|                      | UNITED                STATES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|---------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                      | SECURITIES                AND EXCHANGE COMMISSION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                      | WASHINGTON,                D.C.  20549                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      | FORM                10-Q                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (Mark                one) |
| X                         | Quarterly                Report Pursuant to Section 13 or 15(d) of the Securities Exchange                Act                of 1934                for the quarterly period ended December 31, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                           | Transition                Report Pursuant to Section 13 or 15(d) of the Securities Exchange                Act of                1934 for the transition period from _____to _____                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      | Commission                file                Number                                                                                                                   0-11720                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      | Air                T, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                      | (Exact                name of registrant as specified in its charter)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      |                                                                                                                 Delaware                                                                                                    52-1206400 |
|                      |                                                                                             (State or other jurisdiction                of                                                                              (I.R.S. Employer                                                                                                                                                                                                                 |
|                      |                                                                                              incorporation or                organization)                                                                          Identification No.)                                                                                                                                                                                                                                 |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      | Post                Office Box 488, Denver, North Carolina  28037                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                      | (Address                of principal executive offices, including zip code)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      | (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   X                  No                ______                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      |      Indicate                by check mark whether the registrant is a large accelerated filer,                an                accelerated filer or a non-accelerated filer (see definition of                “accelerated filer and large accelerated filer) in Rule 12b-2 of the                Exchange Act)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      | Large                Accelerated Filer____  Accelerated                Filer_____  Non-Accelerated Filer__X__                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      |      Indicate                by check mark whether the registrant is a shell company (as defined                in                Rule 12b-2 of the Exchange Act)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      | Yes               No                ___X___                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      | APPLICABLE                ONLY TO CORPORATE ISSUERS:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      |      Indicate                the number of shares outstanding of each of the issuer's classes                of common                stock, as of the latest practicable date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                      | 2,423,506                shares of Common Stock, par value of $.25 per share were outstanding                as of                January 31, 2008.  Common Stock is the only class of stock                outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

----

|                                                                    | AIR                T, INC. AND SUBSIDIARIES               |   |   |   |
|-------------------------------------------------------------------------|-----------------------------------------------------------|--------|--------|--------|
|                                                                    |                                                      |   |   |   |
|                                                                    | INDEX                                                     |   |   |   |
|                                                                    |                                                      |   | PAGE   |   |
| PART                I.  FINANCIAL INFORMATION                 |                                                      |   |   |
|                                                                    |                                                      |   |   |   |
| Item                1.  Financial Statements                  |                                                      |   |   |
|                                                                    |                                                      |   |   |   |
| Condensed                Consolidated Statements of Operations          |                                                      |   |   |
| for                the three and nine months ended                      |                                                      |   | 3      |   |
| December                31, 2007 and 2006 (Unaudited)                   |                                                      |   |   |   |
|                                                                    |                                                      |   |   |   |   |
| Condensed                Consolidated Balance Sheets at                 |                                                      |   |   |   |
| December                31, 2007 (Unaudited)                            |                                                      |   |   |   |
| and                March 31, 2007                                       |                                                      |   | 4      |   |
|                                                                    |                                                      |   |   |   |   |
| Condensed                Consolidated Statements of Cash                |                                                      |   |   |   |
| Flows                for the nine months                                |                                                      |   |   |   |
| ended                December 31, 2007 and 2006 (Unaudited)             |                                                      |   | 5      |   |
|                                                                    |                                                      |   |   |   |   |
| Condensed                Consolidated Statements of Stockholders’ |                                                      |   |   |   |
| Equity                and Comprehensive Income for the                  |                                                      |   |   |   |
| nine                months ended December 31,                           |                                                      |   |   |   |
| 2007                and 2006(Unaudited)                                 |                                                      |   | 6      |   |
|                                                                    |                                                      |   |   |   |   |
| Notes                to Condensed Consolidated Financial                |                                                      |   |   |   |
| Statements                (Unaudited)                                   |                                                      |   | 7-12   |   |
|                                                                    |                                                      |   |   |   |   |
| Item                2.                                                  | Management’s                Discussion and Analysis |   |   |   |   |
|                                                                    | of                Financial Condition and Results         |   |   |   |   |
|                                                                    | of                Operations                              |   |   | 12-19  |   |
|                                                                    |                                                      |   |   |   |   |
| Item                3.                                                  | Quantitative                and Qualitative Disclosure    |   |   |   |   |
|                                                                    | About                Market Risk                          |   |   | 19     |   |
|                                                                    |                                                      |   |   |   |   |
| Item                4.                                                  | Controls                and Procedures                    |   |   | 19-20  |   |
|                                                                    |                                                      |   |   |   |   |
| PART                II.  OTHER INFORMATION                    |                                                      |   |   |   |
|                                                                    |                                                      |   |   |   |   |
| Item                1.                                                  | Legal                Proceedings                          |   |   | 20     |   |
|                                                                    |                                                      |   |   |   |   |
| Item                6.                                                  | Exhibits                                                  |   |   | 20     |   |
|                                                                    |                                                      |   |   |   |   |
| Signatures                                                              |                                                      |   | 21     |   |
|                                                                    |                                                      |   |   |   |   |
| Exhibit                Index                                            |                                                      |   | 22     |   |
|                                                                    |                                                      |   |   |   |   |
| Officers’                Certifications                           |                                                      |   | 23-25  |   |
|                                                                    |                                                      |   |   |   |   |
|                                                                    |                                                      |   |   |   |   |
|                                                                    |                                                      |   |   |   |   |

