   | (712,886 | ) |
| Balance,      September 30, 2007                               |   |              | 2,423,506 |   |       | $      | 605,876 |    |   | $       | 5,541,363 |   |     | $                  | 9,211,773  |          |          | $           | 123,302 |   |   | $ | 15,482,314 |   |
|                                                           |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |        |   |   |   |   |   |   |
|                                                           |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |        |   |   |   |   |   |   |
|                                                           |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |        |   |   |   |   |   |   |
|                                                           |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          | Accumulated |   |   |   |   |   |
|                                                           |   | Common      Stock |      |   | Additional |   |    |    |   |    |      | Other  |     |               | Total      |          |
|                                                           |   |              |      |   |       |   |    |    |   | Paid-In |      |   | Retained |               |       | Comprehensive |          |        | Stockholders' |   |
|                                                           |   | Shares            |      |   | Amount     |   |    | Capital |   |    | Earnings  |   |     | Income      (Loss) |       |          | Equity        |        |
| Balance,      March 31, 2008                                   |   |              | 2,423,506 |   |       | $      | 605,876 |    |   | $       | 5,700,002 |   |     | $                  | 11,450,192 |          |          | $           | (41,513 | ) |   | $ | 17,714,557 |   |
|                                                           |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |        |   |   |   |   |   |   |
| Net      earnings                                              |   |              |      |   |       |   |    |    |   |    |      |   |     |               | 2,662,064  |          |          |        |   |   |   |   |   |   |
| Other      comprehensive income,                               |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |        |   |   |   |   |   |   |
|     net      of tax                        |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |        | 9,821 |   |   |   |   |   |
| Comprehensive      Income                                      |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |        |   |   |   |   | 2,671,885 |   |
| Cash      dividend ($0.30 per share)                           |   |              |      |   |       |   |    |    |   |    |      |   |     |               | (727,050   | )             |          |        |   |   |   |   | (727,050 | ) |
| Exercise      of stock options                                 |   |              | 1,000     |   |       |   | 250     |    |   |    | 6,125     |   |     |               |       |          |          |        |   |   |   |   | 6,375 |   |
| Compensation      expense related to                           |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |        |   |   |   |   |   |   |
|     stock      options                     |   |              |      |   |       |   |    |    |   |    | 169,660   |   |     |               |       |          |          |        |   |   |   |   | 169,660 |   |
| Balance,      September 30, 2008                               |   |              | 2,424,506 |   |       | $      | 606,126 |    |   | $       | 5,875,787 |   |     | $                  | 13,385,206 |          |          | $           | (31,692 | ) |   | $ | 19,835,427 |   |
|                                                           |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |        |   |   |   |   |   |   |
|                                                           |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |        |   |   |   |   |   |   |
| See      notes to condensed consolidated financial statements. |   |              |      |   |       |   |    |    |   |    |      |   |     |               |       |          |          |

----

| 1.   | Financial Statement      Presentation |
|----------------|---------------------------------------|

| 2.   | Income      Taxes |
|----------------|-------------------|

| 3.   | Comprehensive      Income |
|----------------|---------------------------|

|                                           |   | Three      Months Ended September 30, |      |   | Six      Months Ended September 30, |   |
|------------------------------------------------|--------|---------------------------------------|-----------|--------|-------------------------------------|--------|
|                                           |   | 2008                                  |      |   | 2007                                |   |   | 2008 |   |   | 2007 |   |
|                                           |   |                                  |      |   |                                |   |   |   |   |   |   |   |
| Net      earnings                              |   | $                                     | 1,321,814 |   |                                | $      | 537,650 |   |   | $ | 2,662,064 |   |   | $ | 1,164,018 |   |
|                                           |   |                                  |      |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Other      Comprehensive Income:               |   |                                  |      |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Change      in Fair Value of Marketable        |   |                                  |      |   |                                |   |   |   |   |   |   |   |   |   |   |   |
|    Securities      (Net of tax) |   |                                  | -         |   |                                |   | 9,372 |   |   |   | - |   |   |   | 18,744 |   |
| Amortization      of Net Actuarial Losses (Net |   |                                  |      |   |                                |   |   |   |   |   |   |   |   |
|    of      tax)                 |   |                                  | 6,049     |   |                                |   | - |   |   |   | 9,821 |   |   |   | - |   |
|                                           |   |                                  |      |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Total      Comprehensive Income                |   | $                                     | 1,327,863 |   |                                | $      | 547,022 |   |   | $ | 2,671,885 |   |   | $ | 1,182,762 |   |
|                                           |   |                                  |      |   |                                |   |   |   |   |   |   |   |   |   |   |   |

