SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549

                                 FORM 10-K

          FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS
            13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

     [X]  Annual  Report  Pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934 for the fiscal year ended MAY 31, 1999

     [  ] 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 0-18352

                 INTERNATIONAL AIRLINE SUPPORT GROUP, INC.

          (Exact name of Registrant as specified in its charter)

       Delaware                                 59-2223025
-------------------------------          ------------------------
(State or Other Jurisdiction of         (I.R.S. Employer Employer
 Incoproration or Organization)           Identification Number)

  1954 Airport Road, Suite 200,
        Atlanta, Georgia                         30341
------------------------------          --------------------------
(Address of Principal Executive Offices)        (Zip Code)

                              (770) 455-7575
            ------------------------------------------------
           (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act:

    Title of class             Name of each exchange on which registered
-----------------------------  -----------------------------------------
Common Stock, $.001 par value           American Stock Exchange

     Securities registered pursuant to Section 12(g) of the Act:  None

     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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K  is  not  contained  herein,  and  will  not  be
contained,  to  the best of the Registrant's knowledge, in definitive proxy
or information statements  incorporated  by  reference  in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

     At August 10, 1999, the aggregate market value of common stock held by
non-affiliates of the Registrant was approximately $8,795,936.

     The number of shares of the Registrant's Common Stock  outstanding  as
of August 10, 1999 was 2,187,598.

                   DOCUMENTS INCORPORATED BY REFERENCE:

     Portions  of  the  Proxy  Statement for the 1999 Annual Meeting of the
Company's Stockholders are incorporated by reference in Parts III and IV.


<PAGE>
                 INTERNATIONAL AIRLINE SUPPORT GROUP INC.
                        ANNUAL REPORT ON FORM 10-K
                  FOR THE FISCAL YEAR ENDED MAY 31, 1999


                            TABLE OF CONTENTS

                                                                     PAGE

PART I

     Item 1.   Business                                                1
     Item 2.   Properties                                             13
     Item 3.   Legal Proceedings                                      13
     Item 4.   Submission of Matters to a Vote of Security Holders    13

PART II

     Item 5.   Market for the Registrant's Common Stock
               and related Stockholder Matters                        14
     Item 6.   Selected Financial Data                                15
     Item 7.   Management's Discussion  and Analysis of
               Financial Condition and Results of Operations          16
     Item 7A.  Quantitative and Qualitative Disclosures
               about Market Risk                                      19
     Item 8.   Financial Statements and Supplementary Data            19
     Item 9.   Changes in and Disagreements with Accountants
               on Accounting and Financial Disclosure                 19

PART III

     Item 10.  Directors and Executive Officers of the Registrant     20
     Item 11.  Executive Compensation                                 20
     Item 12.  Security Ownership of Certain  Beneficial
               Owners and Management                                  20
     Item 13.  Certain Relationships and Related Transactions         20

PART IV

     Item 14.  Exhibits, Financial Statement Schedules and
               Reports on Form 8-K                                    21

SIGNATURES


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                   [THIS PAGE INTENTIONALLY LEFT BLANK]
                                  PART I

<PAGE>
ITEM 1. BUSINESS.

     THIS  ANNUAL  REPORT  ON  FORM  10-K  CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF  1934,  AS  AMENDED  (THE  "EXCHANGE  ACT"),  INCLUDING  THE  PLANS  AND
OBJECTIVES  OF  MANAGEMENT  FOR  THE  BUSINESS,  OPERATIONS   AND  ECONOMIC
PERFORMANCE OF THE COMPANY.  THE FORWARD-LOOKING STATEMENTS AND  ASSOCIATED
RISKS SET FORTH IN THIS ANNUAL REPORT MAY INCLUDE OR RELATE TO, AMONG OTHER
THINGS,  (I)  INCREASING  THE  COMPANY'S  MARKET SHARE OF PARTS FOR CERTAIN
COMMUTER   AIRCRAFT,   WHILE  MAINTAINING  ITS  POSITION   AS   A   LEADING
REDISTRIBUTOR  OF  PARTS  FOR  MD-80  AND  DC-9  AIRCRAFT,  (II)  POTENTIAL
ACQUISITIONS OF ADDITIONAL  INVENTORIES  OF  AIRCRAFT  SPARE  PARTS AND THE
ACQUISITION  OF  OTHER  COMPANIES,  ASSETS  OR  PRODUCT  LINES  THAT  WOULD
COMPLEMENT  OR EXPAND THE COMPANY'S EXISTING AIRCRAFT SPARE PARTS BUSINESS,
(III) DEMAND  AMONG  THE  COMPANY'S  PRINCIPAL  CUSTOMERS,  INCLUDING CARGO
CARRIERS AND REGIONAL COMMERCIAL AIRLINES, FOR THE COMPANY'S  INVENTORY  OF
PARTS,  (IV)  THE SIZE AND GROWTH RATE OF THE AIRCRAFT PARTS REDISTRIBUTION
INDUSTRY AND THE  AIRCRAFT  AND  ENGINE  LEASING INDUSTRY, (V) INCREASES OR
CHANGES IN GOVERNMENT REGULATIONS REGARDING  THE  AVIATION  INDUSTRY,  (VI)
COMPETITION  FROM  OTHER  AIRCRAFT  PARTS REDISTRIBUTORS AND (VII) PROPOSED
EXPANSION  OF  THE  COMPANY'S PRODUCT LINE.   SEE  "CAUTIONARY  STATEMENTS"
HEREIN.

     THE FORWARD-LOOKING  STATEMENTS INCLUDED HEREIN ARE BASED UPON CURRENT
EXPECTATIONS THAT INVOLVE A  NUMBER  OF  RISKS  AND  UNCERTAINTIES.   THESE
FORWARD-LOOKING STATEMENTS ARE BASED UPON ASSUMPTIONS THAT THE COMPANY WILL
CONTINUE  TO  MANAGE ITS INVENTORY EFFECTIVELY, THAT COMPETITIVE CONDITIONS
WITHIN  THE  AIRCRAFT   PARTS   REDISTRIBUTION  INDUSTRY  WILL  NOT  CHANGE
MATERIALLY OR ADVERSELY, THAT DEMAND  FOR  AIRCRAFT SPARE PARTS WILL REMAIN
STRONG, THAT THE COMPANY WILL BE ABLE TO ENTER  INTO NEW LEASES OF AIRCRAFT
AS  EXISTING  LEASES  EXPIRE, THAT THE COMPANY WILL  BE  ABLE  TO  PURCHASE
AIRCRAFT THAT ARE SUBJECT  TO  LEASES,  AND  THAT THERE WILL BE NO MATERIAL
ADVERSE CHANGE IN THE COMPANY'S BUSINESS, FINANCIAL  CONDITION  AND RESULTS
OF  OPERATIONS.   ASSUMPTIONS  RELATING  TO THE FOREGOING INVOLVE JUDGMENTS
WITH  RESPECT, AMONG OTHER THINGS, TO FUTURE  ECONOMIC  COMPETITIVE  MARKET
CONDITIONS  AND  FUTURE  BUSINESS  DECISIONS, ALL OF WHICH ARE DIFFICULT OR
IMPOSSIBLE TO PREDICT ACCURATELY AND  MOST  OF WHICH ARE BEYOND THE CONTROL
OF  THE  COMPANY.   ALTHOUGH  THE  COMPANY BELIEVES  THAT  THE  ASSUMPTIONS
UNDERLYING  THE  FORWARD-LOOKING STATEMENTS  ARE  REASONABLE,  ANY  OF  THE
ASSUMPTIONS  COULD  PROVE  INACCURATE  AND,  THEREFORE,  THERE  CAN  BE  NO
ASSURANCE THAT THE RESULTS CONTEMPLATED IN SUCH FORWARD-LOOKING INFORMATION
WILL BE REALIZED.   IN  ADDITION,  AS  DISCLOSED  ABOVE,  THE  BUSINESS AND
OPERATIONS  OF  THE COMPANY ARE SUBJECT TO SUBSTANTIAL RISKS THAT  INCREASE
THE UNCERTAINTY INHERENT  IN  SUCH  FORWARD-LOOKING STATEMENTS.  ANY OF THE
OTHER FACTORS DISCLOSED ABOVE COULD CAUSE  THE  COMPANY'S  REVENUES  OR NET
EARNINGS, OR GROWTH IN REVENUES OR NET EARNINGS, TO DIFFER MATERIALLY  FROM
PRIOR RESULTS.  FURTHERMORE, A CHANGE IN THE MARKET FOR AIRCRAFT AND ENGINE
PARTS  COULD  RESULT  IN THE COMPANY'S INVENTORY BEING OVERVALUED AND COULD
REQUIRE THE COMPANY TO  WRITE  DOWN  ITS  INVENTORY  VALUATIONS IN ORDER TO
BRING  THEM  IN  LINE  WITH  THE REVISED FAIR MARKET VALUE.   THERE  IS  NO
ASSURANCE  THAT  A WRITE-DOWN WOULD  NOT  ADVERSELY  AFFECT  THE  COMPANY'S
BUSINESS, OPERATING  RESULTS  OR  FINANCIAL  CONDITION.  GROWTH IN ABSOLUTE
AMOUNTS  OF COST OF SALES AND GENERAL AND ADMINISTRATIVE  EXPENSES  OR  THE
OCCURRENCE  OF  EXTRAORDINARY  EVENTS  COULD  CAUSE  ACTUAL RESULTS TO VARY
MATERIALLY FROM THE RESULTS CONTEMPLATED IN THE FORWARD-LOOKING STATEMENTS.
BUDGETING AND OTHER MANAGEMENT DECISIONS ARE SUBJECTIVE  IN  MANY  RESPECTS
AND  THUS  SUSCEPTIBLE  TO INTERPRETATIONS AND PERIODIC REVISIONS BASED  ON
ACTUAL EXPERIENCE AND BUSINESS  DEVELOPMENTS, THE IMPACT OF WHICH MAY CAUSE
THE COMPANY TO ALTER ITS MARKETING,  CAPITAL  EXPENDITURE OR OTHER BUDGETS,
WHICH MAY IN TURN AFFECT THE COMPANY'S RESULTS  OF OPERATIONS.  IN LIGHT OF
THE  SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING  INFORMATION
INCLUDED  HEREIN,  THE INCLUSION OF SUCH INFORMATION SHOULD NOT BE REGARDED
AS A REPRESENTATION  BY THE COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES
OR PLANS OF THE COMPANY WILL BE ACHIEVED.

General

     The Company is a  leading  redistributor of aftermarket aircraft spare
parts used primarily for McDonnell  Douglas  MD-80  and  DC-9  aircraft and
commuter turboprop aircraft.  According to the World Jet Inventory Year-End
1998  (the  "World  Jet Inventory"), MD-80 and DC-9 aircraft accounted  for
approximately 14% of  the  commercial  jet aircraft in service worldwide at
December 31, 1998.  Management believes  that  the  Company  has one of the
most extensive inventories of aftermarket MD-80,  DC-9 and Embraer  EMB-120
Brasilia parts in the industry.  In addition, the Company provides aircraft
spare  parts  for Boeing, Lockheed, Airbus and other McDonnell Douglas  and
commuter turboprop  aircraft.   The aircraft spare parts distributed by the
Company, including avionics, rotable  and  expendable  airframe  and engine
parts,  are sold to a wide variety of domestic and international air  cargo
carriers, major commercial and regional passenger airlines, maintenance and
repair facilities  and  other redistributors.  The wide variety of aircraft
spare parts distributed by  the  Company  are  acquired through purchase or
consignment of surplus or bulk inventories from  airlines,  purchases  from
other redistributors and disassembly of aircraft.