----

|                                                                     |                                                     |                                                          | Three                Months Ended            |                                            | Nine                Months Ended                          |
|--------------------------------------------------------------------------|----------------------------------------------------------|---------------------------------------------------------------|----------------------------------------------|-------------------------------------------------|-----------------------------------------------------------|
|                                                                     |                                                     |                                                          | December                31,                  |                                            | December                31,                               |
|                                                                     |                                                     |                                                          | 2007                                         | 2006                                            |                                                      | 2007 | 2006 |
| Operating                Revenues:                                       |                                                     |                                                          |                                         |                                            |                                                      |
|                                                                     | Overnight                air cargo                       |  $                10,114,872                             |  $8,844,879                             |                                            |  $28,131,038                                         |  $26,067,138 |
|                                                                     | Ground                equipment                          |    11,033,978                                  |   8,549,652                        |                                            |   26,225,596                                    |   22,132,307 |
|                                                                     |                                                     |                                                          |    21,148,850                 |  17,394,531                                |                                                      |   54,356,634 |   48,199,445 |
|                                                                     |                                                     |                                                          |                                         |                                            |                                                      |   |   |
| Operating                Expenses:                                       |                                                     |                                                          |                                         |                                            |                                                      |
|                                                                     | Flight-air                cargo                          |     4,606,970                             |   4,457,557                        |                                            |   13,867,260                                    |   12,945,381 |
|                                                                     | Maintenance-air                cargo                     |     3,904,042                             |   3,041,183                        |                                            |    9,914,606                               |    9,251,179 |
|                                                                     | Ground                equipment                          |     8,380,149                             |   6,832,895                        |                                            |   19,668,962                                    |   16,561,498 |
|                                                                     | General                and administrative                |     2,709,507                             |   2,384,078                        |                                            |    7,292,877                               |    6,780,723 |
|                                                                     | Depreciation                and amortization             |       115,496                   |     153,815              |                                            |      364,418                     |      478,611 |
|                                                                     |                                                     |                                                          |    19,716,164                 |  16,869,528                                |                                                      |   51,108,123 |   46,017,392 |
|                                                                     |                                                     |                                                          |                                         |                                            |                                                      |   |   |
| Operating                Income                                          |     1,432,686                        |     525,003                               |                                         |    3,248,511                     |    2,182,053                               |
|                                                                     |                                                     |                                                          |                                         |                                            |                                                      |   |   |
| Non-operating                (Income) Expense:                           |                                                     |                                                          |                                         |                                            |
|                                                                     | Interest,                net                             |        29,804              |      85,003         |                                            |      151,385                     |      117,020 |
|                                                                     | Deferred                retirement expense               |           - |       5,250    |                                            |          101 |       15,750 |
|                                                                     | Investment                income and other               |       (41,246)                  |     (60,197)             |                                            |     (155,128)                         |     (179,213) |
|                                                                     |                                                     |                                                          |       (11,442) |      30,056            |                                                      |       (3,642) |      (46,443) |
|                                                                     |                                                     |                                                          |                                         |                                            |                                                      |   |   |
|                                                                     |                                                     |                                                          |                                         |                                            |                                                      |   |   |
| Earnings                Before Income Taxes                              |     1,444,128                        |     494,947                               |                                         |    3,252,153                     |    2,228,496                               |
|                                                                     |                                                     |                                                          |                                         |                                            |                                                      |   |   |
| Income                Tax Expense                                        |       524,108              |     191,188                               |                                         |    1,168,115                     |      826,875                     |
|                                                                     |                                                     |                                                          |                                         |                                            |                                                      |   |   |
| Net                Earnings                                              |  $    920,020                   |  $  303,759                                    |                                         |  $                2,084,038                |  $                1,401,621                          |
|                                                                     |                                                     |                                                          |                                         |                                            |                                                      |   |   |
| Basic                and Diluted Net                                     |                                                     |                                                          |                                         |                                            |                                                      |
|                                                                     | Earnings                Per Share                        |  $       0.38         |  $     0.11    |                                            |  $      0.85           |  $      0.52 |
|                                                                     |                                                     |                                                          |                                         |                                            |                                                      |   |   |
| Dividends                Declared Per Share                              |  $        - |  $      -                  |                                         |  $      0.25 |  $      0.25           |
|                                                                     |                                                     |                                                          |                                         |                                            |                                                      |   |   |
| Weighted                Average Shares Outstanding:                      |                                                     |                                                          |                                         |                                            |
|                                                                     |                                                     | Basic                and Diluted                              |     2,423,506            |   2,667,932                           |                                                      |    2,439,077 |    2,670,173 |
|                                                                     |                                                     | Diluted                                                       |     2,423,506            |   2,667,932                           |                                                      |    2,439,077 |    2,670,173 |
|                                                                     |                                                     |                                                          |                                         |                                            |                                                      |   |   |
| See                notes to condensed consolidated financial statements. |                                                     |                                                          |                                         |