----

| 4.   | Net Earnings Per      Share |
|----------------|-----------------------------|

|                                          |   | Three      Months Ended September 30, |      |   | Six      Months Ended September 30, |   |
|-----------------------------------------------|--------|---------------------------------------|-----------|--------|-------------------------------------|--------|
|                                          |   | 2008                                  |      |   | 2007                                |   |   | 2008 |   |   | 2007 |   |
|                                          |   |                                  |      |   |                                |   |   |   |   |   |   |   |
| Net      earnings                             |   | $                                     | 1,321,814 |   |                                | $      | 537,650 |   |   | $ | 2,662,064 |   |   | $ | 1,164,018 |   |
|                                          |   |                                  |      |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Basic      and Diluted Net Earnings Per Share |   | $                                     | 0.55      |   |                                | $      | 0.22 |   |   | $ | 1.10 |   |   | $ | 0.47 |   |
|                                          |   |                                  |      |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      Average Shares Outstanding:     |   |                                  |      |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                         |   |                                  | 2,424,115 |   |                                |   | 2,432,392 |   |   |   | 2,423,812 |   |   |   | 2,446,949 |   |
| Diluted                                       |   |                                  | 2,437,653 |   |                                |   | 2,432,392 |   |   |   | 2,424,929 |   |   |   | 2,446,949 |   |

| 5.   | Inventories |
|----------------|-------------|

|                                       |   | September      30, |       |   | March      31, |   |
|--------------------------------------------|--------|--------------------|------------|--------|----------------|--------|
|                                       |   | 2008               |       |   | 2008           |   |
|  Aircraft      parts and supplies     |   | $                  | 468,044    |   |           | $      | 481,913 |   |
|  Ground      equipment manufacturing: |   |               |       |   |           |   |   |   |
| Raw      materials                         |   |               | 9,234,819  |   |           |   | 5,548,635 |   |
| Work      in process                       |   |               | 1,912,082  |   |           |   | 1,724,522 |   |
| Finished      goods                        |   |               | 582,553    |   |           |   | 1,114,059 |   |
|  Total      inventories               |   |               | 12,197,498 |   |           |   | 8,869,129 |   |
|  Reserves                             |   |               | (946,139   | )      |           |   | (907,693 | ) |
|                                       |   |               |       |   |           |   |   |   |
| Total,      net of reserves                |   | $                  | 11,251,359 |   |           | $      | 7,961,436 |   |

| 6.   | Stock Based      Compensation |
|----------------|-------------------------------|

----

| 7.   | Recent Accounting      Pronouncements |
|----------------|---------------------------------------|

| 8.   | Fair Value of      Financial Instruments |
|----------------|------------------------------------------|

----

|                                                 |   | Fair      Value Measurements at September 30, 2008 |      |
|------------------------------------------------------|--------|----------------------------------------------------|-----------|
|                                                 |   | Total                                              |      |   | Level      1 |   |   | Level      2 |   |   | Level      3 |   |
|                                                 |   |                                               |      |   |   |   |   |   |   |   |   |   |
| Variable      rate demand notes and accrued interest |   | $                                                  | 2,006,250 |   |   |   | - |   |   | $ | 2,006,250 |   |   |   | - |   |
|                                                 |   |                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |

| 9.   | Financing      Arrangements |
|----------------|-----------------------------|

|   |     |
|--------|--------------------|

| 10.   | Segment      Information |
|-----------------|--------------------------|