     In  addition  to being a provider of aircraft spare parts, the Company
leverages its industry  expertise  to purchase, sell and lease aircraft and
engines.  The Company has periodically  acquired, leased and sold a variety
of narrow-body commercial jet aircraft, such  as  Boeing  727  and  737 and
McDonnell Douglas MD-80 and DC-9 aircraft, and commuter turboprop aircraft,
such  as Embraer EMB-120 aircraft. The Company currently leases two Embraer
EMB-120 aircraft and five Pratt & Whitney JT8D series engines.  The Company
also owns  a  50%  interest  in  a  joint  venture  that leases 20 DC-9-41H
aircraft  to  Scandinavian  Airlines System ("SAS").  The  Company  derives
revenue from lease payments and  seeks  to  sell  spare parts to the lessee
both  for  the leased aircraft and other aircraft in  the  lessee's  fleet.
Upon return  of  the  aircraft,  the  Company  either  re-leases,  sells or
disassembles  the  aircraft  for  parts  in  order  to  achieve the highest
utilization of the asset.  The Company believes that its  aircraft  trading
activities  and  its  parts redistribution business complement one another.
Therefore, the Company  is  increasing  its  focus  on aircraft trading and
leasing activities.

COMPANY HISTORY

     The  Company  was  founded in 1982 in Miami, Florida.   Initially  the
Company focused on parting  out  DC-8  aircraft and reselling the resulting
spare  parts.   Based  upon  the  Company's success  in  parting  out  DC-8
aircraft, in 1991, the Company began  purchasing  and  parting out DC-9 and
MD-80  aircraft.   Beginning  in  1992,  the  Company began purchasing  and
parting  out  Boeing  727 aircraft.  Since its founding,  the  Company  has
acquired over 50 aircraft for parting out.  The Company has also engaged in
aircraft and engine trading throughout its history.  During fiscal 1999 and
the first quarter of fiscal 2000, the Company expanded its core aftermarket
parts business by acquiring  significant  parts  inventories  for McDonnell
Douglas DC-10 and Embraer EMB-120 aircraft.  The Company also expanded  its
aircraft  trading  activities  during  fiscal 1999 and the first quarter of
fiscal 2000, completing the purchase of  six  and  the  sale of two EMB-120
aircraft.

INDUSTRY OVERVIEW

     The  Company  believes that the annual worldwide market  for  aircraft
spare parts is approximately  $10  billion,  of  which  approximately  $1.3
billion  represents  sales  of  aircraft  spare parts to the redistribution
market.  The Company believes that this market will continue to grow due to
the following factors:

     INCREASE IN THE NUMBER OF OLDER COMMERCIAL AIRCRAFT.  Increased demand
for air travel and the need for aircraft operators  to reduce operating and
capital  costs  have prompted many airlines to extend the  useful  life  of
older equipment.   According  to  the  World Jet Inventory, at December 31,
1998,  the average age of the worldwide jet  fleet  was  13.6  years.   The
installation  of  FAA-approved  hush-kits  and  extended  life  maintenance
programs have also increased the useful life of many older aircraft.   As a
result,  most  aircraft types have had longer service lives than originally
certified.  In addition,  many  foreign and domestic aircraft operators and
cargo carriers are increasing their  fleets through the acquisition of less
expensive used aircraft.  As older aircraft  are  transitioned  from  major
domestic  passenger  airlines  to  lower  cost  international  and regional
domestic passenger airlines and cargo carriers, used aircraft have  enjoyed
longer service lives than originally anticipated.  Older aircraft typically
require more maintenance and replacement parts than new aircraft.


     REDUCTION IN NUMBER OF APPROVED SUPPLIERS.  Cost considerations  cause
many   aircraft   operators  to  reduce  the  size  of  their  spare  parts
inventories, while  efficiency  and  quality  concerns  may  cause aircraft
operators to maintain relationships with a more limited number  of approved
suppliers.  Quality concerns are causing aircraft operators to demand  that
their  suppliers  be quality certified by organizations such as the Airline
Suppliers Association  ("ASA")  or the International Standards Organization
("ISO") and at least one major commercial  airline has begun to demand that
its suppliers carry product liability insurance.   In addition, as aircraft
operators  adopt  just-in-time  inventory procurement processes,  inventory
storage is increasingly handled by  suppliers  such  as  the  Company.  The
Company  believes  that these trends will continue in the future  and  will
benefit well-positioned aircraft parts suppliers such as the Company.

                                   2
 <PAGE>

    INCREASED INVENTORY  CONSIGNMENT.   Certain of the Company's customers
adjust inventory levels on a periodic basis by disposing of excess aircraft
spare  parts.   Traditionally, larger airlines  have  used  internal  sales
agents to manage  such  dispositions.   The  Company  believes  that  major
airlines  and other owners of aircraft spare parts, in order to concentrate
on their core  businesses  and  to  more  effectively monetize their excess
parts and inventories, are increasingly entering into long-term consignment
agreements  with  redistributors.   By  consigning  inventories  through  a
redistributor  such  as the Company, customers  are  able  to  offer  their
aircraft spare parts to  a  larger  number of prospective inventory buyers,
allowing the customer to maximize the  value of its inventory.  Consignment
also enables a consignee to offer for sale  significant parts and inventory
at minimal capital cost.

     MODERNIZATION  OF  COMMUTER  FLEETS.   Many  of  the  larger  regional
commuter airlines are modernizing their fleets  by retiring their turboprop
aircraft and acquiring short-range commuter jet aircraft.  As a result, the
retired commuter turboprop aircraft and related spare parts inventories are
available  for  purchase at favorable prices.  The  Company  believes  that
smaller regional  commuter  airlines will upgrade their fleets by replacing
the small turboprop aircraft  they  currently  operate  with  larger,  more
efficient  turboprop aircraft being retired by the larger regional commuter
airlines.  Accordingly,  the  Company believes that small regional commuter
airlines are potential customers  for  the aircraft and related spare parts
being retired by the larger regional commuter  airlines.   The Company also
believes  that  there is a significant opportunity for the redeployment  of
certain types of the commuter turboprop aircraft as cargo aircraft.

COMPANY STRATEGY

     The Company's strategy is to capitalize upon its position as a leading
redistributor of  MD-80,  DC-9  and commuter turboprop aircraft spare parts
and to broaden its product lines  to include other high-use aircraft as the
world fleet grows.  Key elements of the Company's strategy include:

     EXPAND AIRCRAFT AND ENGINE TRADING  AND LEASING.  The Company believes
that due to the increasing costs of commercial  aircraft,  the  anticipated
growth  of the worldwide aircraft fleet, and the emergence of new  regional
airlines,  aircraft operators will increasingly turn to operating leases as
an alternative  method  to  finance  their  aircraft and engine needs.  The
Company believes that leasing used commercial  aircraft  and engines should
grow due to the emphasis on airline cost reduction, the desire  of airlines
for  fleet flexibility and the growth in air travel.  In addition,  several
smaller  and regional airlines have recently chosen to lease inventories of
aircraft spare  parts  in  order  to  preserve  capital  while  maintaining
adequate spare parts support.

     The  Company  has periodically acquired, leased and sold a variety  of
aircraft and engines.   The Company derives revenue from lease payments and
seeks to sell spare parts  to  the  lessee  both for the leased aircraft as
well as other aircraft in the lessee's fleet.  Upon return of the aircraft,
the Company either re-leases, sells or disassembles  the aircraft for parts
in order to achieve the highest utilization of the asset.   In  the case of
aircraft  that  are  disassembled for parts, the lease revenues reduce  the
Company's cost of the  aircraft  and,  therefore,  the  parts acquired from
disassembly  of the aircraft.  The Company purchases aircraft  and  engines
for resale when  it believes the aircraft or engines can be purchased at an
attractive price and  resold within a relatively brief period of time.  The
Company  has determined  that  its  spare  parts  sales  opportunities  are
enhanced by  providing  existing  and new customers with whole aircraft and
engines  through  sale  and  lease transactions.   Therefore,  the  Company
believes that its aircraft trading  activities and its parts redistribution
business complement one another.  The  Company  has  increased its aircraft
trading and leasing activities and intends to do so further.

     BROADEN PRODUCT LINE.  The Company has recently expanded  its  product
line to include aftermarket parts for Airbus A-300, McDonnell Douglas DC-10
and  Boeing  747  aircraft and certain commuter aircraft including Embraer,
Shorts,  Saab,  de Havilland,  British  Aerospace  and  ATR  aircraft.   In
addition, the Company intends to expand further its product line to include
parts for Boeing  767 aircraft.  As fleets of these aircraft age and as air
cargo carriers transition  larger  portions  of  their  fleets to wide-body
aircraft,  the  Company  will  seek to capitalize on the demand  for  parts
resulting  from  the aging and continued  use  of  these  aircraft  models.
Several air cargo  carriers  currently  utilize DC-10, 767 and A-300 series
aircraft, and the Company believes use of  these  models  will  continue to
increase.  The Company believes that a significant number of these aircraft
types have been or will be converted to cargo use and that its relationship
with cargo carriers will provide an advantage in supplying parts  for these
aircraft  to  such  customers.   The Company also believes that there is  a
significant opportunity for the redeployment  of  the  Embraer  EMB-120 and
Saab  340 aircraft as a cargo aircraft, as commuter carriers convert  their
fleets to small jet aircraft.

                                  3
<PAGE>
     INCREASE  SALES  TO  CARGO  CARRIERS, REGIONAL COMMERCIAL AIRLINES AND
COMMUTER  AIRLINES.  Cargo  carriers,   regional  commercial  airlines  and
commuter  airlines  are among the  Company's  principal  customers.   Cargo
carriers are important  customers  because  the  fleets  of  such operators
typically  consist  of  older  aircraft  of the type for which the  Company
maintains an extensive inventory of parts.   Additionally,  such  customers
typically  do  not maintain extensive inventories of spare parts.  Regional
commercial airlines  are  important  customers  because such airlines favor
narrow-body  aircraft,  such  as  MD-80 and DC-9 aircraft,  for  which  the
Company is a primary source of spare  parts.  The smaller commuter airlines
are  important  customers because their fleets  consist  primarily  of  the
turboprop aircraft  being  retired  by  the  larger commuter airlines.  The
Company  has  acquired  an  extensive inventory of  aftermarket  parts  for
several popular commuter turboprop aircraft types.  The Company will direct
its marketing activities to broadening its customer base of cargo, regional
and commuter airlines in order  to  increase  market share and leverage its
core competencies.

     UTILIZE CONSIGNMENT AGREEMENTS TO ACQUIRE INVENTORY.  In recent years,
the  Company acquired most of its aircraft parts  inventory  by  purchasing
large  numbers  of  parts in bulk from aircraft operators.  The Company has
recently begun to acquire  inventory  by  means  of  strategic  consignment
arrangements.  Pursuant to a consignment arrangement, an aircraft  operator
permits the Company to market and sell an inventory of aircraft parts.  The
Company  receives  a  percentage  of  the  sales price of a consigned part.
Consignment arrangements allow the Company to  obtain  parts inventory on a
favorable  basis  without  committing its capital to purchasing  inventory.
The Company's margins on sales  of  consigned parts are, however, typically
lower than margins realized on sales  of  parts  acquired by other methods.
During  calendar  year  1999,  the  Company  completed  three   significant
consignment  agreements.  The  Company  believes  that its market presence,
experience  in  evaluating  parts  inventories,  sophisticated   management
information  systems and capital strength will enable the Company to  enter
into additional consignment arrangements.

