<PAGE>

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                                    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 JUNE 30, 1998

                                          OR

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

          FOR THE TRANSITION PERIOD FROM _______________ TO _______________.

                           COMMISSION FILE NUMBER:  0-29490


                               HAWKER PACIFIC AEROSPACE
                (Exact name of registrant as specified in its charter)

     CALIFORNIA                                          95-3528840
     (STATE OR OTHER JURISDICTION OF                  (I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)                  IDENTIFICATION NO.)



     11240 SHERMAN WAY, SUN VALLEY, CALIFORNIA             91352
     (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)            (ZIP CODE)


                                    (818) 765-6201
                 (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   
                                                 ------        ------

     The number of shares of the registrant's common stock outstanding on 
August 12, 1998 was 5,822,222 shares.

------------------------------------------------------------------------------

<PAGE>


                              HAWKER PACIFIC AEROSPACE
                                          
                                Report on Form 10-Q
                                          
                        For the Quarter Ended June 30, 1998
                                          
                                 Table of Contents

<TABLE>
<CAPTION>

                                                                                           Page
                                                                                           ----
<S>                                                                                      <C>
Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          1

Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          2

Part I - Financial Information

     Item 1 - Financial Statements

          Consolidated Condensed Balance Sheets... . . . . . . . . . . . . . . . . .          3

          Consolidated Condensed Statements of Income - Three Months . . . . . . . .          4

          Consolidated Condensed Statements of Income - Six Months . . . . . . . . .          5

          Consolidated Condensed Statements of Cash Flows. . . . . . . . . . . . . .          6

          Consolidated Condensed Statements of Shareholder's Equity. . . . . . . . .          7

          Notes to Consolidated Condensed Financial Statements . . . . . . . . . . .          8

     Item 2 - Management's Discussion and Analysis of Financial Condition and

              Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . .         11


Part II - Other Information

     Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . .         14

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

Exhibit 27.1 - Financial Data Schedule
</TABLE>
                                          
                                         2

<PAGE>
                                          
                              HAWKER PACIFIC AEROSPACE
                                          
                           PART I - FINANCIAL INFORMATION
                                          
                            ITEM 1. FINANCIAL STATEMENTS
                                          
                       CONSOLIDATED CONDENSED BALANCE SHEETS
                                          

<TABLE>
<CAPTION>

                                                                        June 30          December 31
                                                                         1998              1997     
                                                                    ---------------   ----------------
                                                                      (UNAUDITED)   
<S>                                                                <C>               <C>
            ASSETS

Current Assets:

     Cash                                                          $     574,000       $     160,000
     Accounts receivable                                              14,246,000           7,351,000
     Other receivables                                                    85,000              80,000
     Inventories                                                      20,445,000          14,814,000
     Prepaid expenses and other current assets                           636,000             240,000
                                                                   -------------       -------------
               Total current assets                                   35,986,000          22,645,000

Equipment and leasehold improvements, net                              9,569,000           5,083,000
Landing gear exchange, net                                            32,652,000          11,067,000
Goodwill, net                                                                  -             145,000
Deferred financing costs, net                                            497,000             262,000
Deferred offering costs                                                        -             766,000
Deferred taxes                                                           157,000                   -
Other assets                                                             343,000             930,000
                                                                   -------------       -------------
                                                                   $  79,204,000       $  40,898,000
                                                                   -------------       -------------
                                                                   -------------       -------------
     LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
     Accounts payable                                              $   4,967,000       $   6,946,000
     Line of credit                                                   10,470,000           8,529,000
     Accrued liabilities                                               8,886,000           1,976,000
     Current portion of long term debt                                 1,830,000           1,450,000
                                                                   -------------       -------------
               Total current liabilities                              26,153,000          18,901,000
                                                                   -------------       -------------
Long-term debt                                                        29,054,000          17,700,000

Shareholders' equity                                                  23,997,000           4,297,000
                                                                   -------------       -------------
               Total Liabilities and Shareholders' Equity          $  79,204,000       $  40,898,000
                                                                   -------------       -------------
                                                                   -------------       -------------
</TABLE>

See accompanying Notes to Consolidated Condensed Financial Statements

                                       3

<PAGE>


                              HAWKER PACIFIC AEROSPACE
                                          
                    CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                          
                                    (Unaudited)

<TABLE>
<CAPTION>

                                                                 Three Months Ended
                                                                     June 30
                                                        ----------------------------------
                                                             1998                1997
                                                        --------------      --------------
<S>                                                    <C>                 <C>
Revenues                                                $   17,372,000      $   10,544,000
Cost of revenues                                            13,632,000           8,149,000
                                                        --------------      --------------
Gross profit                                                 3,740,000           2,395,000


Selling, general and administrative expenses                 2,228,000           1,399,000
                                                        --------------      --------------
Income from operations                                       1,512,000             996,000

Net interest expense                                          (801,000)           (592,000)                                  
                                                        --------------      --------------
Income before provision (benefit) for income taxes             711,000             404,000

Provision for (benefit) income taxes                          (254,000)            151,000
                                                        --------------      --------------
Net income                                              $      965,000      $      253,000
                                                        --------------      --------------
                                                        --------------      --------------
Earnings per common share                               $          .17      $          .08
                                                        --------------      --------------
                                                        --------------      --------------
Earnings per common share - assuming dilution           $          .16      $          .08
                                                        --------------      --------------
                                                        --------------      --------------
</TABLE>

See accompanying Notes to Consolidated Condensed Financial Statements

                                       4
<PAGE>

                              HAWKER PACIFIC AEROSPACE
                                          
                    CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                          
                                    (Unaudited)
                                          
                                          
<TABLE>
<CAPTION>
                                                                 Six Months Ended
                                                                      June 30
                                                           -------------------------------
                                                               1998              1997
                                                           -----------    ----------------
<S>                                                       <C>            <C>
Revenues                                                  $ 31,039,000        $ 20,358,000
Cost of revenues                                            24,102,000          15,680,000
                                                          ------------        ------------
Gross profit                                                 6,937,000           4,678,000


Selling, general and administrative expenses                 4,090,000           2,794,000
                                                          ------------        ------------
Income from operations                                       2,847,000           1,884,000

Net interest expense                                        (1,449,000)         (1,171,000)
                                                          ------------        ------------
Income before provision (benefit) for income taxes           1,398,000             713,000

Provision (benefit) for income taxes                             5,000             265,000
                                                          ------------        ------------
Net income                                                $  1,393,000        $    448,000
                                                          ------------        ------------
                                                          ------------        ------------
Earnings per common share                                 $        .26        $        .14
                                                          ------------        ------------
                                                          ------------        ------------
Earnings per common share - assuming dilution             $        .25        $        .14
                                                          ------------        ------------
                                                          ------------        ------------
</TABLE>