----

|                                |   | Three      Months Ended September 30, |       |   | Six      Months Ended September 30, |   |
|-------------------------------------|--------|---------------------------------------|------------|--------|-------------------------------------|--------|
|                                |   | 2008                                  |       |   | 2007                                |   |   | 2008 |   |   | 2007 |   |
| Operating      Revenues:            |   |                                  |       |   |                                |   |   |   |   |   |   |   |
| Overnight      Air Cargo            |   | $                                     | 11,560,980 |   |                                | $      | 9,503,715 |   |   | $ | 21,016,544 |   |   | $ | 18,016,166 |   |
| Ground      Equipment Sales:        |   |                                  |       |   |                                |   |   |   |   |   |   |   |   |   |   |   |
|    Domestic          |   |                                  | 8,849,333  |   |                                |   | 7,268,821 |   |   |   | 19,153,428 |   |   |   | 14,453,837 |   |
|    International     |   |                                  | 1,860,410  |   |                                |   | 416,060 |   |   |   | 2,897,320 |   |   |   | 514,560 |   |
| Total      Ground Equipment Sales   |   |                                  | 10,709,743 |   |                                |   | 7,684,881 |   |   |   | 22,050,748 |   |   |   | 14,968,397 |   |
| Ground      Support Services        |   |                                  | 1,741,598  |   |                                |   | 223,221 |   |   |   | 3,361,606 |   |   |   | 223,221 |   |
| Total                               |   |                                  | 24,012,321 |   |                                | $      | 17,411,817 |   |   | $ | 46,428,898 |   |   | $ | 33,207,784 |   |
|                                |   |                                  |       |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Income               |   |                                  |       |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Overnight      Air Cargo            |   | $                                     | 936,398    |   |                                | $      | 512,889 |   |   | $ | 1,777,826 |   |   | $ | 858,954 |   |
| Ground      Equipment Sales         |   |                                  | 1,594,990  |   |                                |   | 821,168 |   |   |   | 3,674,057 |   |   |   | 2,033,954 |   |
| Ground      Support Services        |   |                                  | 194,509    |   |                                |   | 20,313 |   |   |   | 129,134 |   |   |   | 20,313 |   |
| Corporate                           |   |                                  | (707,452   | )      |                                |   | (506,141 | ) |   |   | (1,482,053 | ) |   |   | (1,097,396 | ) |
| Total                               |   | $                                     | 2,018,445  |   |                                | $      | 848,229 |   |   | $ | 4,098,964 |   |   | $ | 1,815,825 |   |
|                                |   |                                  |       |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Capital      Expenditures:          |   |                                  |       |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Overnight      Air Cargo            |   | $                                     | 1,275      |   |                                | $      | 31,807 |   |   | $ | 15,620 |   |   | $ | 47,630 |   |
| Ground      Equipment Sales         |   |                                  | 3,580      |   |                                |   | 5,377 |   |   |   | 7,185 |   |   |   | 43,816 |   |
| Ground      Support Services        |   |                                  | 34,105     |   |                                |   | 66,925 |   |   |   | 40,048 |   |   |   | 66,925 |   |
| Corporate                           |   |                                  | -          |   |                                |   | 19,218 |   |   |   | 38,012 |   |   |   | 66,237 |   |
| Total                               |   | $                                     | 38,960     |   |                                | $      | 123,327 |   |   | $ | 100,865 |   |   | $ | 224,608 |   |
|                                |   |                                  |       |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation      and Amortization: |   |                                  |       |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Overnight      Air Cargo            |   | $                                     | 67,545     |   |                                | $      | 106,270 |   |   | $ | 137,414 |   |   | $ | 216,328 |   |
| Ground      Equipment Sales         |   |                                  | 9,670      |   |                                |   | 15,024 |   |   |   | 22,397 |   |   |   | 27,285 |   |
| Ground      Support Services        |   |                                  | 23,208     |   |                                |   | - |   |   |   | 43,152 |   |   |   | - |   |
| Corporate                           |   |                                  | 10,842     |   |                                |   | 3,754 |   |   |   | 19,640 |   |   |   | 5,309 |   |
| Total                               |   | $                                     | 111,265    |   |                                | $      | 125,048 |   |   | $ | 222,603 |   |   | $ | 248,922 |   |
|                                |   |                                  |       |   |                                |   |   |   |   |   |   |   |   |   |   |   |
|                                |   | As      of:                           |       |   |                                |   |   |   |   |   |   |
|                                |   | 30-Sep-08                             |       |   | 31-Mar-08                           |   |   |   |   |   |   |   |   |   |
| Identifiable      Assets:           |   |                                  |       |   |                                |   |   |   |   |   |   |   |   |   |   |   |
| Overnight      Air Cargo            |   | $                                     | 4,094,916  |   |                                | $      | 5,456,968 |   |   |   |   |   |   |   |   |   |
| Ground      Equipment Sales         |   |                                  | 18,979,046 |   |                                |   | 16,868,328 |   |   |   |   |   |   |   |   |   |
| Ground      Support Services        |   |                                  | 1,435,723  |   |                                |   | 1,422,112 |   |   |   |   |   |   |   |   |   |
| Corporate                           |   |                                  | 5,002,659  |   |                                |   | 3,560,202 |   |   |   |   |   |   |   |   |   |
| Total                               |   | $                                     | 29,512,344 |   |                                | $      | 27,307,610 |   |   |   |   |   |   |   |   |   |

| 11.   | Commitments and      Contingencies |
|-----------------|------------------------------------|