     SEEK  ADDITIONAL   BULK  PURCHASE  OPPORTUNITIES.   The  Company  will
continue to seek opportunities to purchase large spare parts inventories in
bulk.  The Company cannot predict when such opportunities will arise.  Bulk
purchase opportunities arise  when  airlines,  in  order  to reduce capital
requirements, sell large amounts of inventory in a single transaction, when
inventories of aircraft spare parts are sold in conjunction  with corporate
restructurings or reorganizations or when an aircraft operator realigns its
aircraft  fleet,  reducing  the number of or exiting a particular  aircraft
model.   Bulk  inventory  purchases  allow  the  Company  to  obtain  large
inventories of aircraft spare  parts at a lower cost than can ordinarily be
obtained  by  purchasing parts on  an  individual  basis.   Therefore,  the
Company realizes  higher  gross  margins on sales of parts acquired by bulk
purchases, as opposed to other methods.   However, bulk inventory purchases
require a commitment of the Company's capital.   The  Company believes that
it  has the ability, due to its market presence, experience  in  evaluating
parts inventories, sophisticated management information systems and capital
strength,  to complete large bulk purchase opportunities to the extent such
purchases are considered favorable.

     MAINTAIN  MARKET SHARE OF PARTS FOR MD-80 AND DC-9 AIRCRAFT.  Recently
several of the Company's  competitors  have  increased their inventories of
parts for MD-80 and DC-9 aircraft.  The Company  intends  to  maintain  its
market   share  of  parts  for  such  aircraft  despite  such  competition.
According  to  the  World  Jet  Inventory, MD-80 and DC-9 aircraft together
accounted for approximately 14% of  the  commercial jet aircraft in service
worldwide  at  December  31, 1998.  Although  the  DC-9  is  no  longer  in
production, many of the DC-9's  parts  are  interchangeable with the MD-80,
which is still in production.  The Company believes that its experience and
knowledge of the DC-9 gives it a competitive  advantage  in  selling  parts
into  the  MD-80  marketplace.  Boeing has indicated its intention to cease
production of the MD-80  when  current  production  commitments  end.   The
Company  intends to capitalize on the limited availability of new parts for
such aircraft models by acquiring (i) pools of inventory from airlines that
cease to operate  such  aircraft  or  that desire to reduce their levels of
parts  inventory  and  (ii)  aircraft  for  disassembly  when  economically
justified.  The Company believes that its knowledge of the fleets of MD-80s
and  DC-9s  currently  in  operation  and  its worldwide  contacts  in  the
commercial  aviation industry will permit it  to  acquire  other  inventory
pools and aircraft for disassembly on favorable terms in the future.

     CONTINUED  COMMITMENT  TO  QUALITY  AND TECHNOLOGICAL INNOVATION.  The
Company emphasizes adherence to high quality standards during each stage of
its operations (product acquisition, documentation,  inventory  control and
delivery).  In August 1997, the ASA, an FAA-recognized independent  quality
assurance  organization, accredited the Company as an aftermarket supplier.
In addition,  the  Company  believes  it  was  one of the first aftermarket
redistributors to bar-code its inventory and it has created and sponsors an
industry-wide  Internet  parts  locator service for  its  customers,  which
heightens awareness of the Company,  enhances  its position in the industry
and increases sales of parts.

                                   4
<PAGE>

     PURSUE STRATEGIC ACQUISITIONS.  The Company  competes  in a fragmented
market in which numerous small companies serve distinct market niches.  The
Company believes that small aftermarket parts redistributors, many of which
are  family-owned  or  capital  constrained,  are  unable  to  provide  the
extensive  inventory and quality control measures necessary to comply  with
applicable  regulatory   and   customer   requirements,  and  will  provide
acquisition opportunities for the Company.  Similarly, the Company believes
that  many  small  aircraft  leasing companies  are  potential  acquisition
targets.  Acquisitions are expected  to  increase  the  Company's  customer
base,  expand  its product line both with respect to aircraft in which  the
Company currently  specializes  and  into new aircraft types, to strengthen
its  relationships  with  existing  customers   through   availability   of
additional  inventory and permit the Company to expand its aircraft trading
opportunities.

AIRCRAFT SPARE PARTS

     Aircraft spare parts can be categorized by their ongoing ability to be
repaired and  returned  to service.  The general categories are as follows:
(i) rotable; (ii) repairable;  and  (iii)  expendable.  A rotable is a part
which  is  removed periodically as dictated by  an  operator's  maintenance
program or on  an  as-needed  basis and is typically repaired or overhauled
and re-used an indefinite number of times.  An important subset of rotables
is life limited parts.  A life  limited  rotable has a designated number of
allowable flight hours and/or cycles (one  take-off  and  landing generally
constitutes one cycle) after which it is rendered unusable.   A  repairable
is  similar  to  a  rotable  except  that it can only be repaired a limited
number of times before it must be discarded.   An expendable is generally a
part which is used and not thereafter repaired for further use.

     Aircraft spare parts' conditions are classified within the industry as
(i) factory new, (ii) new surplus, (iii) overhauled,  (iv)  serviceable and
(v)  as removed.  A factory new or new surplus part is one that  has  never
been installed or used.  Factory new parts are purchased from manufacturers
or their  authorized  distributors.   New  surplus parts are purchased from
excess stock of airlines, repair facilities  or  other  redistributors.  An
overhauled  part  has  been  completely disassembled, inspected,  repaired,
reassembled and tested by a licensed  repair  facility.   An aircraft spare
part  is  classified  serviceable  if  it is repaired by a licensed  repair
facility rather than completely disassembled as in an overhaul.  A part may
also be classified serviceable if it is  removed  by  the  operator from an
aircraft  or  engine while operating under an approved maintenance  program
and is functional and meets any manufacturer or time and cycle restrictions
applicable to the part.  With appropriate documentation, a factory new, new
surplus, overhauled or serviceable part designation indicates that the part
can be immediately utilized on an aircraft.  A part in as removed condition
requires functional  testing,  repair  or  overhaul  by a licensed facility
prior  to  being  returned to service in an aircraft.  The  aircraft  spare
parts sold by the Company include avionics, rotable and expendable airframe
and  engine  parts  for   commercial   aircraft.   Currently,  the  Company
specializes in replacement parts for MD-80,  DC-9  and  commuter  turboprop
aircraft  and  management  believes  that  the  Company has one of the most
extensive inventories of aftermarket MD-80, DC-9  and  EMB-120 parts in the
industry.  Currently, the Company has approximately 70,000  inventory  line
items,  many  of which represent multiple unit quantities and relate to the
MD-80, DC-9 and  EMB-120  aircraft.   Many of these parts, such as avionics
and engine parts, can also be used by a wide variety of aircraft other than
MD-80, DC-9 and EMB-120 aircraft.  In addition  to  the Company's inventory
of  MD-80,  DC-9 and EMB-120 parts, the Company's inventory  also  includes
spare parts for Boeing 727, 737 and 747 aircraft, Lockheed L-1011 aircraft,
McDonnell Douglas  DC-8  and  DC-10  aircraft, and Airbus, Shorts, Saab, de
Havilland, British Aerospace and ATR aircraft  and  for the Pratt & Whitney
JT8D engine series.

OPERATIONS OF THE COMPANY

     The  Company's  core  business  is buying and selling  aircraft  spare
parts.   In  addition, the Company engages  in  the  sale  and  leasing  of
aircraft and engines.   The  Company  believes  that  aircraft  and  engine
trading  will  become a more significant part of the Company's business  in
the future and that it provides significant opportunities for expansion.

                                   5
<PAGE>

     INVENTORY ACQUISITION.   The  Company  has  recently  begun to acquire
inventory by means of strategic consignment arrangements.  The Company also
acquires  inventory  by  purchasing individual parts from airlines,  repair
facilities or other redistributors,  by  purchasing  excess  inventory from
aircraft operators or by purchasing aircraft for disassembly.   The Company
may  also  fill  a  customer  order  for  a  part not held in the Company's
inventory  by  locating  the  part for the customer  from  another  vendor,
purchasing the part and then reselling  the  part  to  the  customer.   The
Company  obtains  inventory  on  consignment from or purchases inventory in
bulk from airlines that are eliminating  certain  portions  of  their spare
parts  inventory  due  to  the  retirement  of  an aircraft type from their
fleets,  implementing  inventory  reduction  programs   to   reduce  costs,
downsizing their operations or ceasing to conduct business.

     AIRCRAFT  AND  ENGINE  SALES  AND LEASING.  The Company has determined
that its spare parts sales opportunities are enhanced by providing existing
and new customers with whole aircraft  and  engines  through sale and lease
transactions.  Such transactions allow the Company to  expand  its customer
base for spare parts and, through leasing, to reduce the cost basis  in its
aircraft and engines.  The Company derives revenue from lease payments  and
seeks  to  sell  spare  parts to the lessee both for the leased aircraft as
well as other aircraft in the lessee's fleet.  Upon return of the aircraft,
the Company either re-leases,  sells or disassembles the aircraft for parts
in order to achieve the highest utilization of the asset.

     The Company currently leases  two  Embraer  EMB-120  aircraft and five
JT8D  engines.  The Company's aircraft leases are operating  leases  rather
than finance  leases  and  expire during August 2003.  The Company's engine
leases are "evergreen" leases  which,  although  they  have  no termination
date, are cancelable by either party upon specified notice, typically 30 to
90  days.   Under  an  operating  lease, the Company retains title  to  the
aircraft or engine, thereby retaining  the  potential benefits and assuming
the risk of the residual value of the aircraft or engine.  Operating leases
allow  aircraft operators greater fleet and financial  flexibility  due  to
their shorter-term  nature,  the  relatively  small  initial capital outlay
necessary  to  obtain use of the aircraft or engine and  off-balance  sheet
accounting treatment.   The  Company  currently focuses on leasing commuter
turboprop aircraft, particularly the EMB-120.   The  Company  believes that
there is an increasing demand by customers for operating leases,  which are
being used as an alternative to traditional financing arrangements.

     During the second quarter of fiscal 1999, the Company entered  into  a
joint  venture  (the "Air41 Joint Venture") for the acquisition of 20 DC-9-
41H aircraft from SAS.  The aircraft were leased back to SAS and the leases
had an average term of 39 months.  The Company's original investment in the
Air41 Joint Venture  was  approximately  $1.4 million.  The Company's Air41
Joint  Venture partner is AirCorp, Inc., a  privately  held  company.   The
aircraft  were  financed  through the joint venture, utilizing non-recourse
debt to the partners.  The  Company  is  exploring  opportunities  for  the
aircraft  after  the  end  of  the  term  of  the  leases  with  SAS.  Such
opportunities  include  releasing the aircraft to SAS, leasing the aircraft
to one or more different  lessee(s),  selling the aircraft, parting out the
aircraft, or directly placing the aircraft  into  either passenger or cargo
service, whereby the Company may have a principal interest  in  an airline.
At this time, the Company has no firm commitment for the aircraft after the
SAS leases expire.