----

|                                                                                                                        |   | December                31, 2007 |       |   | March                31, 2007 |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|------------|--------|-------------------------------|--------|
| ASSETS                                                                                                                      |   | (Unaudited)                      |       |   | (Note)                        |   |
| Current                Assets:                                                                                              |   |                             |       |   |                          |   |
| Cash                and cash equivalents                                                                                    |   | $                                | 1,448,615  |   |                          | $      | 2,895,499 |   |
| Marketable                securities                                                                                        |   |                             | 869,209    |   |                          |   | 860,870 |   |
| Accounts                receivable, less allowance                                                                          |   |                             |       |   |                          |   |   |   |
| for                doubtful accounts of $231,000 at December                                                                |   |                             |       |   |                          |
|   31,                2007 and $413,000 at March 31, 2007                                                          |   |                             | 7,752,244  |   |                          |   | 7,643,391 |   |
| Notes                and other non-trade receivables-current                                                                |   |                             | 33,309     |   |                          |   | 68,730 |   |
| Inventories,                net                                                                                             |   |                             | 9,034,349  |   |                          |   | 8,085,755 |   |
| Deferred                tax assets                                                                                          |   |                             | 729,655    |   |                          |   | 724,534 |   |
| Prepaid                expenses and other                                                                                   |   |                             | 386,545    |   |                          |   | 325,533 |   |
|   Total                Current Assets                                                                             |   |                             | 20,253,926 |   |                          |   | 20,604,312 |   |
|                                                                                                                        |   |                             |       |   |                          |   |   |   |
| Property                and Equipment                                                                                       |   |                             | 7,802,723  |   |                          |   | 8,113,363 |   |
| Less                accumulated depreciation                                                                                |   |                             | (5,943,771 | )      |                          |   | (5,820,852 | ) |
|   Property                and Equipment, net                                                                      |   |                             | 1,858,952  |   |                          |   | 2,292,511 |   |
|                                                                                                                        |   |                             |       |   |                          |   |   |   |
| Deferred                Tax Assets                                                                                          |   |                             | 311,762    |   |                          |   | 170,353 |   |
| Cash                Surrender Value of Life Insurance Policies                                                              |   |                             | 1,347,707  |   |                          |   | 1,296,703 |   |
| Notes                and Other Non-Trade Receivables-Long Term                                                              |   |                             | 173,174    |   |                          |   | 200,529 |   |
| Other                Assets                                                                                                 |   |                             | 79,763     |   |                          |   | 50,576 |   |
|   Total                Assets                                                                                     |   | $                                | 24,025,284 |   |                          | $      | 24,614,984 |   |
|                                                                                                                        |   |                             |       |   |                          |
| LIABILITIES                AND STOCKHOLDERS' EQUITY                                                                         |   |                             |       |   |                          |   |   |   |
| Current                Liabilities:                                                                                         |   |                             |       |   |                          |   |   |   |
| Accounts                payable                                                                                             |   | $                                | 4,143,036  |   |                          | $      | 5,304,022 |   |
| Accrued                expenses                                                                                             |   |                             | 1,801,966  |   |                          |   | 2,236,106 |   |
| Income                taxes payable                                                                                         |   |                             | 120,543    |   |                          |   | 194,840 |   |
| Current                portion of long-term debt and obligations                                                            |   |                             | 123,217    |   |                          |   | 144,684 |   |
|  Total                Current Liabilities                                                                              |   |                             | 6,188,762  |   |                          |   | 7,879,652 |   |
|                                                                                                                        |   |                             |       |   |                          |   |   |   |
| Capital                Lease Obligations (less current portion)                                                             |   |                             | 65,277     |   |                          |   | 77,702 |   |
| Long-Term                Debt (less current portion)                                                                        |   |                             | 654,295    |   |                          |   | 575,204 |   |
| Deferred                Retirement Obligations (less current portion)                                                       |   |                             | 640,605    |   |                          |   | 633,693 |   |
|                                                                                                                        |   |                             |       |   |                          |   |   |   |
| Stockholders'                Equity:                                                                                        |   |                             |       |   |                          |   |   |   |
| Preferred                stock, $1 par value, authorized 50,000 shares,                                                     |   |                             |       |   |                          |
|   none                issued                                                                                      |   |                             | -          |   |                          |   | - |   |
| Common                stock, par value $.25; authorized 4,000,000 shares;                                                   |   |                             |       |   |                          |
| 2,423,506                and 2,509,998 shares issued and                                                                    |   |                             |       |   |                          |
|   outstanding                                                                                                     |   |                             | 605,876    |   |                          |   | 627,499 |   |
| Additional                paid in capital                                                                                   |   |                             | 5,628,641  |   |                          |   | 6,058,070 |   |
| Retained                earnings                                                                                            |   |                             | 10,131,793 |   |                          |   | 8,658,606 |   |
| Accumulated                other comprehensive income, net                                                                  |   |                             | 110,035    |   |                          |   | 104,558 |   |
| Total                Stockholders' Equity                                                                                   |   |                             | 16,476,345 |   |                          |   | 15,448,733 |   |
|   Total                Liabilities and Stockholders’ Equity                                                 |   | $                                | 24,025,284 |   |                          | $      | 24,614,984 |   |
|                                                                                                                        |   |                             |       |   |                          |   |   |   |
| Note: The                balance sheet at March 31, 2007 has been derived from the audited                consolidated |   |
| financial                statements included in the Company's Annual Report on Form 10-K for                the             |   |
|        fiscal                year ended March 31, 2007.                                  |   |                             |       |   |                          |   |   |   |
|                                                                                                                        |   |                             |       |   |                          |   |   |   |
| See                notes to condensed consolidated financial statements.                                                    |   |                             |       |   |                          |
|                                                                                                                        |   |                             |       |   |                          |   |   |   |