See accompanying Notes to Consolidated Condensed Financial Statements

                                          5
<PAGE>
                                          
                              HAWKER PACIFIC AEROSPACE
                                          
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          
                                    (Unaudited)
                                          
<TABLE>
<CAPTION>
                                                    Six Months Ended
                                                       June 30
                                                 1998         1997
                                               ---------  ------------
                                                   (UNAUDITED)
<S>                                          <C>        <C>
OPERATING ACTIVITIES
Net income ..............................    $1,393,000     $ 448,000  
Adjustments to reconcile net income                    
  to net cash provided by (used                 
  in) operating activities:                            
  Deferred income taxes..................       (12,000)      279,000   
  Depreciation...........................       637,000       353,000  
  Amortization...........................       657,000       254,000  
Changes in operating assets and                        
  liabilities:                                         
  Accounts receivable....................    (6,900,000)      737,000  
  Inventory..............................    (3,669,000)      128,000  
  Prepaid expenses and other current                   
    assets...............................      (396,000)     (304,000) 
  Accounts payable.......................    (1,979,000)     (883,000) 
  Deferred revenue.......................       690,000      (866,000) 
  Accrued liabilities....................     3,341,000      (732,000) 
                                            -----------      ---------  
  Cash provided by (used in) operating                 
    activities...........................    (6,238,000)     (586,000) 
INVESTING ACTIVITIES                                   
Purchase of equipment, leasehold                       
  improvements and landing gear..........    (5,360,000)     (495,000) 
Purchase of equipment and landing gear                 
  from BA................................   (18,887,000)       --      
Purchase of BA inventory.................    (1,962,000)       --      
Other assets.............................       587,000       (39,000) 
                                            -----------      ---------  
Cash used in investing activities........   (25,622,000)     (534,000) 
FINANCING ACTIVITIES                                   
Borrowing under bank note................    13,285,000        --      
Principal payments on bank note..........       (51,000)     (425,000) 
Principal payments on related party                     
  note...................................    (1,500,000)       --      
Borrowings/payments on line of credit,                 
  net....................................     1,941,000       600,000  
Deferred offering costs..................    (1,966,000)       --      
Deferred loan fees.......................      (235,000)       --      
Net proceeds from equity offering........    20,800,000        --      
                                            -----------     ---------  
Cash provided by financing activities....    32,274,000       175,000  
Increase (decrease) in cash..............       414,000      (945,000) 
Cash, beginning of period................       160,000     1,055,000  
                                            -----------     ---------  
Cash, end of period......................    $  574,000     $ 110,000  
                                            -----------     ---------  
                                            -----------     ---------  
Supplemental disclosure of cash flow
  information:
Noncash investing and financing
  activities
  Purchase of landing gear from BA......     $2,879,000     $      --
</TABLE>
 
                            SEE ACCOMPANYING NOTES.
 
                                       6

<PAGE>

                            HAWKER PACIFIC AEROSPACE

              CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY

                                  (Unaudited)

<TABLE>
<CAPTION>
                                    Preferred Stock             Common Stock      
                                  --------------------     ------------------------                      Other
                                                           Number of                     Retained    Comprehensive
                                  Shares      Amount         Shares        Amount        Earnings       Income             Total
                                  ------   -----------     ---------    -----------    ----------    -------------     -----------
<S>                               <C>      <C>             <C>          <C>            <C>            <C>              <C>
Balance at December 31, 1997       400     $ 2,000,000     2,972,222    $ 1,040,000    $ 1,257,000            -        $ 4,297,000

Net income for the period            -               -             -              -      1,393,000            -          1,393,000
Foreign currency translation 
    adjustment (unaudited)           -               -             -              -              -      239,000            239,000
                                                                                                                        ----------

Comprehensive Income
    (unaudited)                      -               -             -              -              -            -          1,632,000

Conversion of preferred stock
    (unaudited)                   (400)     (2,000,000)      250,000      2,000,000              -            -                  -

Issuance of common stock
    (unaudited)                      -               -     2,600,000     18,068,000              -            -         18,068,000
                                  ----      ----------     ---------    -----------    -----------    ---------        -----------

Balance at June 30, 1998
    (unaudited)                   $  -      $        -     5,822,222    $21,108,000    $ 2,650,000    $ 239,000        $23,997,000
                                  ----      ----------     ---------    -----------    -----------    ---------        -----------
                                  ----      ----------     ---------    -----------    -----------    ---------        -----------
</TABLE>

  See accompanying Notes to Consolidated Condensed Financial Statements


                                       7

<PAGE>

                              HAWKER PACIFIC AEROSPACE
                                          
                NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                          
                                    (Unaudited)


1.   BASIS OF PRESENTATION

INTERIM CONDENSED FINANCIAL STATEMENTS

During interim periods, Hawker Pacific Aerospace (the "Company") follows the
accounting policies set forth in its Annual Report to Shareholders and applies
appropriate interim financial reporting standards, as indicated below.  Users of
financial information produced for interim periods are encouraged to refer to
the notes contained in the Annual Report to Shareholders when reviewing interim
financial results.

Interim financial reporting standards require management to make estimates 
that are based on assumptions regarding the outcome of future events and 
circumstances not known at the present time, including the use of estimated 
effective tax rates.  Some assumptions may not materialize and unanticipated 
events and circumstances may occur which vary from those estimates and such 
variations may significantly affect the Company's future results.

In the opinion of management, the accompanying unaudited consolidated condensed
financial statements of the Company have been prepared in accordance with the
Securities and Exchange Commission's requirements of form 10-Q and contain all
adjustments, of a normal and recurring nature, which are necessary to present
fairly the financial position of the Company as of June 30, 1998, and the
results of its operations and cash flows for the three and six month periods
ended June 30, 1998 and 1997.

CONTINGENCIES

The Company is party to various legal and environmental proceedings incidental
to its business.  Certain claims, suits and complaints arising in the ordinary
course of business have been filed or are pending against the Company.  Based on
facts now known to the Company, management believes all such matters are
adequately provided for, covered by insurance or, if not so covered or provided
for, are without merit, or involve such amounts that would not materially
adversely affect the consolidated results of operations and cash flows or
financial position of the Company.