     EXCHANGE TRANSACTIONS.  An "exchange transaction" generally involves a
high value/high turnover rotable part which an operator frequently replaces
when  performing  aircraft  maintenance.   In  an  exchange transaction,  a
customer  pays  an exchange fee and returns a "core" unit  to  the  Company
within 14 days.  A "core" unit is the same part which is being delivered to
the customer by the  Company, but in need of overhaul.  The Company has the
customer's core unit overhauled  and  bills  the  customer for the overhaul
charges  and  retains the overhauled core unit in its  inventory.   If  the
"core" unit cannot  be  repaired,  it  is  returned to the customer and the
exchange transaction is converted to an outright  sale  at  a  sales  price
agreed  upon  at  the  time  the  exchange transaction was negotiated.  The
Company  continues  to emphasize exchange  transactions  because  they  are
profitable and ensure that scarce parts remain in stock for future sales.

SALES AND MARKETING; CUSTOMERS

     The Company has  developed  a sales and marketing infrastructure which
includes  well-trained  and  knowledgeable  sales  personnel,  computerized
inventory management, listing  of  parts  in  electronic industry data bank
catalogues  and  a home page on the Internet.  Crucial  to  the  successful
marketing of the Company's  inventory  is  the  Company's  ability  to make
timely delivery of spare parts in reliable condition.  The Company believes
aircraft  operators  are  more sensitive to reliability and timeliness than
price.
                                   6
<PAGE>

     In addition to directly  marketing  its  inventory,  the  Company  has
created and sponsors an industry-wide internet parts locator service, which
is  found at http://www.ipls.com.  The Company's internet service is a free
service  available to any potential customer and lists all of the inventory
available  for  sale  by  the  Company.   In order to increase its value to
potential  customers,  the  Company's  Internet   service  also  lists  the
inventory   of  over  100  additional  aftermarket  parts   redistributors,
representing  more  than  1.2  million  individual  parts.   Similarly, the
Company lists its inventory in the Air Transport Association's computerized
databank   ("AIRS")   and   with  the  Inventory  Locator  Service  ("ILS")
proprietary computerized databank.   Buyers  of  aircraft  spare  parts can
access  any  of  the  databases  described  above,  as  well as other parts
databases,  to  determine  the  companies which have the desired  inventory
available.   Neither  the  Company's   service,  AIRS  or  ILS  list  price
information relating to particular parts.

     Market forces establish the price for  aftermarket aircraft parts.  No
pricing   service  or  price  catalogue  exists  for   aftermarket   parts.
Aftermarket  aircraft  parts prices are determined by referencing new parts
catalogues  with  consideration   given   to  existing  supply  and  demand
conditions.  Often, aircraft operators will  opt  for  quality  aftermarket
parts  even  when  new parts are still in production.  Aftermarket aircraft
parts meet the same  FAA standard as new parts, cost less than the same new
parts and are often more readily available.

     The  Company's customers  include  a  wide  variety  of  domestic  and
international  air  cargo carriers, major commercial, regional and commuter
passenger  airlines,  maintenance   and   repair   facilities   and   other
redistributors.   Management  believes  that its customer relationships are
important to the Company's operational success.   The  Company maintains an
adequate level of inventory in order to service its customers  in  a timely
manner.   Management  believes  that  availability  and  timely delivery of
quality  spare parts are the primary factors considered by  customers  when
making  a  spare   parts   purchase  decision.   Cargo  carriers,  regional
commercial airlines and commuter airlines are among the Company's principal
customers.  Cargo carriers are  important  customers  because the fleets of
such operators typically consist of older aircraft of the  type  for  which
the  Company  maintains  an  extensive  inventory of parts and because such
customers typically do not maintain extensive  inventories  of spare parts.
Regional commercial airlines are important customers because  such airlines
favor narrow-body aircraft, such as MD-80 and DC-9 aircraft, for  which the
Company  is a primary source of spare parts.  The smaller commuter airlines
are important  customers  because  their  fleets  consist  primarily of the
turboprop  aircraft  being  retired  by the larger commuter airlines.   The
Company  has  acquired  an extensive inventory  of  aftermarket  parts  for
several popular commuter turboprop aircraft types

     Excluding aircraft and  engine  sales,  in  fiscal  1999, no customers
accounted for more than 5% of the Company's total revenues.   Each aircraft
or  engine  sale  is  unique  and  the  Company  does  not rely on previous
customers for repeat business.  Currently, the Company believes that it has
no customer, the loss of which would have a material adverse  effect on the
Company's  business, financial condition and results of operations.   In  a
given period,  a  substantial  portion  of  the  Company's  revenues may be
attributable  to the sale of one or more aircraft or engines.   Such  sales
are unpredictable  transactions  dependent,  in  part,  upon  the Company's
ability to purchase an aircraft or engine at an attractive price and resell
it within a relatively brief period of time.  The revenues from the sale of
an aircraft or engine, the timing of inventory sales or a lease transaction
during  a  given period may result in a customer being considered  a  major
customer of the Company for that period.

QUALITY ASSURANCE

     The  Company  adheres  to  stringent  quality  control  standards  and
procedures  in  the purchase and sale of its products.  In August 1997, the
ASA accredited the  Company's quality assurance system after the completion
of an extensive facilities  audit  and numerous meetings with the Company's
management.  Parts procured from an accredited supplier convey assurance to
the  purchaser  that  the  quality  is  as   stated   and  the  appropriate
documentation is on file at the supplier's place of business.  Furthermore,
accreditation  provides  assurance  that  the supplier has  implemented  an
appropriate quality assurance system and has  demonstrated  the  ability to
maintain  that  system.   In  addition,  many  of  the  Company's customers
periodically audit the Company's operations to ensure compliance  with such
customer's quality standards.

     Because   aircraft   operators   require   a   readily  available  and
identifiable  source  of  inventory  meeting  regulatory requirements,  the
Company has implemented a total quality assurance  program.   This  program
consists of numerous quality procedures, including the following:

                                 7
<PAGE>

     <circle>  Inspection  procedures  mandating  that  procured  aircraft,
          engines  and  parts  be  traceable  to  a  source approved by the
          Company

     <circle> Training and supervision of personnel to  properly  carry out
          the total quality assurance program

     <circle>  On-going  quality  review board meetings conducted by senior
          management to oversee the total quality assurance program

GOVERNMENT REGULATION

     The aviation industry is highly  regulated in the United States by the
FAA  and  in  other  countries  by  similar  regulatory   agencies.   These
regulations are designed to ensure that all aircraft, engines  and aircraft
components  are  continuously  maintained in proper condition for the  safe
operation of aircraft.  Before spare  parts  are  installed on an aircraft,
they must meet certain standards as to their condition and have appropriate
documentation.   Parts  owned  or  acquired  by the Company  may  not  meet
currently  applicable standards, or standards may  change  in  the  future,
causing parts  already  contained in the Company's inventory to be scrapped
or modified.  While the Company's  operations  are  not currently regulated
directly by the FAA, the independent facilities that  repair  and  overhaul
the  Company's  products and the aircraft operators that ultimately utilize
the Company's products  are  subject to extensive regulation.  Accordingly,
the Company must consider the  regulatory requirements of its customers and
provide  them  with  parts  that  comply   with   airworthiness   standards
established by the FAA, together with required documentation which  enables
these  customers  to  comply with other applicable regulatory requirements.
The inspection, maintenance  and repair procedures for the various types of
aircraft, engines and aircraft  components  are  prescribed  by  regulatory
authorities  and  can  be  performed only by FAA-licensed repair facilities
utilizing certified technicians.   Compliance  with  applicable FAA and OEM
standards are required prior to installation of a part on an aircraft.  The
Company only utilizes FAA-licensed repair facilities to  repair and certify
aircraft, engines and aircraft components.

     In September 1996, the FAA issued an advisory circular  to support the
implementation  of  a  voluntary  accreditation program for civil  aircraft
parts suppliers.  This accreditation  program establishes quality standards
applicable to aftermarket suppliers, such  as  the  Company, and designates
FAA  approved  organizations such as the ASA to perform  quality  assurance
audits  for  initial   accreditation  of  aftermarket  suppliers.   Quality
assurance  audits  are  required   on   an   on-going   basis  to  maintain
accreditation.   In addition, many of the Company's customers  periodically
audit the Company's  operations  to  ensure compliance with such customer's
quality standards.  The Company believes  that  ongoing  quality  assurance
audits and strict adherence to its quality assurance system is essential to
meeting  the  needs of its existing and future customers.  In August  1997,
the Company received accreditation from the ASA.

     Because the  Company's  sales  consist  largely  of  parts  for  older
aircraft,  regulations  promulgated  by  the  FAA  governing noise emission
standards for older aircraft and the FAA's Aging Aircraft Program Plan (the
"Aging Aircraft Program") may increase the cost of operating  such aircraft
and  have a material impact on the market for the Company's products.   All
stage  two  aircraft must install hush-kits pursuant to such noise emission
standards or  be  phased  out of operation in the United States by December
31, 1999 and in the European  Union  by  April 1, 2002.  The Aging Aircraft
Program requires aircraft operators to perform structural modifications and
inspections  to  address  airframe  fatigue  and   to  implement  corrosion
prevention  and  control  programs,  which  increase  the   operating   and
maintenance  costs of older aircraft.  Furthermore, the EPA and the various
agencies of the  European  Union  have  sought  the  adoption  of  stricter
standards  limiting  the  emission  of nitrous oxide from aircraft engines.
The Company believes that notwithstanding  the substantial costs imposed by
noise emission standards and the Aging Aircraft  Program on older aircraft,
estimated by the Company to average less than $4 million  per  aircraft  on
aircraft  such  as  the  DC-9,  certain aircraft operators will continue to
utilize older aircraft due to the  substantially  greater cost of acquiring
new replacement aircraft.


                                  8
<PAGE>

     The inability of the Company to supply its customers  with spare parts
on  a  timely  basis,  or any occurrence of the Company providing  products
which subsequently fail,  may  adversely affect the Company's relationships
with its customers and have a material  adverse  effect  on  its  business,
financial condition and results of operations.  The core operations  of the
Company   may  in  the  future  be  subject  to  FAA  or  other  regulatory
requirements.   The  Company  closely  monitors  the FAA and industry trade
groups  in an attempt to understand how possible future  regulations  might
impact the  Company.   There  can  also  be  no assurance that new and more
stringent government regulations, if enacted,  would  not  have a direct or
indirect adverse effect on the Company.

     An important factor in the aircraft spare parts redistribution  market
relates  to  the  documentation and traceability of an aircraft spare part.
The Company requires all of its suppliers to provide adequate documentation
as dictated by the  Company's  customers.   The Company utilizes electronic
data scanning and storage techniques to maintain  complete  copies  of  all
documentation.   Documentation  required  includes, where applicable, (i) a
maintenance release from a certified FAA repair  facility  signed and dated
by  a  licensed  airframe  and/or  power plant mechanic or other  certified
inspector who repaired the aircraft spare part and an inspection to certify
that the proper methods, materials and workmanship were used, (ii) a "tear-
down"  report  detailing the discrepancies  and  corrective  actions  taken
during the last  shop repair, and (iii) an invoice or purchase order for an
approved source.