----

|                                                                        |   | Nine                Months Ended |       |
|-----------------------------------------------------------------------------|--------|----------------------------------|------------|
|                                                                        |   | December                31,      |       |
|                                                                        |   | 2007                             |       |   | 2006 |   |
| Cash                flows from operating activities:                        |   |                             |       |   |   |   |
| Net                earnings                                                 |   | $                                | 2,084,038  |   |   | $ | 1,401,621 |   |
| Adjustments                to reconcile net earnings to net                 |   |                             |       |   |   |   |   |   |
|  cash                provided (used) by operating activities:          |   |                             |       |   |   |   |   |   |
| Change                in accounts receivable and inventory reserves         |   |                             | 126,747    |   |   |   | 123,529 |   |
| Depreciation                and amortization                                |   |                             | 364,418    |   |   |   | 478,611 |   |
| Increase                in cash surrender value of life insurance           |   |                             | (51,004    | ) |   |   | (42,638 | ) |
| Deferred                taxes                                               |   |                             | (149,801   | ) |   |   | (90,626 | ) |
| Warranty                reserve                                             |   |                             | 70,000     |   |   |   | (48,206 | ) |
| Compensation                expense related to stock options                |   |                             | 261,834    |   |   |   | 185,864 |   |
| Change                in assets and liabilities which provided (used) cash: |   |                             |       |   |   |   |   |   |
| Accounts                receivable                                          |   |                             | 73,163     |   |   |   | (146,997 | ) |
| Notes                receivable                                             |   |                             | 62,776     |   |   |   | 60,862 |   |
| Income                taxes payable                                         |   |                             | (74,297    | ) |   |   | (225,650 | ) |
| Inventories                                                                 |   |                             | (813,561   | ) |   |   | (3,730,991 | ) |
| Prepaid                expenses and other                                   |   |                             | (90,200    | ) |   |   | 82,714 |   |
| Accounts                payable                                             |   |                             | (1,160,986 | ) |   |   | 12,374 |   |
| Accrued                expenses and other current liabilities               |   |                             | (509,209   | ) |   |   | (633,744 | ) |
|  Total                adjustments                                      |   |                             | (1,890,120 | ) |   |   | (3,974,898 | ) |
|  Net                cash provided (used) by operating activities       |   |                             | 193,918    |   |   |   | (2,573,277 | ) |
| Cash                flows from investing activities:                        |   |                             |       |   |   |   |   |   |
| Capital                expenditures                                         |   |                             | (374,655   | ) |   |   | (111,526 | ) |
|  Net                cash used by investing activities                  |   |                             | (374,655   | ) |   |   | (111,526 | ) |
| Cash                flows from financing activities:                        |   |                             |       |   |   |   |   |   |
| Payments                on aircraft term loan                               |   |                             | (92,043    | ) |   |   | (51,568 | ) |
| Net                borrowings on line of credit                             |   |                             | 163,709    |   |   |   | 3,057,763 |   |
| Stock                repurchase                                             |   |                             | (712,886   | ) |   |   | (90,472 | ) |
| Payments                on capital leases                                   |   |                             | (14,076    | ) |   |   | (43,402 | ) |
| Payment                of cash dividend                                     |   |                             | (610,851   | ) |   |   | (667,823 | ) |
|  Net                cash (used) provided by financing activities       |   |                             | (1,266,147 | ) |   |   | 2,204,498 |   |
| Net                decrease in cash and cash equivalents                    |   |                             | (1,446,884 | ) |   |   | (480,305 | ) |
| Cash                and cash equivalents at beginning of period             |   |                             | 2,895,499  |   |   |   | 2,702,424 |   |
| Cash                and cash equivalents at end of period                   |   | $                                | 1,448,615  |   |   | $ | 2,222,119 |   |
|                                                                        |   |                             |       |   |   |   |   |   |
| Supplemental                disclosure of cash flow information:            |   |                             |       |   |   |   |   |   |
| Cash                paid during the period for:                             |   |                             |       |   |   |   |   |   |
| Interest                                                                    |   | $                                | 187,541    |   |   | $ | 135,565 |   |
| Income                taxes                                                 |   |                             | 1,393,446  |   |   |   | 1,139,435 |   |
|                                                                        |   |                             |       |   |   |   |   |   |
| Summary                of significant non-cash information:                 |   |                             |       |   |   |   |   |   |
| Increase                in fair value of marketable securities, net of tax  |   |                             | 5,477      |   |   | $ | 44,746 |   |
| Leased                equipment transferred to (from) inventory             |   |                             | (458,300   | ) |   |   | 815,293 |   |
|                                                                        |   |                             |       |   |   |   |   |   |
| See                notes to condensed consolidated financial statements.    |   |                             |       |   |   |   |   |   |