EARNINGS PER SHARE

Basic earnings per share are based upon the weighted average number of common
shares outstanding including the 250,000 shares issued upon the automatic
conversion of the convertible preferred stock as if the conversion occurred at
the beginning of the periods presented.  The weighted average common shares used
in calculating basic earnings per share were 5,822,222 and 3,120,603 for the
three months ended June 30 1998 and 1997, respectively and 5,420,012 and
3,120,603 for the six months then ended, respectively.  Diluted earnings per
share is based on the number of shares used in the basic earnings per share
calculation plus the dilutive effects of stock options under the treasury stock
method.  The weighted average of common and common equivalent shares used in
calculating diluted earnings per share were 6,023,152 and 3,120,603, for the
three months ended June 30, 1998 and 1997, respectively and 5,573,074 and
3,120,603 for the six months then ended, respectively.

STOCK SPLITS

The information set forth herein reflects a 579.48618 for one stock split
effected in November 1997 and a one for .9907406 reverse stock split effected in
January 1998.  All references in the accompanying financial statements and notes
to the number of shares of common stock and per common share amounts have been
retroactively adjusted to reflect the stock splits.

                                          8
<PAGE>

                              HAWKER PACIFIC AEROSPACE
                                          
          NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
                                          
                                    (Unaudited)
                                          
INVENTORIES

Inventories are comprised of the following:

<TABLE>
<CAPTION>
                                                       June 30
                                            ------------------------------
                                                1998              1997
                                            -------------    -------------
<S>                                        <C>              <C>
Purchased parts and assemblies              $  18,615,000    $  10,106,000
Work-in-process                                 1,830,000        2,716,000
                                            -------------    -------------
                                            $  20,445,000    $  12,822,000
                                            -------------    -------------
                                            -------------    -------------
</TABLE>

INCOME TAXES

The tax provision for the three months and six months ended June 30, 1998 
includes a benefit of approximately $514,000 resulting from the reduction of 
the deferred tax valuation allowance.

RECENTLY ISSUED ACCOUNTING STANDARDS

As of January 1, 1998, the Company adopted Statement 130, Reporting
Comprehensive Income.  Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components.  However, the adoption of
this Statement had no impact on the Company's net income or shareholders'
equity. Under Statement 130, the Company has elected to report other
comprehensive income, which includes unrealized gains or losses on the Company's
foreign currency translation adjustments, within the Statement of Shareholder
Equity.  Comprehensive income for the quarter and six months ended June 30, 1997
was the same as net income for the period.

During the quarter and six months ended June 30, 1998, total comprehensive
income amounted to $821,000 and $1,632,000, respectively.

FORWARD LOOKING STATEMENTS

Statements included in this filing which are not historical in nature are
forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995.  Forward looking statements regarding the
Company's future performance and financial results are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those set forth in the forward looking statements due to a variety of factors. 
Factors that may impact such forward looking statements include, among other,
changes in the condition of the industry, changes in general economic conditions
and the success of the Company's strategic operating plans.

2.   ACQUISITIONS

On February 4, 1998, the Company completed the acquisition of certain assets 
("BA Assets") of the British Airways plc landing gear operation (the "BA 
Acquisition") for a purchase price of approximately $19.5 million, (including 
acquisition related expenses) excluding a 747-400 landing gear rotable asset 
that was acquired during the second quarter of fiscal 1998 for approximately 
$2.9 million.  The BA assets consisted of $1.9 million in inventory, $4.0 
million in machinery and equipment and $13.6 million in landing gear rotable 
assets.  Transaction expenses of $1.1 million were capitalized as part of the 
landing gear rotable asset value.

3.   NOTES PAYABLE

On January 23, 1998, the Company and Bank of America National Trust and 
Savings Association ("Bank of America") entered into the Amended and Restated 
Business Loan Agreement (the "Amended Loan Agreement"), which agreement 
increased the maximum amount of credit available to the Company from $26.5 
million to $45.5 million.  The credit facilities of the Amended Loan 
Agreement became available upon the completion of the Company's initial 
public offering and consummation of the BA Acquisition.  The Company 


                                          9
<PAGE>

used approximately $9.2 million of the proceeds available under the Amended 
Loan Agreement to fund a portion of the purchase price of the BA Assets.  The 
Amended Loan Agreement provides the Company with a $15.0 million revolving 
line of credit, a $24.5 million term loan, and a $6.0 million capital 
expenditure facility.  The revolving line of credit matures in January 2001, 
and the term loan and capital expenditure facilities mature in January 2005.  
The Amended Loan Agreement is secured by a lien on all of the assets of the 
Company, including the BA Assets. At the Company's election, the rate of 
interest on each of the three facilities available under the Amended Loan 
Agreement is either Bank of America's reference rate or the inter-bank 
eurodollar rates on either, at the Company's option, the London market or the 
Cayman Islands market.

4.   INITIAL PUBLIC OFFERING

On February 3, 1998, the Company completed an initial public offering (the 
"Initial Public Offering") of 2,766,667 shares of the Company's common stock 
("Common Stock"). Of the 2,766,667 shares of Common Stock sold in the Initial 
Public Offering, 2,600,000 shares were sold by the Company and 166,667 shares 
were sold by a principal shareholder of the Company. The principal 
shareholder sold 415,000 additional shares of Common Stock pursuant to the 
exercise of an over-allotment option granted to the underwriters by the 
principal shareholder. The Company received net proceeds of approximately 
$18.1 million net of expenses of approximately $2.7 million. The Company used 
approximately $9.2 million of the net proceeds to fund a portion of the 
purchase price for certain assets of British Airways as discussed in Note 3, 
and approximately $7.6 million to repay a portion of the revolving and term 
debt previously outstanding under the Company's credit facility.  The balance 
of $1.3 million in net proceeds has been used for working capital purposes.

                                          10
<PAGE>

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

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Quarterly Report contains forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995, such as statements of the Company's plans, objectives, expectations and
intentions, that involve risks and uncertainties that could cause actual results
to differ materially from those discussed in such forward-looking statements. 
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in this Quarterly Report and in the Company's
various filings with the Securities and Exchange Commission, including without
limitation the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.

The following discussion and analysis should be read in conjunction with the
Company's financial statements and related notes thereto included herein and
with the information set forth under Management's Discussion and Analysis of
Financial Condition and Results of Operations of the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.

RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data for the
periods indicated:

<TABLE>
<CAPTION>

                                                                (unaudited)                           (unaudited)
                                                          For the Three Months                    For the Six Months
                                                              Ended June 30,                        Ended June 30,
                                                    ---------------------------------      ----------------------------------
                                                         1998                 1997                1998                1997
                                                    --------------     --------------      ---------------    ---------------
<S>                                                <C>                <C>                 <C>                <C>
Landing gear repairs                                $  11,131,000        $  5,027,000       $  19,122,000       $   9,388,000
Hydromechanics repairs                                  3,926,000           3,621,000           8,788,000           8,134,000
Spares & other                                          2,315,000           1,896,000           3,129,000           2,836,000
                                                    -------------        ------------       -------------       -------------
Total revenue                                          17,372,000          10,544,000          31,039,000          20,358,000

Gross profit                                            3,740,000           2,395,000           6,937,000           4,678,000

Selling, general and 
     administrative expense                             2,228,000           1,399,000           4,090,000           2,794,000
                                                    -------------        ------------       -------------       -------------
Income from operations                                  1,512,000             996,000           2,847,000           1,884,000

Net interest expense                                         (801,000)           (592,000)         (1,449,000)         (1,171,000)
                                                    -------------        ------------       -------------       -------------
Income before provision (benefit) for 
     income taxes                                         711,000             404,000           1,398,000             713,000

Provision (benefit) for income taxes                     (254,000)            151,000               5,000             265,000
                                                    -------------        ------------       -------------       -------------
Net income                                           $    965,000        $    253,000       $   1,393,000        $    448,000
                                                    -------------        ------------       -------------       -------------
                                                    -------------        ------------       -------------       -------------
</TABLE>

Revenues in the second quarter increased 64.8% to $17.4 million compared with 
$10.5 million for the same period in 1997. Revenues increased 52.5% to $31.0 
million for the six months ended June 30, 1998 compared to $20.4 million for 
the same period in 1997.  Internal growth from new business accounted for 
28.8% of this increase in the quarter and 23.8% of the increase for the six 
months ended June 30, 1998.  External growth from the acquisition of British 
Airways' landing gear operation accounted for 36.0% of the increase in 
revenue in the second quarter and 28.7% of the increase for the six months 
ended June 30, 1998.  The British Airways' landing gear operation acquisition 
was completed on February 4, 1998 and was accounted for using the purchase 
method of accounting.  Landing gear repair

                                          11
<PAGE>

services is the fastest growing segment for the Company.  Landing gear repair
services revenue, which represented 47.7% of total revenues in the second 
quarter of 1997 increased 121.4% from $5.0 million in that period to $11.1 
million in the second quarter of 1998 and accounted for 64.1% of total 
revenues. Landing gear repair services revenue, which represented $9.4 
million, or 46.1% of total revenues for the six months ended June 30, 1997, 
increased 103.7% to $19.1 million, or 61.6% of total revenues for the six 
months ended June 30, 1998. The increase in landing gear services revenue was 
due in part to new long-term contracts with American Airlines Inc. ("American 
Airlines"), British Airways plc ("British Airways"), United Parcel Services, 
British Midland Engineering Services and Canadian Airlines International Ltd. 
in addition to further penetration at Federal Express Corporation ("FedEx") 
to support their MD10 freighter conversion program and their fleet of Airbus 
A310 aircraft. 

Gross profit increased 56.1% to $3.7 million for the quarter ended June 30, 
1998 compared to $2.4 million for the same period in 1997. Gross profit 
increased 48.3% to $6.9 million in the six months ended June 30, 1998 
compared to $4.7 million for the same period in 1997.  Gross profit as a 
percent of revenues in the second quarter of 1998 was 21.5% compared to 22.7% 
in the comparable period in 1997. The decline in gross profit margins is 
attributable to certain costs incurred at the new United Kingdom operation, 
which began operations in February 1998. These costs included expenses 
incurred to outsource United Kingdom landing gear services to the Company's 
repair facility in California, which significantly increased freight 
expenses, in addition to increased subcontracted expenses with other United 
Kingdom landing gear repair stations. 

Selling, general and administrative expenses increased 59.3% to $2.2 million 
for the quarter ended June 30, 1998 compared to $1.4 million for the same 
period in 1997. Selling, general and administrative expenses increased 46.4% 
to $4.1 million for the six months ended June 30, 1998 compared to $2.8 
million for the same period in 1997.  As a percent of revenues, selling, 
general and administrative expenses declined to 12.8% in the second quarter 
from 13.3% in the same period in 1997. Expenses during the second quarter and 
six months ended June 30, 1998 included expenses related to the new United 
Kingdom operation and outside consultant costs relating to the pending 
relocation of such operations to a new facility. The Company expects to enter 
into a long-term lease agreement and begin construction on the new facility 
in the third quarter of 1998. Completion and relocation is expected to occur 
in the second quarter of 1999.

Operating income increased 51.8% to $1.5 million for the quarter ended June 
30, 1998 compared to $1.0 million for the same period in 1997. Operating 
income increased 51.1% to $2.8 million for the six months ended June 30, 1998 
compared to $1.9 million for the same period in 1997.  As a percent of 
revenue, operating income declined to 8.7% in the second quarter compared to 
9.4% in the comparable period in 1997. As a percent of revenue, operating 
income declined slightly in the first half of 1998 to 9.2% compared to 9.3% 
in the first half of 1997.  The decline is a result of increased expenses 
related to the integration of the new United Kingdom operations offset by 
reductions in selling, general and administrative expenses as a percentage of 
total revenue. 

Net interest expense increased 35.3% to $0.8 million for the second quarter 
ended June 30, 1998 compared to $0.6 million for the same period in 1997. 
Interest expense increased 23.7% to $1.4 million for the six months ended 
June 30, 1998 compared to $1.2 million for the same period in 1997.  This 
increase is a result of increased borrowings to fund expansion of existing 
business and to fund the acquisition of the United Kingdom operation.  As a 
percent of revenue, net interest expense declined to 4.6% in the second quarter 
of 1998 compared to 5.6% in the comparable period in 1997.  Interest income 
was not significant for either period.

Income tax provision for the second quarter included a reversal of $514,000 
for a previously recorded deferred tax valuation allowance.  The effective 
tax rate for the six months ended June 30, 1998, excluding this one-time tax 
benefit was 37.1% compared to 37.2% for the same period in 1997.  The 
deferred tax valuation allowance was a previously recorded allowance against 
the potential future benefit of net operating loss carry-forwards and other 
deferred tax assets, net of deferred tax liabilities.

Net income in the quarter ended June 30, 1998 increased 281.4% to $1.0 
million compared to $0.3 million for the same period in 1997.  Excluding the 
reversal of the previously recorded deferred tax valuation allowance, net 
income would have increased 78.3% to $0.5 million in the second quarter of 
1998 over the comparable period in 1997. Net income in the six months ended 
June 30, 1998 increased 210.9% to $1.4 million compared to $0.4 million for 
the same period in 1997.  Excluding the effect of the reversal of the 
previously recorded deferred tax valuation allowance, net income would have 
increased 96.2% to $0.9 million in the first half of 1998 over the same period
in 1997.