PRODUCT LIABILITY

     The commercial aviation industry periodically experiences catastrophic
losses.  As a redistributor,  the  Company may be named as a defendant in a
lawsuit as a result of such catastrophic loss if a part sold by the Company
were  installed  in an incident-related  aircraft.   In  this  regard,  the
Company maintains  product  liability  insurance  in  an amount the Company
believes is sufficient.  While the Company believes that  it  has liability
insurance  to  protect it from such claims, and while no lawsuit  has  ever
been filed against  the  Company  based upon a product liability theory, no
assurance can be given that claims  will  not  arise  in the future or that
such  insurance  coverage  will  be  adequate.   However, an  uninsured  or
partially  insured claim, or a claim for which third-party  indemnification
is not available,  could  have  a  material adverse effect on the Company's
business,  financial condition and results  of  operations.   Additionally,
there can be  no assurance that insurance coverage can be maintained in the
future at an acceptable  cost.  Any such liability not covered by insurance
could have a material adverse  effect  on  the  financial  condition of the
Company.

COMPETITION

     The aircraft spare parts redistribution market is highly  competitive.
The  market  consists  of  a  limited  number of well-capitalized companies
selling a broad range of products and numerous  small  competitors  serving
distinct  market  niches.   Certain of these competitors have substantially
greater financial, marketing  and  other  resources  than the Company.  The
Company  believes that current industry trends will benefit  larger,  well-
capitalized  companies.   The  Company  believes  that  range  and depth of
inventories,  quality  and traceability of products, service and price  are
the key competitive factors  in the industry.  The principal companies with
which the Company competes are  AAR  Corp.,  AGES,  Aviation Sales Company,
Kellstrom Industries Inc., The Memphis Group, Inc. and AVTEAM, all of which
are significantly larger than the Company.  Customers  in  need of aircraft
parts have access, through on-line inventory catalogues, to  a  broad array
of  suppliers,  including  aircraft  manufacturers,  airlines  and aircraft
services  companies,  which  may  have the effect of increasing competition
for, and lowering prices on, parts sales.

EMPLOYEES

     As of May 31, 1999, the Company  had 28 employees.  The Company is not
a party to any collective bargaining agreement.   The  Company believes its
relations with its employees are good.

YEAR 2000 ISSUES

     The Year 2000 problem is the result of computer programs being written
using  two  digits  rather than four to define the applicable  year.  These
programs can fail by  misinterpreting  dates  beyond  the  year 1999, which
could cause possible miscalculations, and a disruption in the  operation of
such  systems.  This  is  commonly referred to as the Year 2000 issue.  The
Company has identified four  major  areas  of  concern regarding Year 2000:
Internal Information Systems, External Facilities, Materials Held for Sale,
and Outside Vendors' Information Systems and Materials.

                                   9
<PAGE>

     INTERNAL INFORMATION SYSTEMS.  The Company  has  developed  a  plan to
address  issues  related  to  the  impact  of  the Year 2000 problem on its
internal information systems ("IT").  Starting in  fiscal  1997 the Company
began  the  process of upgrading or replacing all personal computers.  This
process was completed in the third quarter of fiscal 1998. At the same time
all critical  software  systems were assessed for Year 2000 compliance. The
inventory system, which is written in PICK, required no further action. The
accounting package required  a  "patch"  which sets an assumption for dates
between  1975  and  2035. The Company anticipates  no  further  remediation
requirements on the part of either of these packages. The Company primarily
uses  Microsoft Operating  Systems  and  productivity  packages.  Microsoft
continues  to  find  and fix Year 2000 issues as they appear throughout its
product line. To date  all  patches  have  been  applied  to the Windows NT
Servers.   The  Windows  95 and 98 machines were patched with  all  current
updates in the second quarter  of  calendar  1999.   The  Company is in the
process of replacing one Unix based system that is not Year 2000 compliant.
Incremental costs, which include consulting costs and costs associated with
internal resources to modify existing systems in order to achieve Year 2000
compliance, are charged to expense as incurred. The Company does not expect
the financial impact of making the required system changes, which are being
funded from operating cash flows, to be material to the Company's financial
position,  results of operations or cash flows.  The anticipated  costs  of
the project  and  the  dates on which the Company believes it will complete
the Year 2000 modifications  and assessments are based on management's best
estimates, which were derived  utilizing  numerous  assumptions  of  future
events,  including  the  continued availability of certain resources. There
can  be no guarantee that these  estimates  will  be  achieved  and  actual
results  could  differ  materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to,
the availability and cost of personnel trained in this area and the ability
to locate and correct the remaining relevant systems.

     EXTERNAL FACILITIES.   The  Company  has  received assurances from the
owners  of  its  facilities  that  the  owners are taking  steps  that  are
appropriate  to  assure  uninterrupted  access   to  these  facilities  and
uninterrupted fire protection and security services.  The  Company  has not
sought or received assurances regarding the uninterrupted services provided
by  the  public  utilities,  financial  institutions, governmental agencies
(e.g., Federal Aviation Administration) and  other  similar  entities,  the
services of which the Company utilizes.  The Company believes, based on its
analysis  of  the  Year 2000 issue, that it will not experience significant
disruptions of its business  as  a  result of interruptions in the services
provided by such entities.

     MATERIALS HELD FOR SALE.  Like all  other  companies  in  the aircraft
parts  redistribution  industry, the Company lists parts to indicate  their
condition. The parts are  categorized  as  "serviceable",  "as removed", or
"unserviceable."  The  Company  makes  no  representation or warranty  with
respect  to  the  parts  it  sells.  Specifically,  the  Company  makes  no
representation or warranty regarding whether  there  are  Year  2000 issues
with  respect to any of the parts available for sale. All parts purchasers'
concerns   about  the  Year  2000  issue  are  therefore  directed  to  the
manufacturer of such part.

     OUTSIDE VENDORS INFORMATION SYSTEMS AND MATERIALS.  The Company's Year
2000 issues,  and  any  potential business interruptions, costs, damages or
losses related thereto, may  be  dependent upon the Year 2000 compliance of
its  suppliers and vendors.  However,  the  Company  believes  that  it  is
unlikely  that  it will be materially affected by the failure of any of its
suppliers, vendors  or  other third parties to be Year 2000 compliant.  The
Company obtains its parts  inventory  from a variety of sources.  If one or
more sources were to experience a business  interruption as a result of its
failure to be Year 2000 complaint, the Company believes it would be able to
obtain inventory from another supplier.  Furthermore,  the Company does not
believe that its aircraft trading activities are likely  to be disrupted by
the  failure  of  the  entities  to which it sells and leases aircraft  and
engines to be Year 2000 compliant.

     A reasonable worst case scenario  is  that  a  large  number  of third
parties  (including  lessees  and  spare parts customers) may be unable  to
operate and generate revenues and as  a  result may be unable to make lease
payments on a timely basis or purchase parts.   The  Company  is  unable to
estimate  the likelihood or the magnitude of the resulting lost revenue  at
this time should  the worst case scenario come to pass.  However, should it
occur, the Company  would attempt to repossess leased engines, aircraft and
spare parts from non-compliant  third  parties  and  place such assets with
compliant third parties.  The Company can offer no assurances that it would
be able to re-lease such assets at favorable terms or  at  all.  Similarly,
the  Company  would  attempt to find compliant customers for the  Company's
spare part sales.

                                  10
<PAGE>

CAUTIONARY STATEMENTS

     THIS ANNUAL REPORT  ON  FORM  10-K  CONTAINS  CERTAIN  FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE EXCHANGE ACT, INCLUDING  THE PLANS AND
OBJECTIVES   OF  MANAGEMENT  FOR  THE  BUSINESS,  OPERATIONS  AND  ECONOMIC
PERFORMANCE OF  THE COMPANY.  THE FORWARD-LOOKING STATEMENTS AND ASSOCIATED
RISKS SET FORTH IN THIS ANNUAL REPORT MAY INCLUDE OR RELATE TO, AMONG OTHER
THINGS, THE FACTORS  SET  FORTH  BELOW, TOGETHER WITH OTHER INFORMATION SET
FORTH IN THIS ANNUAL REPORT.

     RISKS  REGARDING  THE  COMPANY'S   INVENTORY.   The  Company  acquires
inventory by purchasing individual parts  from  airlines, repair facilities
or  other  redistributors,  by  purchasing excess inventory  from  aircraft
operators, or by purchasing aircraft  for  disassembly.   The  Company also
obtains  parts  inventory  on  consignment  from  airlines.   The Company's
business is substantially dependent on its ability to acquire inventory  by
one  of these methods because its net  sales are directly influenced by the
level  and  composition  of inventory available for sale.  Because the size
and composition of the Company's  inventory  is  critical to its results of
operations  and  because there is no organized market  to  procure  surplus
inventory, the Company's operations are materially dependent on the success
of management in identifying potential sources of inventory and obtaining a
consignment of the  inventory  on  acceptable  terms  or  purchasing  it at
acceptable  prices.   There  can  be  no  assurance  that inventory will be
available on acceptable terms or at the times required  by the Company.  In
addition, once acquired, the market value of the Company's  inventory could
be adversely affected by factors beyond the Company's control,  such as the
sudden availability of additional inventory, a sudden decline in demand for
the  Company's  parts  due  to  a decline in use of certain aircraft types,
regulatory changes mandating uneconomic improvements to items in inventory,
or a decision by an OEM to begin manufacturing new parts that would compete
with aftermarket parts.  Any of such  factors could result in the Company's
inventory being overvalued and could require  the Company to write down its
inventory valuations in order to bring them in  line  with the revised fair
market value.  The failure to identify and acquire inventory  in  a  timely
fashion  on  acceptable  terms  or  a decline in the value of the Company's
inventory would have a material adverse  effect  on the Company's business,
financial condition and results of operations.

     CONCENTRATION ON MD-80 AND DC-9 AIRCRAFT.  The  Company's  net   sales
are  concentrated  in  the  aftermarket  for MD-80 and DC-9 aircraft, which
aircraft  at  December  31, 1998 accounted for  approximately  14%  of  the
commercial jet aircraft in  service  worldwide  according  to the World Jet
Inventory.   The  DC-9 is no longer in production and Boeing has  indicated
its intention to cease  production  of  the  MD-80  when current production
commitments  end.   Any decline in the use of MD-80 and  DC-9  aircraft  by
aircraft operators, the  unscheduled  removal from service of large numbers
of  MD-80  and  DC-9  aircraft  or  the  grounding   of  such  aircraft  by
governmental  authorities  for  any  reason  could have a material  adverse
effect  on  the  Company's  business, financial condition  and  results  of
operations.  In addition, all  DC-9  aircraft operated in the United States
and European Union will need to be hush-kitted, relocated to other areas or
removed from service by 2000 or 2002,  respectively.   In  the  event these
aircraft are removed from service, demand for the Company's MD-80  and DC-9
parts could decline and the supply of spare parts may increase, which would
have  a  material  adverse  effect  on  the  Company's  business, financial
condition and results of operations.