----

|                                                                     |   |                        |      |   |       |   |    |     |   |    |      |   |     | Accumulated   |       |          |          |        |
|--------------------------------------------------------------------------|--------|-----------------------------|-----------|--------|------------|--------|---------|----------|--------|---------|-----------|--------|----------|---------------|------------|---------------|---------------|-------------|
|                                                                     |   | Common                Stock |      |   | Additional |   |    | Retained |   |    | Other     |   |     | Total         |       |
|                                                                     |   |                        |      |   |       |   |    | Paid-In  |   |    | Earnings  |   |     | Comprehensive |       |          | Stockholders' |        |
|                                                                     |   | Shares                      |      |   | Amount     |   |    | Capital  |   |    |      |   |     | Income        |       |          | Equity        |        |
|                                                                     |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |
| Balance,                March 31, 2006                                   |   |                        | 2,671,293 |   |       | $      | 667,823 |     |   | $       | 6,939,357 |   |     | $             | 6,840,383  |          |          | $           | 52,479 |   |   | $ | 14,500,042 |   |
|                                                                     |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   |   |   |
| Comprehensive                Income:                                     |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   |   |   |
| Net                earnings                                              |   |                        |      |   |       |   |    |     |   |    |      |   |     |          | 1,401,621  |          |          |        |   |   |   |   |   |   |
| Unrealized                loss                                           |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   |   |   |
| on                securities, net of tax                                 |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       | 44,746        |          |        |   |   |   |
| Total                Comprehensive Income                                |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   | 1,446,367 |   |
| Cash                dividend                                             |   |                        |      |   |       |   |    |     |   |    |      |   |     |          | (667,823   | )             |          |        |   |   |   |   | (667,823 | ) |
| Compensation                expense                                      |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   |   |   |
| related                to stock options                                  |   |                        |      |   |       |   |    |     |   |    | 185,864   |   |     |          |       |          |          |        |   |   |   |   | 185,864 |   |
| Stock                repurchase                                          |   |                        | (10,084   | )      |       |   | (2,521  | )        |   |    | (87,951   | )      |     |          |       |          |          |        |   |   |   |   | (90,472 | ) |
| Balance,                December 31, 2006                                |   |                        | 2,661,209 |   |       | $      | 665,302 |     |   | $       | 7,037,270 |   |     | $             | 7,574,181  |          |          | $           | 97,225 |   |   | $ | 15,373,978 |   |
|                                                                     |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   |   |   |
|                                                                     |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   |   |   |
|                                                                     |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   |   |   |
|                                                                     |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   |   |   |
|                                                                     |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          | Accumulated |   |   |   |   |   |
|                                                                     |   | Common                Stock |      |   | Additional |   |    | Retained |   |    | Other     |   |     | Total         |       |
|                                                                     |   |                        |      |   |       |   |    |     |   | Paid-In |      |   | Earnings |          |       | Comprehensive |          |        | Stockholders' |   |
|                                                                     |   | Shares                      |      |   | Amount     |   |    | Capital  |   |    |      |   |     |          | Income     |          |          | Equity      |   |
|                                                                     |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   |   |   |
| Balance,                March 31, 2007                                   |   |                        | 2,509,998 |   |       | $      | 627,499 |     |   | $       | 6,058,070 |   |     | $             | 8,658,606  |          |          | $           | 104,558 |   |   | $ | 15,448,733 |   |
|                                                                     |   |                        |      |   |       |   |    |     |   | `       |      |   |     |          |       |          |          |        |   |   |   |   |   |
| Comprehensive                Income:                                     |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   |   |   |
| Net                earnings                                              |   |                        |      |   |       |   |    |     |   |    |      |   |     |          | 2,084,038  |          |          |        |   |   |   |   |   |   |