LIQUIDITY AND CAPITAL RESOURCES

Working capital and funds for capital expenditures have been provided by cash 
generated from operations, borrowings on the Company's credit facilities, and 
cash generated from the sale of Common Stock. 

Contemporaneously with the Initial Public Offering and the BA Acquisition, 
the Company entered into the Amended Loan Agreement, which increased the 
maximum amount of credit available to the Company from $26.5 million to $45.5 
million. The Company used approximately $9.2 million of the proceeds 
available under the Amended Loan Agreement to fund a portion of the purchase 
price of the BA Assets. The Amended Loan Agreement provides the Company with 
a $15.0 million revolving line of credit, a $24.5 million term loan, and a 
$6.0 million capital expenditure facility. The revolving line of credit 
matures in January 2001, and the term loan and capital expenditure facilities 
mature in January 2005. The Amended Loan Agreement is secured by a lien on 
all of the assets of the Company, including the BA Assets. At the Company's 
election, the rate of interest on each of the three facilities available 
under the Amended Loan Agreement is either Bank of America's reference rate 
or the inter-bank eurodollar rates on either, at the Company's option, the 
London market or the Cayman Islands market. As of June 30, 1998, there was 
$36.4 million outstanding under the Amended Loan Agreement.

On February 3, 1998, the Company completed its Initial Public Offering and 
received net proceeds of $18.1 million. A portion of the net proceeds, 
together with proceeds from the Amended Loan Agreement were used to acquire 
the BA Assets. The balance of the net offering proceeds was used to pay down 
indebtedness and for working capital.

Net cash used in operating activities was $6.2 million for six months ended 
June 30, 1998 compared to $0.6 million for the same period in 1997.  The 
increased use of cash relates to increases in working capital to support the 
new United Kingdom operation.  Accounts receivable increased as a result of 
higher revenues and inventory was increased to cover production requirements 
related to new contracts, including contracts with British Airways, American 
Airlines and Airbus landing gear contracts for Federal Express.


                                          12
<PAGE>


Approximately $2.9 million is to be paid to British Airways plc during the 
third quarter of 1998 as part of the acquisition described in Note 2 to the 
Financial Statements which will be funded by borrowings against the revolving 
credit line and cash flow from operations.

Working capital and current ratio were $9.8 million and 1.4 for the second 
quarter ended June 30, 1998, respectively.  Working capital increased  $2.5 
million from June 30, 1997.  The ratio of total debt to equity improved to 
1.7 for the quarter ended June 30, 1998 from 6.4 at June 30, 1997.  This 
improvement is the result of the increased equity from the public offering 
consummated in the first quarter of 1998.

                                      

                                RISK FACTORS

AVIATION INDUSTRY RISKS

The Company derives all of its sales and operating income from the services 
and parts that it provides to its customers in the aviation industry. 
Therefore, the Company's business is directly affected by economic factors 
and other trends that affect its customers in the aviation industry, 
including a possible decrease in aviation activity, a decrease in outsourcing 
by aircraft operators or a decrease in market growth. When such economic and 
other factors adversely affect the aviation industry, they tend to reduce the 
overall demand for the Company's products and services, thereby decreasing 
the Company's sales and operating income. There can be no assurance that 
economic and other factors that might affect the aviation industry will not 
adversely affect the Company's results of operations.

FLUCTUATIONS IN RESULTS OF OPERATIONS

The Company's operating results are affected by a number of factors, 
including the timing of orders for the repair and overhaul of landing gear 
and fulfillment of such contracts, the timing of expenditures to manufacture 
parts and purchase inventory in anticipation of future services and sales, 
parts shortages that delay work in progress, general economic conditions and 
other factors. Although the Company has secured several long-term agreements 
to service multiple aircraft, the Company receives sales under these 
agreements only when it actually performs a repair or overhaul. Because the 
average time between landing gear overhauls is seven years for an aircraft, 
the work orders that the Company receives and the number of repairs or 
overhauls that the Company performs in particular periods may vary 
significantly, causing the Company's quarterly sales and results of 
operations to fluctuate substantially. The Company is unable to predict the 
timing of the actual receipt of such orders and, as a result, significant 
variations between forecasts and actual orders will often occur. In addition, 
the Company's need to make significant expenditures to support new aircraft 
in advance of generating revenues from repairing or overhauling such aircraft 
may cause the Company's quarterly operating results to fluctuate. 
Furthermore, the rescheduling of the shipment of any large order, or portion 
thereof, or any production difficulties or delays by the Company, could have 
a material adverse effect on the Company's quarterly operating results.

ESTABLISHMENT OF UNITED KINGDOM OPERATIONS

In February 1998, the Company consummated the BA Acquisition and established 
its operations in the United Kingdom. Before the BA Acquisition, the Company 
had no history or experience operating in the United Kingdom. Accordingly, 
establishing operations in the United Kingdom will subject the Company to all 
of the risks inherent in the establishment of a new business enterprise. 
These include, without limitation, the need to establish manufacturing, 
marketing and administrative capabilities, the need to integrate the 
Company's United Kingdom operations into the Company's existing operations, 
the need to implement the Company's management information systems in its new 
location, the need to locate and move into a new facility, unanticipated 
marketing problems, new competitive pressures and expenses. There can be no 
assurance that the risks inherent in establishing the United Kingdom 
operations will not have a material adverse effect on the Company's business, 
financial condition and results of operations.

SUBSTANTIAL COMPETITION

Numerous companies compete with the Company in the aviation services 
industry. The Company primarily competes with various repair and overhaul 
organizations, which include the service divisions of original equipment 
manufacturers ("OEMs"), the maintenance departments or divisions of large 
commercial airlines (some of which also offer maintenance services to third 
parties) and independent organizations such as the Aerospace Division of B.F. 
Goodrich Company, the Landing Gear Division of AAR Corporation, Revima, a 
company organized and operating under the laws of France, and Dowty Aerospace 
Aviation Services. The Company's major competitors in its hydromechanical 
components business include AAR and OEMs such as Sundstrand Corporation, 
Inc., Aeroquip Vickers, Inc., Parker-Hannifin Corporation, Messier-Bugatti 
and Lucas. The Company expects that competition in its industry will increase 
substantially as a result of industry consolidations and alliances in 
response to the trend in the aviation industry toward outsourcing of repair 
and overhaul services. In addition, as the Company moves into new geographic 
or product markets it will encounter new competition.