     BROADENING  OF  PRODUCT LINE.  The Company has recently  expanded  its
product line to include  aftermarket  parts  for  Airbus  A-300,  McDonnell
Douglas  DC-10  and  Boeing  747  aircraft  and  certain commuter turboprop
aircraft including Embraer, Shorts, Saab, de Havilland,  British  Aerospace
and ATR aircraft.  In addition, the Company intends to broaden further  its
product  line  to  include  parts for Boeing 767 aircraft.  The Company has
limited experience with respect to the purchase and sale of spare parts for
these aircraft models.  There  can  be  no  assurance that the Company will
have the same level of success in managing its  parts  inventories for such
aircraft  that  it  has  had  with parts for MD-80 and DC-9 aircraft.   The
failure to successfully broaden  its  product  line  could  have a material
adverse effect on the Company's ability to implement its growth strategy.

     EFFECTS  OF  THE  ECONOMY  ON  THE  OPERATIONS  OF  THE COMPANY.   The
Company's  customers  include a wide variety of domestic and  international
air  cargo carriers, major  commercial,  regional  and  commuter  passenger
airlines, maintenance and repair facilities and other redistributors.  As a
result, the Company's business can be impacted by the economic factors that
affect  the  airline and air cargo industries.  When such factors adversely
affect the airline  and  air  cargo industries, they tend to cause downward
pressure on the pricing for aircraft  spare  parts  and increase the credit
risk associated with doing business with airlines and  air  cargo carriers.
Additionally,  factors such as the price of fuel affect the aircraft  spare
parts  market  for   older  aircraft,  since  older  aircraft  become  less
competitive with newer  model  aircraft  as  the  price  of fuel increases.
There  can  be  no  assurance that economic and other factors  which  might
affect the airline and  air  cargo  industries  will  not  have  a material
adverse  effect on the Company's business, financial condition and  results
of operations.

                                  11
<PAGE>

     RISKS  ASSOCIATED  WITH  LEASES.   The  Company  currently  leases two
Embraer EMB-120 aircraft and five Pratt & Whitney JT8D series engines.  The
Company also owns a 50% interest in a joint venture that leases 20 DC-9-41H
aircraft  to  SAS.  The success of an operating lease depends in part  upon
having the aircraft  and  engines  returned  to  the  Company in marketable
condition  as  required  by  the  lease of such aircraft and  engines.   In
addition, the financial return to the  Company  from  a  leased aircraft or
engine depends in part on the re-lease of aircraft and engines on favorable
terms  on a timely basis, the ability to sell the aircraft  or  engines  at
favorable prices or realize sufficient value from the disassembly for parts
of the aircraft or engines at the end of the lease term.  Numerous factors,
many of  which are beyond the control of the Company, may have an impact on
the Company's  ability  to  re-lease  or  sell aircraft, engines and parts.
These  factors  include  general  market  conditions,   regulatory  changes
(particularly   those   imposing   environmental,  maintenance  and   other
requirements on the operation of aircraft  and  engines),  changes  in  the
supply  or  cost  of  aircraft  and  engines and technological development.
Consequently,  there  can  be no assurance  that  the  Company's  estimated
residual value for aircraft or engines will be realized.  If the Company is
unable to re-lease, sell its  aircraft  or  engines  on  favorable terms or
realize sufficient value from the disassembly for parts of  the aircraft or
engines  on  a  timely  basis  upon  expiration  of the related lease,  its
business, financial condition and results of operations  may  be  adversely
affected.   In  the event that a lessee defaults in the performance of  its
obligations, the  Company  may  be  unable  to enforce its remedies under a
lease.  The Company's inability to collect lease  payments  when  due or to
repossess  aircraft or engines in the event of a default by a lessee  could
have an adverse  effect  on the Company's business, financial condition and
results of operations.  If  the  Company  were  to  acquire  an aircraft or
engines and such acquisitions were not financed by additional borrowing, it
could result in a reduction of the Company's liquidity.

     RISKS  ASSOCIATED WITH ACQUISITIONS.  One of the Company's  strategies
for growth is  to  pursue  acquisitions  of  aftermarket redistributors and
small  aircraft  leasing  companies.   Currently,   the   Company   has  no
acquisition  agreements, understandings or commitments for any acquisitions
and, in order  to  consummate an acquisition, the Company would be required
to receive the consent of the lender under its Credit Agreement.  There can
be no assurance that  any such acquisitions will be completed on reasonable
terms, if at all.  Certain  of  the  Company's competitors may also seek to
acquire the same companies which the Company  seeks  to  acquire.  This may
increase the price and related costs at which the Company  could  otherwise
have  acquired such companies, perhaps materially.  The Company's inability
to complete  acquisitions  on  reasonable  terms  could limit the Company's
ability to grow its business.

     The  Company  may  expend significant funds to pursue  and  consummate
acquisitions.   Such  use of  funds  would  reduce  the  Company's  working
capital.  In addition,  the  Company  may  fund acquisitions in whole or in
part by issuing equity securities, and any such  issuances, individually or
in  the  aggregate,  may  be  dilutive  to  holders  of the  Common  Stock.
Acquisitions also may result in the Company incurring  additional  debt and
amortizing costs related to goodwill and other intangible assets, either of
which  could  have  a  material  adverse  effect on the Company's business,
financial condition and results of operations.

     The   Company  may  experience  difficulties   in   assimilating   the
operations,  services and personnel of acquired companies and may be unable
to sustain or  improve  the  historical  revenue  and  earnings  levels  of
acquired  companies,  any  of  which  may  materially  adversely affect the
Company's  business,  financial  condition  and results of operations.   In
addition, to the extent it becomes necessary  for  the  Company to fund the
working  capital requirements of acquired companies, the Company's  working
capital available  for  its  currently  existing operations would decrease.
Acquisitions involve a number of additional  risks, including the diversion
of  management's  attention  from  ongoing  business   operations  and  the
potential loss of key employees of acquired companies.   There  can  be  no
assurance  that  the  Company  can  successfully  implement its acquisition
strategy.  The failure to consummate acquisitions on  reasonable  terms  or
the  inability to successfully integrate and manage acquired operations and
personnel  could  have a material adverse impact on the Company's business,
financial condition and results of operations.

                                12
<PAGE>

     RELIANCE ON EXECUTIVE  OFFICERS.  The continued success of the Company
is dependent to a significant  degree  upon  the  services of its executive
officers  and upon the Company's ability to attract  and  retain  qualified
personnel experienced in the various phases of the Company's business.  The
ability of  the Company to operate successfully could be jeopardized if one
or more of its  executive  officers were unavailable and capable successors
were not found.  The Company  does not maintain key man insurance on any of
its executive officers.  The Company has employment agreements with Alexius
A.  Dyer III, its Chairman of the  Board,  President  and  Chief  Executive
Officer,  and  George  Murnane  III, its Executive Vice President and Chief
Operating  Officer.  The employment  agreements  between  the  Company  and
Messrs. Dyer  and  Murnane  are  individually  terminable by each executive
officer upon a change of control of the Company.

ITEM 2. PROPERTIES.

     The Company's executive offices and operations  are  located  at  1954
Airport   Road,   Suite   200,   Atlanta,   Georgia  30341,  consisting  of
approximately  3,600  square  feet  of leased space  pursuant  to  a  lease
expiring in January 2000.  The Company  leases  approximately 29,500 square
feet  of warehouse facilities in Fort Lauderdale,  Florida  pursuant  to  a
lease expiring in June 2002.  The Company leases approximately 1,350 square
feet of office space as a sales and marketing office in Seattle, Washington
pursuant  to  a lease expiring in March 2001.  All facilities are rented at
competitive rates  for  their  location  and utility.  The Company believes
that its facilities are adequate for its needs for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS.

     The Company is not now a defendant in any material litigation or other
legal proceeding.  The Company may become  a defendant in legal proceedings
in the ordinary course of business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None.



                                     13


<PAGE>




                                  PART II


ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK  AND  RELATED  STOCKHOLDER
MATTERS.

     The Company's Common Stock, which has been publicly traded since April
2,  1990,  is  listed  and traded on the American Stock Exchange under  the
symbol "YLF."  The following  table  sets  forth  the  high and low closing
prices of the Common Stock as reported on the American Stock  Exchange  for
each quarter in fiscal 1999 and 1998.

<TABLE>
<CAPTION>
1999 FISCAL YEAR                      HIGH        LOW
----------------                     -------    -------
<S>                                  <C>      <C>
First Quarter                     $   8  1/2   $ 5  7/8
Second Quarter                        7  1/8     3  3/4
Third Quarter                         5  1/2     3  1/4
Fourth Quarter                        4  5/8     3  3/4

1998 FISCAL YEAR                      HIGH        LOW
----------------                     ------      ------
First Quarter                     $  8  1/4    $ 4  1/4
Second Quarter                      11           7  5/8
Third Quarter                        8  1/2      5 15/16
Fourth Quarter                      10 11/16     6 15/16
</TABLE>

     At  August 10, 1999, there were 111 holders of record of the Company's
Common Stock.

     The Company  has  never  paid  dividends  on  the  Common  Stock.  The
Company's  secured  credit  facility  prohibits  the  Company  from  paying
dividends  on  the Common Stock as long as indebtedness issued pursuant  to
such facility remains  outstanding.   It unlikely that the Company will pay
dividends on the Common Stock in the foreseeable future.




                                     14
<PAGE>



ITEM 6. SELECTED FINANCIAL DATA.

     The selected consolidated financial  data  presented below for, and as
of  the  end  of,  each of the fiscal years in the five-year  period  ended
May 31, 1999, have been  derived  from  the  Company's audited consolidated
financial statements.  The consolidated financial statements of the Company
as of May 31, 1998 and 1999 and for the three-year  period  ended  May  31,
1999  and  the  accountant's reports thereon are included in Item 8 of this
Form 10-K.

<TABLE>
<CAPTION>
                                            Year Ended May 31,
                                -------------------------------------------
                                1995      1996     1997     1998       1999
                                ------   ------    ------  ------    ------
                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING DATA:
<S>                           <C>     <C>     <C>        <C>        <C>
Net sales                      $21,999  $21,410   $20,123 $25,648 $  24,344
Lease and service revenue        2,984    1,795     1,109   2,315     3,328
                                ------   ------    ------  ------    ------
  Total revenue                 24,983   23,205    21,232  27,963    27,672

Total operating expenses        23,343   18,528    17,423  23,186    24,406

Equity  in  earnings of joint
venture                          --         --       --      --       1,026
                                ------   ------    ------  ------    ------
Income from continuing
operations                       1,640   4,677     3,809    4,777     4,292
Interest expense, net            2,254   2,377     1,550    1,934     1,302
                                ------   ------    ------  ------    ------
  Earnings (loss) before
  income taxes                   (614)   2,300     2,259     2,843    2,990
     and extraordinary item
Provision    (benefit)    for
income taxes                      --        14       --     (2,820)   1,036
Earnings (loss) before
extraordinary item               (614)   2,286     2,259     5,663    1,954
  Extraordinary loss on
  extinguishment of debt          --      --        (531)      --       --
                                ------   ------    ------  ------    ------
Net earnings (loss)             $(614)   2,286  $  1,728  $  5,663   $1,954
                               =======   ======    ======  ======    ======
PER SHARE DATA:
Earnings  (loss)  per  common
share  -  basic before effect
of extraordinary item         $(4.10) $ 15.27  $   1.37  $   2.29  $    .77

  Extraordinary item             --      --       (0.32)      --         --
                                ------   ------    ------  ------    ------

     Net earnings (loss)      $(4.10) $ 15.27 $    1.05  $   2.29  $    .77
                               =======   ======    ======  ======    ======