| Unrealized                gain                                           |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   |   |   |
| on                securities, net of tax                                 |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       | 5,477         |          |        |   |   |   |
| Total                Comprehensive Income                                |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   | 2,089,515 |   |
|                                                                     |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   | - |   |
|                                                                     |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   | - |   |
| Cash                dividend                                             |   |                        |      |   |       |   |    |     |   |    |      |   |     |          | (610,851   | )             |          |        |   |   |   |   | (610,851 | ) |
| Compensation                expense                                      |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   |   |   |
| related                to stock options                                  |   |                        |      |   |       |   |    |     |   |    | 261,834   |   |     |          |       |          |          |        |   |   |   |   | 261,834 |   |
| Stock                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 |   |   | $ | 16,476,345 |   |
|                                                                     |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   |   |   |
|                                                                     |   |                        |      |   |       |   |    |     |   |    |      |   |     |          |       |          |          |        |   |   |   |   |   |   |
| See                notes to condensed consolidated financial statements. |   |                        |      |   |       |   |    |     |   |    |      |   |     |

----

----

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

|                                                |   |                              |    |   |                             |   |    |   |   |   |      |   |
|-----------------------------------------------------|--------|-----------------------------------|---------|--------|----------------------------------|--------|---------|--------|--------|--------|-----------|--------|
|                                                |   | Three                Months Ended |    |   | Nine                Months Ended |   |
|                                                |   | December                31,       |    |   | December                31,      |   |
|                                                |   | 2007                              |    |   | 2006                             |   |    | 2007   |   |   | 2006      |   |
|                                                |   |                              |    |   |                             |   |    |   |   |   |      |   |
| Net                earnings                         |   | $                                 | 920,020 |   |                             | $      | 303,759 |   |   | $      | 2,084,038 |   |   | $ | 1,401,621 |   |
|                                                |   |                              |    |   |                             |   |    |   |   |   |      |   |   |   |   |   |
| Other                Comprehensive Income:          |   |                              |    |   |                             |   |    |   |   |   |      |   |   |   |   |   |
| Unrealized                gain(loss) on securities, |   |                              |    |   |                             |   |    |   |   |   |      |   |   |   |   |   |
|   net                of tax               |   |                              | (13,267 | )      |                             |   | 26,201  |   |   |   | 5,477     |   |   |   | 44,746 |   |
| Total                Comprehensive Income           |   | $                                 | 906,753 |   |                             | $      | 329,960 |   |   | $      | 2,089,515 |   |   | $ | 1,446,367 |   |

|                                                    |   | Three                Months Ended |      |   | Nine                Months Ended |   |
|---------------------------------------------------------|--------|-----------------------------------|-----------|--------|----------------------------------|--------|
|                                                    |   | December                31,       |      |   | December                31,      |   |
|                                                    |   | 2007                              |      |   | 2006                             |   |   | 2007 |   |   | 2006 |   |
|                                                    |   |                              |      |   |                             |   |   |   |   |   |   |   |
| Net                earnings                             |   | $                                 | 920,020   |   |                             | $      | 303,759 |   |   | $ | 2,084,038 |   |   | $ | 1,401,621 |   |
|                                                    |   |                              |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Basic                and Diluted Net Earnings Per Share |   | $                                 | 0.38      |   |                             | $      | 0.11 |   |   | $ | 0.85 |   |   | $ | 0.52 |   |
|                                                    |   |                              |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                Average Shares Outstanding:     |   |                              |      |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Basic                and Diluted                        |   |                              | 2,423,506 |   |                             |   | 2,667,932 |   |   |   | 2,439,077 |   |   |   | 2,670,173 |   |