The Company believes that the primary competitive factors in its marketplace 
are quality, price, rapid turnaround time and industry experience. Certain of 
the Company's competitors have substantially greater financial, technical, 
marketing and other resources than the Company. These competitors may have 
the ability to adapt more quickly to changes in customer requirements, may 
have stronger customer relationships and greater name recognition and may 
devote greater resources to the development, promotion and sale of their 
products than the Company. There can be no assurance that competitive 
pressures will not materially and adversely affect the Company's business, 
financial condition and results of operations.

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

The Company's growth strategy is based in part on the Company's ability to 
expand its international operations, which will require significant 
management attention and financial resources. The Company currently has 
divisions in the United Kingdom and the Netherlands and plans to expand 
further its international customer base. There can be no assurance that the 
Company's efforts to expand operations internationally will be successful. 
Failure to increase revenue in international markets could have a material 
adverse effect on the Company's business, operating results and financial 
condition. In addition, international operations are subject to a number of 
risks, including longer receivable collection periods and greater difficulty 
in accounts receivable collections, unexpected changes in regulatory 
requirements, foreign currency fluctuations, import and export restrictions 
and tariffs, difficulties and costs of staffing and managing foreign 
operations, potentially adverse tax consequences, political instability, the 
burdens of complying with multiple, potentially conflicting laws and the 
impact of business cycles and economic instability outside the United States. 
Moreover, the Company's operating results could also be adversely affected by 
seasonality of international sales, which are typically lower in Asia in the 
first calendar quarter and in Europe in the third calendar quarter. In 
addition, inflation in such countries could increase the Company's expenses. 
These international factors could have a material adverse effect on future 
sales of the Company's products to international end-users and, consequently, 
on the Company's business, financial condition and results of operations.

FOREIGN CURRENCY RISKS

The Company's sales are principally denominated in United States dollars and 
British pounds and to some extent in Dutch guilders. The Company makes 
substantial inventory purchases in French francs from such suppliers as 
Messier-Bugatti, Societe D'Applications Des Machines Motrices ("SAMM") and 
Eurocopter France. The Company's Netherlands facility's inventory purchases 
are primarily United States dollar denominated, while sales and operating 
expenses are partially denominated in Dutch guilders. To date, the Company's 
business has not been significantly affected by currency fluctuations or 
inflation. However, the Company conducts business in the Netherlands and in 
the United Kingdom, and thus fluctuations in currency exchange rates could 
cause the Company's products to become relatively more expensive in 
particular countries, leading to a reduction in sales in that country. As a 
result of the BA Acquisition, the Company may engage in additional foreign 
currency denominated sales or pay material amounts of expenses in foreign 
currencies that may generate gains and losses due to currency fluctuations. 
The Company's operating results could be adversely affected by such 
fluctuations.

GOVERNMENT REGULATION

The Company is highly regulated worldwide by the Federal Aviation 
Administration ("FAA"), the Joint Airworthiness Authority ("JAA"), a 
consortium of European regulatory authorities, and various other foreign 
regulatory authorities, including the Dutch Air Agency, which regulates the 
Company's Netherlands' operations and the Civil Aviation Authority, which 
regulates the Company's United Kingdom operations. These regulatory 
authorities require aircraft to be maintained under continuous condition 
monitoring programs and to periodically undergo thorough inspections. In 
addition, all parts must be certified by the FAA and equivalent regulatory 
agencies in foreign countries and conformed to regulatory standards before 
they are installed on an aircraft. The Company is a certified FAA and JAA 
approved repair station and has been granted Parts Manufacturer Approvals by 
the FAA Manufacturing Inspectors District Office. In addition, the Company's 
operations are regularly audited and accredited by the Coordinating Agency 
for Supplier Evaluation, formed by commercial airlines to approve FAA 
approved repair stations and aviation parts suppliers. If material 
authorizations or approvals were revoked or suspended, the Company's 
operations would be materially and adversely affected. As the Company 
attempts to commence operations in countries in which it has not previously 
operated, it will need to obtain new certifications and approvals, and any 
delay or failure in attaining such certifications or approvals could have a 
material adverse effect on the Company's business, financial condition and 
results of operations. In addition, if in the future new and more stringent 
regulations are adopted by foreign or domestic regulatory agencies, the 
Company's business may be materially and adversely affected.

DEPENDENCE ON KEY SUPPLIERS

The Company purchases landing gear spare parts and components for a variety 
of fixed wing aircraft and helicopters. The Company has separate ten-year 
agreements that each expires in October 2006 with (i) Dunlop Limited, 
Aviation Division, (ii) Dunlop Limited, Precision Rubber and (iii) Dunlop 
Equipment Division (collectively, "Dunlop"). Under two of these agreements, 
the Company is entitled to purchase, at a discount from list price, Dunlop 
parts for resale and for use in the repair and overhaul of a variety of fixed 
wing aircraft and helicopters. For the years ended December 31, 1996 and 
1997, the Company's single largest supplier was Dunlop, accounting for 
approximately $5.6 million (27.0%) and $4.3 million (19.3%), respectively, of 
the spare parts and components that the Company purchased in such periods. 
During the six months ended June 30, 1998, Boeing was the single largest 
supplier, accounting for $5.8 million (19.2%) of the spare parts and 
components that the Company purchased. Dunlop was the second largest 
supplier, accounting for $2.3 million (7.7%) of the spare parts and 
components that the Company purchased during the six months ended June 30, 
1998. Failure by any one of these divisions of Dunlop to renew its agreement 
on similar terms when it expires could have a material adverse affect on the 
Company's business, financial condition and results of operations. In 
addition, the Company has agreements with Messier-Bugatti, SAMM and 
Eurocopter France that enable the Company to purchase new aircraft parts at 
discounts from list price. Many of the Company's supplier agreements, other 
than its agreements with Dunlop, are short-term and can be terminated by the 
suppliers upon providing 90 days prior written notice. A decision by any one 
of these suppliers to terminate their agreements would eliminate the 
competitive advantage the Company derives therefrom and could have a material 
adverse effect on the Company's business, financial condition and results of 
operations.