  Weighted average shares
  outstanding used in basic  149,696  149,696 1,646,629 2,471,025 2,550,940
  calculation
Earnings  (loss)  per  common
share - diluted before effect
of extraordinary item         $(4.10) $ 12.69   $  1.25   $  2.03 $     .72
  Extraordinary item
                                 --      --       (0.29)     --          --
                                ------   ------    ------  ------    ------
Net earnings (loss)           $(4.10)   12.69   $  0.96   $  2.03 $     .72
                               =======   ======    ======  ======    ======
Weighted   average   shares
outstanding used in diluted  149,696  242,288 1,806,938 2,793,414 2,720,513
  calculation
</TABLE>

                                     15
<PAGE>

<TABLE>
<CAPTION>

                                                          AT MAY 31,
                                    1995       1996         1997         1998           1999
                                   ------     -------      -----       -------        -------
                                                       (IN THOUSANDS)
BALANCE SHEET DATA:
<S>                              <C>          <C>        <C>           <C>            <C>
Working capital (deficit)        $(13,489)   $(10,841)     9,141       $10,228        $11,524
Total assets                       14,511      16,132     21,287        23,636         23,976
Total debt                         20,336      18,144     13,749         9,648          9,594
Stockholders' equity (deficit)     (9,702)     (7,416)     4,660        10,808         11,263
---------------------------------------------------------------------------------------------
</TABLE>

ITEM  7.   MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

OVERVIEW

     The Company is primarily  engaged  in  the  sale of aircraft, aircraft
engines  and  aircraft parts, as well as leasing of  aircraft  and  related
services.  The Company's total revenue includes net parts sales revenue and
lease and service  revenue.    Net   sales  revenue  includes  revenue from
individual  parts  sales  and  revenue  from  aircraft  and  engine  sales.
Aircraft  and  engine  sales  are unpredictable transactions, dependent, in
part, upon the Company's ability  to  purchase  an  aircraft  or engine and
resell it within a relatively brief period of time.  In a given  period,  a
substantial  portion  of  the  Company's revenue may be attributable to the
sale  of  aircraft  or  engines.   Cost  of  sales  consists  primarily  of
inventory, aircraft and engine costs  and  shipping  charges.   The cost of
aircraft  parts  is  determined  on  a  specific  identification  basis and
inventory  is  stated  at  the  lower  of  cost  or  market.  The Company's
operating  results are affected by many factors, including  the  timing  of
orders from  large  customers, the timing of aircraft and engine sales, the
timing of expenditures  to  purchase  parts inventory, aircraft and engines
and  the mix of parts contained in the Company's  inventory.   The  Company
does  not   obtain  long-term  purchase  orders  or  commitments  from  its
customers.

     Revenue from the sale of parts is recognized when products are shipped
to the customer.  Revenue from aircraft and engine sales is recognized when
the Company has  received  consideration for the sale price and the risk of
ownership  has  passed  to  the  buyer.   Lease  and  service  revenue  are
recognized on an accrual basis, unless collectability is uncertain.

RESULTS OF OPERATIONS

FISCAL 1999 COMPARED WITH FISCAL 1998

     Net sales decreased by 5.1% from $25.6 million in fiscal 1998 to $24.3
million in fiscal 1999.  This  decrease  was primarily due to a decrease in
aircraft and engine sales, which was partially  offset  by  an  increase in
parts  sales.   During  fiscal 1999, the Company acquired two aircraft  and
sold three aircraft, as compared  to  fiscal 1998, during which the Company
acquired  two aircraft and sold four aircraft.   During  fiscal  1999,  the
Company sold  three  engines  as  compared to fiscal 1998, during which the
Company sold seven engines.  Lease  and  service  revenue increased to $3.2
million in fiscal 1999 from $2.3 million in fiscal  1998,  due primarily to
the Company's acquisition and lease of three spare engines during the first
quarter of fiscal 1999.  These engines remain on lease.  Due  primarily  to
the decrease in aircraft and engine sales, partially offset by the increase
in parts sales and lease and service revenue, total revenue for fiscal 1999
decreased 1.0% to $27.7 million from $28.0 million for fiscal 1998.

     Cost  of  sales  increased  8.4%  from $16.8 million in fiscal 1998 to
$18.2  million in fiscal 1999.  Cost of sales  as  a  percentage  of  total
revenue  increased  from 60.0% in fiscal 1998 to 65.8% in fiscal 1999.  The
increase in the cost  of  sales  as  a  percentage of total revenue was due
primarily to an increase in the cost of aircraft  and  engine  sales  as  a
percent  of  revenue  in fiscal 1999 compared to fiscal 1998, as well as an
increase in the cost of  the  parts  sold.  As the Company enters into more
consignment agreements, the Company anticipates  that  it will incur higher
cost  of sales.  These higher cost of sales should be partially  offset  by
lower inventory costs, including interest.

     Selling,  general and administrative expenses decreased 5.3% from $5.3
million in fiscal  1998  to $5.1 million in fiscal 1999.  This decrease was
due  primarily  to  lower expenses  related  to  compensation,  travel  and
entertainment, investor relations, and the Company's provision for doubtful
accounts.

                                  16
<PAGE>

     Depreciation was  $1,147,000  in fiscal 1999 compared to $1,060,000 in
fiscal 1998.  The net increase from  fiscal  1998  to  fiscal  1999 was due
primarily  to  an  increase  in  depreciation  of  engines  held for lease,
resulting from the engines acquired in the first quarter of fiscal 1999.

     Equity in Net Earnings of Unconsolidated Joint Venture for fiscal 1999
was $1,026,000 compared to $0 during fiscal 1998.  This increase was due to
the Air41 Joint Venture, which was entered into during September 1998.

     Interest  expense  decreased 20.2% from $1,648,000 in fiscal  1998  to
$1,315,000 in fiscal 1999.  The reduction in interest expense resulted from
a lower outstanding average  balance  and  a reduction in the interest rate
applicable to the outstanding balance.  Interest  and  other  expenses  for
fiscal  1998  were  $286,000  compared to other income of $13,000 in fiscal
1999.  Included in the interest  and  other  expense  for  fiscal  1998  is
$400,000 in expenses relating to a withdrawn secondary offering.

     The  Company's  income  tax  benefit for fiscal 1998 was $2.8 million,
primarily due to a reduction in the valuation allowance applied against its
deferred   tax  assets  and  the  utilization   of   net   operating   loss
carryforwards.   The  Company's  income  tax  expense  in  fiscal  1999 was
$1,036,000.   Income  taxes  have  been provided at the Company's estimated
effective tax rate of approximately  35%  for  fiscal  1999.   In the prior
year,  the  Company recognized deferred tax benefits as the realization  of
such benefits  was  determined  to  be  more likely than not because of the
Company's consistent profitability.  The  realization  of  the tax benefits
was  accomplished through a reduction in the valuation allowance  that  had
been previously established against the Company's deferred tax assets.

     Earnings  before income taxes increased from $2,843,000 in fiscal 1998
to $2,990,000 in  fiscal  1999.  Earnings for fiscal 1999 were benefited by
equity in net earnings of unconsolidated  joint  venture,  the  Air41 joint
venture,  of $1,026,000.  Net earnings for fiscal 1998 were $5,663,000,  or
$2.29 per share  -  basic  and  $2.03  per share - diluted, compared to net
earnings for fiscal 1999 of $2,550,000,  or  $0.77  per  share  - basic and
$0.72  per  share  -  diluted.   On  a pro forma basis, adjusted as if  the
company  had been a full taxpayer in fiscal  1998,  Earnings  per  share  -
diluted for fiscal 1998 would have been $0.67.

     In the  third  quarter  of 1999, the Company began acquiring shares of
its common stock in connection with a stock repurchase program announced in
December 1998.  During fiscal  1999, the Company repurchased 467,525 shares
of its common stock at an average price of $4.16.

FISCAL 1998 COMPARED WITH FISCAL 1997

     Total revenue for fiscal 1998  increased  31.7%  to $28.0 million from
$21.2  million  for  fiscal 1997.  This increase was primarily  due  to  an
increase in aircraft and  engine  sales.   During  fiscal 1998, the Company
acquired two aircraft and sold four aircraft, as compared  to  fiscal 1997,
during  which  the  Company  acquired three aircraft and sold two aircraft.
During fiscal 1998, the Company  sold  seven  engines as compared to fiscal
1997, during which the Company sold four engines.   Lease revenue increased
to  $2.3  million  in  fiscal  1998 from $1.1 million in fiscal  1997,  due
primarily to the Company's acquisition  and  lease of three aircraft during
the fourth quarter of fiscal 1997 which were on  lease  for  all  of fiscal
1998.

     Cost  of  sales  increased 32.3% from $12.7 million in fiscal 1997  to
$16.8 million in fiscal  1998.   Cost  of  sales  as  a percentage of total
revenue increased from 59.7% in fiscal 1997 to 60.0% in  fiscal  1998.  The
increase  in  the  cost  of sales as a percentage of total revenue was  due
primarily to a change in the  mix  of  sales  as well as an increase in the
cost of aircraft and engine sales as a percent  of  revenue  in fiscal 1998
compared to fiscal 1997.

     Selling,  general  and administrative expenses increased 36%  to  $5.3
million in fiscal 1998 compared  to  $3.8  million  in  fiscal  1997.  This
increase  was  due  primarily to expenses related to increased revenue,  as
expenses for fiscal 1998  amounted  to  19.1%  of total revenue compared to
18.6%  of  total  revenue in fiscal 1997, such as increased  rent  expense,
insurance costs, professional  fees,  investor  relations  costs, marketing
expenses and employee compensation.


                               17
<PAGE>

     Depreciation  was  $1,060,000 in fiscal 1998 compared to  $792,000  in
fiscal 1997.  The net increase  from  fiscal  1997  to  fiscal 1998 was due
primarily  to  an  increase  in  depreciation of aircraft held  for  lease,
resulting from the aircraft acquired in the fourth quarter of fiscal 1997.

     Interest expense in fiscal 1998  and  fiscal  1997  was  $1.6 million.
Interest and other expenses for fiscal 1998 was $286,000 compared  to other
income  of  $61,000  in  fiscal  1997.   Included in the interest and other
expense for fiscal 1998 is $400,000 in expenses  relating  to  a  secondary
offering that was withdrawn.

     The  Company's  benefit  for  income  taxes  for  fiscal 1998 was $2.8
million,  primarily  due to a reduction in the valuation allowance  applied
against its deferred tax  assets  and the utilization of net operating loss
carryforwards.  The Company's income  tax  expense  in fiscal 1997 was zero
primarily   as   a  result  of  the  utilization  of  net  operating   loss
carryforwards to offset taxes that would otherwise have been payable.

     Net earnings  for  fiscal  1998  were $5,663,000, or $2.29 per share -
basic and $2.03 per share - diluted, compared  to  net  earnings  before an
extraordinary  loss  for  fiscal  1997 of $2,259,000, or $1.37 per share  -
basic and $1.25 per share - diluted.  The Company recorded an extraordinary
loss of $530,596 in fiscal 1997 relating  to  the exchange of shares of its
common stock for certain debt securities.  Net  earnings, after considering
the extraordinary loss, were $1,728,000 or $1.05 per share - basic and $.96
per share - diluted, for fiscal 1997.