|                                           |   | December                31, 2007 |       |   | March                31, 2007 |   |
|------------------------------------------------|--------|----------------------------------|------------|--------|-------------------------------|--------|
| Aircraft                parts and supplies     |   | $                                | 527,885    |   |                          | $      | 485,209 |   |
| Ground                equipment manufacturing: |   |                             |       |   |                          |   |   |   |
| Raw                materials                   |   |                             | 7,256,505  |   |                          |   | 6,250,813 |   |
| Work                in process                 |   |                             | 1,572,687  |   |                          |   | 1,648,896 |   |
| Finished                goods                  |   |                             | 649,886    |   |                          |   | 364,688 |   |
| Total                inventories               |   |                             | 10,006,963 |   |                          |   | 8,749,606 |   |
| Reserves                                       |   |                             | (972,614   | )      |                          |   | (663,851 | ) |
|                                           |   |                             |       |   |                          |   |   |   |
| Total,                net of reserves          |   | $                                | 9,034,349  |   |                          | $      | 8,085,755 |   |

----

----

|                                                                |   | Three                Months Ended December 31, |       |   | Nine                Months Ended December 31, |   |
|---------------------------------------------------------------------|--------|------------------------------------------------|------------|--------|-----------------------------------------------|--------|
|                                                                |   | 2007                                           |       |   | 2006                                          |   |   | 2007 |   |   | 2006 |   |
| Operating                Revenues:                                  |   |                                           |       |   |                                          |   |   |   |   |   |   |   |
| Overnight                Air Cargo                                  |   | $                                              | 10,114,872 |   |                                          | $      | 8,844,879 |   |   | $ | 28,131,038 |   |   | $ | 26,067,138 |   |
| Ground                Equipment:                                    |   |                                           |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
|    Domestic                                          |   |                                           | 9,599,788  |   |                                          |   | 7,769,359 |   |   |   | 24,276,846 |   |   |   | 20,749,600 |   |
|    International                                     |   |                                           | 1,434,190  |   |                                          |   | 780,293 |   |   |   | 1,948,750 |   |   |   | 1,382,707 |   |
| Total                Ground Equipment                               |   |                                           | 11,033,978 |   |                                          |   | 8,549,652 |   |   |   | 26,225,596 |   |   |   | 22,132,307 |   |
| Total                                                               |   | $                                              | 21,148,850 |   |                                          | $      | 17,394,531 |   |   | $ | 54,356,634 |   |   | $ | 48,199,445 |   |
|                                                                |   |                                           |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Operating                Income (Loss):                             |   |                                           |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Overnight                Air Cargo                                  |   | $                                              | 860,661    |   |                                          | $      | 417,824 |   |   | $ | 1,719,615 |   |   | $ | 1,240,464 |   |
| Ground                Equipment                                     |   |                                           | 1,424,316  |   |                                          |   | 745,139 |   |   |   | 3,478,583 |   |   |   | 2,746,472 |   |
| Corporate  (1)                                            |   |                                           | (852,291   | )      |                                          |   | (637,960 | ) |   |   | (1,949,687 | ) |   |   | (1,804,883 | ) |
| Total                                                               |   | $                                              | 1,432,686  |   |                                          | $      | 525,003 |   |   | $ | 3,248,511 |   |   | $ | 2,182,053 |   |
|                                                                |   |                                           |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                and Amortization:                       |   |                                           |       |   |                                          |   |   |   |   |   |   |   |   |
| Overnight                Air Cargo                                  |   | $                                              | 90,123     |   |                                          | $      | 120,848 |   |   | $ | 306,451 |   |   | $ | 370,200 |   |
| Ground                Equipment                                     |   |                                           | 25,722     |   |                                          |   | 18,237 |   |   |   | 53,007 |   |   |   | 67,050 |   |
| Corporate                                                           |   |                                           | (349       | )      |                                          |   | 14,730 |   |   |   | 4,960 |   |   |   | 41,361 |   |
| Total                                                               |   | $                                              | 115,496    |   |                                          | $      | 153,815 |   |   | $ | 364,418 |   |   | $ | 478,611 |   |
|                                                                |   |                                           |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Capital                Expenditures, net:                           |   |                                           |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Overnight                Air Cargo                                  |   | $                                              | 8,909      |   |                                          | $      | 31,312 |   |   | $ | 56,539 |   |   | $ | 63,087 |   |
| Ground                Equipment                                     |   |                                           | 142,679    |   |                                          |   | - |   |   |   | 253,420 |   |   |   | - |   |
| Corporate                                                           |   |                                           | (1,541     | )      |                                          |   | 13,078 |   |   |   | 64,696 |   |   |   | 48,439 |   |
| Total                                                               |   | $                                              | 150,047    |   |                                          | $      | 44,390 |   |   | $ | 374,655 |   |   | $ | 111,526 |   |
|                                                                |   |                                           |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
|                                                                |   |                                           |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
|                                                                |   | As                of                           |       |   |                                          |   |   |   |   |   |   |
|                                                                |   | December                31, 2007               |       |   | March                31, 2007                 |   |   |   |   |   |   |   |   |   |
| Identifiable                Assets:                                 |   |                                           |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Overnight                Air Cargo                                  |   | $                                              | 4,896,594  |   |                                          | $      | 5,823,455 |   |   |   |   |   |   |   |   |   |
| Ground                Equipment                                     |   |                                           | 15,016,381 |   |                                          |   | 13,247,048 |   |   |   |   |   |   |   |   |   |
| Corporate                                                           |   |                                           | 4,112,309  |   |                                          |   | 5,544,481 |   |   |   |   |   |   |   |   |   |
|                                                                |   |                                           |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                               |   | $                                              | 24,025,284 |   |                                          | $      | 24,614,984 |   |   |   |   |   |   |   |   |   |
|                                                                |   |                                           |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| (1)                Includes income from inter-segment transactions. |   |                                           |       |   |                                          |   |   |   |   |