SHORTAGES OF SUPPLY; INVENTORY OBSOLESCENCE 

The Company's inventory consists principally of new, overhauled, serviceable 
and repairable aircraft landing gear parts and components that it purchases 
primarily from OEMs, parts resellers and customers. The Company believes it 
maintains a sufficient supply of inventory to meet its current and 
immediately foreseeable production schedule. However, the Company may fail to 
order sufficient parts in advance to meet its work requirements, a particular 
part may be unavailable when the Company needs it from its suppliers or the 
Company unexpectedly may receive one or more large orders simultaneously for 
repair and overhaul services. As a result, the Company may on occasion face 
parts shortages that delay its production schedule and prevent it from 
meeting required turnaround times. Delays or failure to meet turnaround times 
could have a material adverse effect on the Company's business, financial 
condition and results of operations. In addition, regulatory standards may 
change in the future, causing parts which are currently included in the 
Company's inventory to be scrapped or modified. Aircraft manufacturers may 
also develop new parts to be used in lieu of parts already contained in the 
Company's inventory. In all such cases, to the extent that the Company has 
such parts or excess parts in its inventory, their value will be reduced, 
which would adversely affect the Company's financial condition.

CUSTOMER CONCENTRATION; CONCENTRATION OF CREDIT RISKS 

A small number of customers have historically accounted for a substantial 
part of the Company's revenue in any given fiscal period. Sales derived from 
FedEx and the United States Coast Guard (the "USCG") accounted for 18.4%, and 
11.2%, respectively, of product sales for the year ended December 31, 1996 
and 19.3% and 6.5%, respectively, of product sales for the year ended 
December 31, 1997. Sales derived from British Airways, FedEx, American 
Airlines and the USCG accounted for 20.3%, 19.3%, 10.4% and 5.2%, 
respectively, of the Company's total revenue during the six months ended June 
30, 1998. Some of the Company's long-term service agreements may be 
terminated by the customers upon providing the Company with 90 days prior 
written notice, and the Company's agreement with the USCG is subject to 
termination at any time at the convenience of the government. In addition, 
the Company's sales are made primarily on the basis of purchase orders rather 
than long-term agreements. The Company expects that a small number of 
customers will continue to account for a substantial portion of its sales for 
the foreseeable future. As a result, the Company's business, financial 
condition and results of operations could be materially adversely affected by 
the decision of a single customer to cease using the Company's products. In 
addition, there can be no assurance that sales from customers that have 
accounted for significant sales in past periods, individually or as a group, 
will continue, or if continued, will reach or exceed historical levels in any 
future period.

As of June 30, 1998, 16.7% and 27.2% of the Company's total accounts 
receivable were associated with FedEx and British Airways, respectively. As a 
result of the BA Acquisition, British Airways accounts for a significant 
percentage of both the Company's product sales and accounts receivable. 
Although the Company has not had any material difficulties in collecting its 
accounts receivable during the past three years, the Company cannot ensure 
that it will not have difficulty collecting receivables in the future. Any 
inability by the Company to collect material amounts of receivables under its 
service agreements could have a material adverse effect on the Company's 
business, financial condition and results of operations.

RISKS RELATING TO ACQUISITION STRATEGY 

In the future, the Company may attempt to grow by acquiring other service and 
parts providers whose operations or inventories complement or expand the 
Company's existing repair and overhaul businesses or whose strategic 
locations enable the Company to expand into new geographic markets. The 
Company's ability to grow by acquisition depends upon, and may be limited by, 
the availability of suitable acquisition candidates and the Company's capital 
resources. Acquisitions involve risks that could adversely affect the 
Company's operating results, including the assimilation of the operations and 
personnel of acquired companies, the potential amortization of acquired 
intangible assets and the potential loss of key employees of acquired 
companies. Although the Company investigates the operations and assets that 
it acquires, there may be liabilities that the Company fails or is unable to 
discover, and for which the Company as a successor owner or operator may be 
liable. In addition, costs and charges, including legal and accounting fees 
and reserves and write-downs relating to an acquisition, may be incurred by 
the Company or may be reported in connection with any such acquisition. There 
can be no assurance that the Company will be able to consummate acquisitions 
on satisfactory terms, or at all, or that it will be successful in 
integrating any such acquisitions into its operations.

ENVIRONMENTAL REGULATIONS 

The Company's operations are subject to extensive and frequently changing 
federal, state and local environmental laws and substantial related 
regulation by government agencies, including the United States Environmental 
Protection Agency, the California Environmental Protection Agency and the 
United States Occupational Safety and Health Administration. Among other 
matters, these regulatory authorities impose requirements that regulate the 
operation, handling, transportation and disposal of hazardous materials 
generated by the Company during the normal course of its operations, govern 
the health and safety of the Company's employees and require the Company to 
obtain and maintain permits in connection with its operations. This extensive 
regulatory framework imposes significant compliance burdens and risks on the 
Company and, as a result, substantially affects its operational costs. In 
addition, the Company may become liable for the costs of removal or 
remediation of certain hazardous substances released on or in its facilities 
without regard to whether or not the Company knew of, or caused, the release 
of such substances. The Company believes that it currently is in material 
compliance with applicable laws and regulations and is not aware of any 
material environmental problem at any of its current or former facilities. 
There can be no assurance, however, that its prior activities did not create 
a material problem for which the Company could be responsible or that future 
uses or conditions (including, without limitation, changes in applicable 
environmental laws and regulation, or an increase in the amount of hazardous 
substances generated by the Company's operations) will not result in any 
material environmental liability to the Company and materially and adversely 
affect the Company's financial condition and results of operations. The 
Company's plating operations, which use a number of hazardous materials and 
generate a significant volume of hazardous waste, increase the Company's 
regulatory compliance burden and compound the risk that the Company may 
encounter a material environmental problem in the future. Furthermore, 
compliance with laws and regulations in foreign countries in which the 
Company locates its operations may cause future increases in the Company's 
operating costs or otherwise adversely affect the Company's results of 
operations or financial condition. 

In August 1997 and January 1998, two separate lawsuits were filed by various 
individuals against Lockheed Martin Corporation and various other parties, 
including the Company, in the Los Angeles Superior Court pleading various 
causes of action in connection with certain alleged injuries caused by toxic 
and carcinogenic chemicals allegedly released by the defendants in the 
Burbank and Glendale areas of Los Angeles County, California. The individual 
plaintiffs seek unspecified compensatory and punitive damages. The Company 
does not believe that it caused the release of toxic and carcinogenic 
chemicals alleged in the complaints and BTR has assumed the defense and has 
agreed to indemnify the Company in connection with such claims.