----

----

| (In      thousands)                                     |   |                                  |   |   |                                |   |
|---------------------------------------------------------|--------|---------------------------------------|--------|--------|-------------------------------------|--------|
|                                                    |   | Three      Months Ended September 30, |   |   | Six      Months Ended September 30, |   |
|                                                    |   | 2008                                  |   |   | 2007                                |   |   | 2008 |   |   | 2007 |   |
|                                                    |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Overnight      Air Cargo Segment:                       |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     FedEx                           |   | $                                     | 11,561 |   |                                |   | 48 | % |   | $ | 9,504 |   |   |   | 55 | % |   | $ | 21,017 |   |   |   | 45 | % |   | $ | 18,016 |   |   |   | 54 | % |
| Ground      Equipment Sales Segment:                    |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Military                        |   |                                  | 2,462  |   |                                |   | 10 | % |   |   | 899 |   |   |   | 5 | % |   |   | 11,258 |   |   |   | 25 | % |   |   | 6,628 |   |   |   | 20 | % |
|     Commercial      - Domestic      |   |                                  | 6,388  |   |                                |   | 27 | % |   |   | 6,370 |   |   |   | 37 | % |   |   | 7,896 |   |   |   | 17 | % |   |   | 7,826 |   |   |   | 23 | % |
|     Commercial      - International |   |                                  | 1,860  |   |                                |   | 8 | % |   |   | 416 |   |   |   | 2 | % |   |   | 2,897 |   |   |   | 6 | % |   |   | 515 |   |   |   | 2 | % |
|                                                    |   |                                  | 10,710 |   |                                |   | 45 | % |   |   | 7,685 |   |   |   | 44 | % |   |   | 22,051 |   |   |   | 48 | % |   |   | 14,969 |   |   |   | 45 | % |
|                                                    |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ground      Support Services Segment                    |   |                                  | 1,741  |   |                                |   | 7 | % |   |   | 223 |   |   |   | 1 | % |   |   | 3,361 |   |   |   | 7 | % |   |   | 223 |   |   |   | 1 | % |
|                                                    |   | $                                     | 24,012 |   |                                |   | 100 | % |   | $ | 17,412 |   |   |   | 100 | % |   | $ | 46,429 |   |   |   | 100 | % |   | $ | 33,208 |   |   |   | 100 | % |
|                                                    |   |                                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

----

----

----

----

| Nominee                       |   | Shares      Voted For |      |   | Shares      Voted Withheld |   |
|-------------------------------|--------|-----------------------|-----------|--------|----------------------------|--------|
|                          |   |                  |      |   |                       |   |
| Walter      Clark             |   |                  | 1,944,846 |   |                       |   | 36,106 |   |
| John      Parry               |   |                  | 1,913,508 |   |                       |   | 67,444 |   |
| William      H. Simpson       |   |                  | 1,942,536 |   |                       |   | 38,416 |   |
| Claude      S. Abernethy, Jr. |   |                  | 1,924,277 |   |                       |   | 56,675 |   |
| Sam      Chesnutt             |   |                  | 1,518,802 |   |                       |   | 462,150 |   |
| Allison      T. Clark         |   |                  | 1,939,271 |   |                       |   | 41,681 |   |
| George      C. Prill          |   |                  | 1,958,985 |   |                       |   | 21,967 |   |
| Dennis      A. Wicker         |   |                  | 1,931,393 |   |                       |   | 49,559 |   |
| J.      Bradley Wilson        |   |                  | 1,970,115 |   |                       |   | 10,837 |   |

| Shares      Voted For |   | Shares      Voted Against |   | Shares      Cast to Abstain |
|-----------------------|--------|---------------------------|--------|-----------------------------|
| 1,953,307             |   | 24,171                    |   | 3,472                       |

| Shares      Voted For |   | Shares      Voted Against |   | Shares      Cast to Abstain |
|-----------------------|--------|---------------------------|--------|-----------------------------|
| 1,951,649             |   | 27,575                    |   | 1,726                       |

|   | (a)  Exhibits |
|--------|-------------------------|

| 3.1   | Restated      Certificate of Incorporation and Certificate of Amendment to Certificate      of Incorporation dated September 25,2008 |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------|

| 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 | Letter      of Bank of America, N.A. extending term of line of  credit |
|--------|------------------------------------------------|------------------------------------------------------------------------|

| 31.1   | Section      302 Certification of Chief ExecutiveOfficer |
|------------------|----------------------------------------------------------|

| 31.2   |  Section      302 Certification of Chief FinancialOfficer |
|------------------|----------------------------------------------------------------|

| 32.1  |   Section      1350 Certifications |
|------------|----------------------------------------------|

----

----

| 3.3   | Restated      Certificate of Incorporation and Certificate of Amendment to Certificate      of Incorporation dated September 25,2008 |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------|

| 3.4   | 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 | Letter      of Bank of America, N.A. extending term of line of  credit |
|--------|------------------------------------------------|------------------------------------------------------------------------|

| 31.1   |  Section      302 Certification of Chief ExecutiveOfficer |
|------------------|----------------------------------------------------------------|

| 31.2   |  Section      302 Certification of Chief FinancialOfficer |
|------------------|----------------------------------------------------------------|

| 32.2   |   Section      1350 Certifications |
|------------------|----------------------------------------------|