----

----

----

|                                        |   | Three                Months Ended |       |   | Nine                Months Ended |   |
|---------------------------------------------|--------|-----------------------------------|------------|--------|----------------------------------|--------|
|                                        |   | December                31,       |       |   | December                31,      |   |
|                                        |   | 2007                              |       |   | 2006                             |   |   | 2007 |   |   | 2006 |   |
|                                        |   |                              |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Overnight                Air Cargo Segment: |   |                              |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FedEx                                       |   | $                                 | 9,693,092  |   |                             |   | 46 | % |   | $ | 8,844,879 |   |   |   | 51 | % |   | $ | 27,709,258 |   |   |   | 51 | % |   | $ | 26,067,138 |   |   |   | 54 | % |
| Other                Maintenance            |   |                              | 421,780    |   |                             |   | 2 | % |   |   | - |   |   |   | - |   |   |   | 421,780 |   |   |   | 1 | % |   |   | - |   |   |   | - |   |
|                                        |   | $                                 | 10,114,872 |   |                             |   | 48 | % |   | $ | 8,844,879 |   |   |   | 51 | % |   | $ | 28,131,038 |   |   |   | 52 | % |   | $ | 26,067,138 |   |   |   | 54 | % |
|                                        |   |                              |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ground                Equipment Segment:    |   |                              |       |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Military                                    |   |                              | 2,625,533  |   |                             |   | 12 | % |   |   | 2,977,953 |   |   |   | 17 | % |   |   | 9,253,355 |   |   |   | 17 | % |   |   | 9,732,451 |   |   |   | 20 | % |
| Commercial                - Domestic        |   |                              | 6,974,255  |   |                             |   | 33 | % |   |   | 4,791,406 |   |   |   | 28 | % |   |   | 15,023,491 |   |   |   | 28 | % |   |   | 11,017,149 |   |   |   | 23 | % |
| Commercial                - International   |   |                              | 1,434,190  |   |                             |   | 7 | % |   |   | 780,293 |   |   |   | 4 | % |   |   | 1,948,750 |   |   |   | 3 | % |   |   | 1,382,707 |   |   |   | 3 | % |
|                                        |   |                              | 11,033,978 |   |                             |   | 52 | % |   |   | 8,549,652 |   |   |   | 49 | % |   |   | 26,225,596 |   |   |   | 48 | % |   |   | 22,132,307 |   |   |   | 46 | % |
|                                        |   | $                                 | 21,148,850 |   |                             |   | 100 | % |   | $ | 17,394,531 |   |   |   | 100 | % |   | $ | 54,356,634 |   |   |   | 100 | % |   | $ | 48,199,445 |   |   |   | 100 | % |

----

----

----

----

----

----

----

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

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

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

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

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

| 31.2   |  Certification                of John Parry |
|------------------|--------------------------------------------------|

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

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