PRODUCT AND SERVICE LIABILITY RISKS 

The Company's business exposes it to possible claims for personal injury, 
death or property damage which may result from the failure or malfunction of 
landing gear, hydromechanical components or aircraft spare parts repaired or 
overhauled by the Company. Many factors beyond the Company's control could 
lead to liability claims, including the failure of the aircraft on which 
landing gear or hydromechanical components overhauled by the Company is 
installed, the reliability of the customer's operators of the aircraft and 
the maintenance of the aircraft by the customers. The Company currently has 
in force aviation products liability and premises insurance in the amount of 
$500 million, which the Company believes provides coverage in amounts and on 
terms that are generally consistent with industry practice. The Company has 
not experienced any material product liability claims related to its 
products. However, the Company may be subject to a material loss to the 
extent that a claim is made against the Company that is not covered in whole 
or in part by insurance and for which any third-party indemnification is not 
available. There can be no assurance that the amount of product liability 
insurance that the Company carries at the time a product liability claim may 
be made will be sufficient to protect the Company. A product liability claim 
in excess of the amount of insurance carried by the Company could have a 
material adverse effect on the Company's business, financial condition and 
results of operations. In addition, there can be no assurance that insurance 
coverages can be maintained in the future at an acceptable cost.

DEPENDENCE ON KEY PERSONNEL 

The continued success of the Company depends to a large degree upon the 
services of certain of its executive officers and upon the Company's ability 
to attract and retain qualified managerial and technical personnel 
experienced in the various operations of the Company's business. Loss of the 
services of such employees, particularly David L. Lokken, President and Chief 
Executive Officer, Brian S. Aune, Vice President and Chief Financial Officer, 
Brian S. Carr, Managing Director of Sun Valley Operations, or Michael A. 
Riley, Vice President Hydromechanical Business Unit, could adversely affect 
the operations of the Company. The Company has entered into an employment 
agreement expiring October 31, 2001 with Mr. Lokken and into employment 
agreements expiring October 31, 1999 with Messrs. Aune, Carr and Riley. The 
Company has obtained key person insurance on the life of Mr. Lokken in the 
amount of $1,000,000. There can be no assurance that the proceeds of such 
insurance will be sufficient to compensate the Company in the event that Mr. 
Lokken dies. Competition for qualified technical personnel is intense and 
from time to time, the Company has experienced difficulty in attracting and 
retaining personnel skilled in its repair and overhaul operations. There can 
be no assurance that these individuals will continue employment with the 
Company. The loss of certain key personnel could have a material adverse 
effect on the Company's business, financial condition and results of 
operations. 

CONTROL BY EXISTING SHAREHOLDERS AND ANTI-TAKEOVER PROVISIONS 

As of August 1, 1998, the five shareholders (the "Unique Shareholders") of 
Unique Investment Corporation ("Unique") owned in the aggregate approximately 
40.4% of the Company's Common Stock. The directors and executive officers of 
the Company beneficially owned approximately 24.9% of the Company's Common 
Stock. By virtue of such ownership, the Unique Shareholders together with the 
executive officers of the Company will have effective control over all 
matters requiring a vote of shareholders, including the election of a 
majority of directors. The ownership positions of the existing shareholders, 
together with the authorization of blank check preferred stock and the 
implementation, if certain conditions are met, of a staggered board and 
elimination of cumulative voting in the Company's Amended and Restated 
Articles of Incorporation and Amended and Restated Bylaws, may have the 
effect of delaying, deferring or preventing a change in control of the 
Company, may discourage bids for the Company's Common Stock at a premium over 
the market price of the Common Stock, and may adversely affect the market 
price of the Common Stock. 

YEAR 2000 COMPLIANCE 

The Company is currently working to resolve the potential impact of the year 
2000 on the processing of date-sensitive information by the Company's 
computerized information systems. The year 2000 problem is the result of 
computer programs being written using two digits (rather than four) to define 
the applicable year. Any of the Company's programs that have time-sensitive 
software may recognize a date using "00" as the year 1900 rather than the 
year 2000, which could result in miscalculation or system failures. The 
Company believes that its mainframe database and operating systems are year 
2000 compliant. However, certain of the Company's software applications 
currently are coded using two digits rather than four to define the 
applicable year. The Company is systematically modifying such software 
applications to be coded as four digits and anticipates such modifications to 
be completed by March 1999. The Company plans to replace its telephone system 
at an estimated cost of approximately $100,000 and any other non-information 
technology systems by July 1999 to be year 2000 compliant. In addition, the 
Company is working with its external suppliers, vendors and service providers 
to ensure that their systems will be able to support and interact with the 
Company's server and network. The Company has not quantified the total costs 
required to become year 2000 compliant, but does not expect such costs to be 
material. As of June 30, 1998, the total costs incurred to address the 
Company's year 2000 issues have not been material. However, if the Company, 
its customers or vendors are unable to resolve such processing issues in a 
timely manner, it could have a material adverse impact on the Company's 
financial position, results of operations or cash flows in future periods. 
Accordingly, the Company plans to devote the necessary resources to becoming 
year 2000 compliant in a timely manner and is currently working to create a 
contingency plan by July 1999 to handle any year 2000 problems.

EUROPEAN MONETARY UNIT

A single currency called the euro will be introduced in Europe on January 1, 
1999. The Company does not believe the introduction of the euro will have a 
material effect on the Company's business, financial condition and results of 
operations.

                                          13
<PAGE>
                             PART II -- OTHER INFORMATION

                         ITEM 6.  Exhibits and Reports on Form 8-K

(a)       Exhibits

<TABLE>
<CAPTION>

Exhibit   
   No.    Exhibit Description
-------   -------------------
<S>      <C>
10.1      Tenancy Agreement relating to Bennebroekerweg, Rijsinboat 
          (Netherlands), dated March 15, 1998, between Hawker Pacific Holland, 
          a division of the Company, and Mateor II C.V.

10.2      Statement of Terms and Conditions of Employment, dated May 12, 1998 
          between Hawker Pacific Aerospace, Limited and Richard Adey.

27        Financial Data Schedule
</TABLE>
___________________


(b)       Form 8-K

          No reports on Form 8-K were filed by the Company during the quarter
          ended June 30, 1998.

                                          14
<PAGE>


                                        SIGNATURES

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

                              HAWKER PACIFIC AEROSPACE


Date:  August 14, 1998          By    /s/ Scott W. Hartman
                                  ----------------------------
                                  Scott W. Hartman
                                  CHAIRMAN OF THE BOARD


Date:  August 14, 1998          By    /s/ David L. Lokken 
                                  ----------------------------
                                  David L. Lokken
                                  PRESIDENT AND CHIEF EXECUTIVE OFFICER


Date:  August 14, 1998          By    /s/ Brian S. Aune   
                                  ----------------------------
                                  Brian S. Aune
                                  VICE PRESIDENT AND CHIEF FINANCIAL OFFICER



                                          15