LIQUIDITY AND CAPITAL RESOURCES

     The Credit Agreement entered into by the Company  in  October  of 1996
provided  for  a  $3  million  term loan and up to an $11 million revolving
credit.  The Credit Agreement has  been  amended  to  create  new term loan
facilities totaling $15.35 million and to increase the revolving  credit to
$14  million  (collectively  referred  to  as  the "Credit Facility").  The
revolving credit facility matures in October 2001 and the term loans mature
between March 2000 and October 2001.  The interest rate that the Company is
assessed  is  subject  to  fluctuation and may change  based  upon  certain
financial covenants.  As of  May  31,  1999,  the  interest  rate under the
Credit Facility was the lender's base rate minus 0.25% (7.50%).  The Credit
Facility is secured by substantially all of the assets of the  Company  and
availability of amounts for borrowing is subject to certain limitations and
restrictions.   Such  limitations  and  restrictions  are  discussed in the
Company's Proxy Statement/Prospectus filed with the Securities and Exchange
Commission on August 29, 1996.

     Net cash provided by operating activities for the fiscal  years  ended
May  31,  1999  and  1998  amounted  to  $1.6  million  and  $4.2  million,
respectively.   For  fiscal  1999,  the  primary use of cash from operating
activities was an increase in accounts receivable  offset  partially  by  a
decrease  in  inventory.   For  fiscal  1998,  the primary use of cash from
operating  activities, excluding the purchase of  two  aircraft  that  were
subsequently  sold  during  the  same  fiscal  year,  was  an  increase  in
inventories.

     Net  cash  provided  by (used in) investing activities for fiscal 1999
and 1998 amounted to $856,000  and  ($574,000),  respectively.   For fiscal
1999,  the Company received proceeds from the sale of aircraft and  engines
that had  been  held for lease of $5,875,000.  The primary use of funds for
investing activities  was  the  Company's  investment  in  the  Air41 Joint
Venture of $1,587,000 and capital expenditures for aircraft and engines  of
$3,786,000.   For fiscal 1998, the primary use of funds was the purchase of
engines held for  lease.  During fiscal 1998, the Company received proceeds
from the sale of an aircraft held for lease of $667,000.

     Net cash used  in  financing  activities  for  fiscal  1999  and  1998
amounted  to $1.6 million and $3.6 million, respectively.  For fiscal 1999,
net of borrowings,  the  Company prepaid $54,000 under the Credit Facility.
The  primary  use of cash in  financing  activities  was  the  purchase  of
treasury stock  for  $1,947,000.  The Company received $288,000 in proceeds
from  employees'  exercise  of stock options.   For  fiscal  1998,  net  of
borrowings, the Company repaid $4.0 million under the Credit Facility.  The
Company received $508,000 in  proceeds  from  employees'  exercise of stock
options during fiscal 1998.

     At  May  31,  1999,  the  Company  was  permitted to borrow up  to  an
additional  $5.7  million  pursuant to the Credit  Facility.   The  Company
believes that its working capital  and  amounts  available under the Credit
Facility will be sufficient to meet the requirements of the Company for the
foreseeable future.


                                18

<PAGE>

FLUCTUATIONS IN OPERATING RESULTS

     The  Company's operating results, both on an annual  and  a  quarterly
basis, are  affected  by many factors, including the timing of large orders
from  customers,  the timing  of  expenditures  to  purchase  inventory  in
anticipation of future  sales, the Company's ability to obtain inventory on
consignment on acceptable  terms, the mix of available aircraft spare parts
contained at any time in the Company's inventory, the timing of aircraft or
engine   sales  or  leases,  unanticipated   aircraft   or   engine   lease
terminations, default by any lessees and many other factors largely outside
the Company's  control.  Since  the Company typically does not obtain long-
term purchase orders or commitments  from its customers, it must anticipate
the future volume of orders based upon  the historic purchasing patterns of
its  customers  and  discussions  with  customers   as   to   their  future
requirements. Cancellations, reductions or delays in orders by  a  customer
or group of customers could have a material adverse effect on the Company's
business,  financial condition and results of operations. In addition,  due
to the value  of  a single aircraft or engine sale relative to the value of
parts typically sold  by  the  Company,  any  concentration  of aircraft or
engine  sales  in  a  particular quarter may obscure existing or developing
trends  in the Company's  business,  financial  condition  and  results  of
operations.

RECENT ACCOUNTING PRONOUNCEMENTS

     In 1998 the AICPA issued Statement of Position (SOP) 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use."
SOP 98-1  establishes  standards  for  accounting for internal use software
projects.  This Statement is effective for  financial statements for fiscal
years beginning after December 15, 1998 for costs  incurred in those fiscal
years for all projects, including projects in progress  when  the  SOP  was
adopted.   Management  does  not  expect  this Statement to have a material
impact on the Company's financial statements.

     In 1998, the AICPA issued Statement of Position (SOP) 98-5, "Reporting
on  the  Costs  of Start-Up Activities."  SOP  98-5  provides  guidance  on
accounting  for start-up  costs  and  organization  costs,  which  must  be
expensed as incurred.  This Statement is effective for financial statements
for fiscal years  beginning  after  December 15, 1998.  Management does not
expect this Statement to have a material  impact on the Company's financial
statements.

     In  June  1998,  the  FASB issued Statement  of  Financial  Accounting
Standards (FAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities."   FAS   No.  133  establishes  standards  for  accounting  and
reporting for derivative instruments,  and  conforms  the  requirements for
treatment  of  different  types  of hedging activities.  This statement  is
effective for all fiscal years beginning  after  June 15, 2000.  Management
does not expect this standard to have a significant impact on the Company's
operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  Company's  major  market  risk exposure is to  changing  interest
rates.  The Company's policy is to manage  interest  rate  risk through the
use  of  floating  rate  debt instruments.  The Company has loans  under  a
Credit Facility totaling approximately  $9.6  million at May 31, 1999.  The
interest  rate on the Credit Facility, which fluctuates  based  on  certain
financial ratios  of  the Company, was the lender's prime rate less .25% at
May 31, 1999 (7.50%).  An immediate increase of 10% in interest rates would
increase the Company's annual interest expense by approximately $141,000.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Information with respect  to  this  Item is contained in the Company's
consolidated  financial  statements  and  financial   statement   schedules
indicated  in the Index on Page F-1 of this Annual Report on Form 10-K  and
is incorporated herein by reference.

ITEM 9. CHANGES  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE.
     None.


                                     19
<PAGE>


                                 PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The  information  contained  under  the  heading  "Information  as  to
Directors  and  Executive  Officers"  in  the  Company's  definitive  proxy
statement  for  its  1999  Annual  Meeting of stockholders (the "1999 Proxy
Statement") is incorporated by reference herein.

ITEM 11.  EXECUTIVE COMPENSATION.

     The information contained under  the  heading "Executive Compensation"
in the 1999 Proxy Statement is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information contained under the headings  "Directors and Executive
Officers"  and  "Principal  Stockholders"  in the 1999 Proxy  Statement  is
incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information contained under the heading  "Executive Compensation--
Certain  Transactions"  in  the  1999  Proxy Statement is  incorporated  by
reference.




                                     20


<PAGE>




                                  PART IV

ITEM  14.  EXHIBITS, FINANCIAL STATEMENT  SCHEDULES  AND  REPORTS  ON  FORM
8-KITEM  14.   EXHIBITS,  FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.

<TABLE>
<CAPTION>
<S>                                                                  <C>
           (a) FINANCIAL STATEMENTS                                  PAGE OR
                                                                     METHOD
                                                                     OF FILING
(1)  Index to Consolidated Financial Statements                      F-1

(2)  Report of Grant Thornton LLP                                    F-2
          (3)  Consolidated   Financial   Statements  and  Notes  to
          Consolidated   Financial  Statements   of   the   Company, F-3
          including Consolidated  Balance  Sheets as of May 31, 1998
          and 1997 and related Consolidated  Statements of Earnings,
          Consolidated  Cash  Flows  and Consolidated  Stockholders'
          Equity (Deficit) for each of  the  years in the three-year
          period ended May 31, 1998
(b)  FINANCIAL STATEMENTS SCHEDULES                                  PAGE OR
                                                                     METHOD
                                                                     OF FILING
          (1)   Schedule II.  Valuation and Qualifying
                Accounts                                             S-1
</TABLE>


Schedules  not  listed above and columns within certain Schedules have been
omitted because of  the absence of conditions under which they are required
or  because  the  required   material   information   is  included  in  the
Consolidated  Financial  Statements or Notes to the Consolidated  Financial
Statements included herein.

     (c)  EXHIBITS


<TABLE>
<CAPTION>

 Exhibit
 NUMBER  DESCRIPTION   PAGE NUMBER OR METHOD OF FILING
<S> <C>  <C>           <C>

 2.4     Credit        Incorporated by reference to Exhibit 2.4 to
         Agreement     Amendment   No.  2  to  the  Company's  Registration
         between   BNY Statement on Form S-4 filed on August 29, 1996 (File
         Financial     No. 333-08065).
         Corporation
         and       the
         Registrant
         (the  "Credit
         Agreement").
 2.5     First
         Amendment,    Filed herewith.
         Waiver    and
         Agreement,
         dated  as  of
         March     24,
         1997, between
         BNY Financial
         Corporation
         and       the
         Registrant
         and   related
         to the Credit
         Agreement.
 2.6     Second        Filed herewith.
         Amendment and
         Agreement,
         dated  as  of
         September  9,
         1997, between
         BNY Financial
         Corporation
         and       the
         Registrant
         and   related
         to the Credit
         Agreement.


                                            21

<PAGE>

 2.7     Third
         Amendment and Filed herewith.
         Agreement,
         dated  as  of
         October   15,
         1997, between
         BNY Financial
         Corporation
         and       the
         Registrant
         and   related
         to the Credit
         Agreement.
 2.8     Fourth
         Amendment and Filed herewith.
         Agreement,
         dated  as  of
         February   2,
         1998, between
         BNY Financial
         Corporation
         and       the
         Registrant
         and   related
         to the Credit
         Agreement.
 2.9     Fifth
         Amendment,    Filed herewith.
         dated  as  of
         July      16,
         1998, between
         BNY Financial
         Corporation
         and       the
         Registrant
         and   related
         to the Credit
         Agreement.
 2.10    Sixth
         Amendment,    Filed herewith.
         dated  as  of
         May 30, 1998,
         between   BNY
         Financial
         Corporation
         and       the
         Registrant
         and   related
         to the Credit
         Agreement.
 2.11    Seventh
         Amendment,    Filed herewith.
         dated  as  of
         October   28,
         1998, between
         BNY Financial
         Corporation
         and       the
         Registrant
         and   related
         to the Credit
         Agreement.
 3.1     Amended   and Incorporated  by  reference  to  Exhibit  3.1 to the
         Restated      Company's  Annual Report on Form 10-K for the fiscal
         Certificate   year ended May 31, 1996 (the "1996 Form 10-K").
         of
         Incorporation
         of        the
         Registrant.

 3.2     Restated  and Incorporated by reference to Exhibit 3.2 to the 1996
         Amended       Form 10-K.
         Bylaws of the
         Registrant.

 4.1     Specimen      Incorporated by reference to Exhibit 4.1 to the 1996
         Common  Stock Form 10-K.
         Certificate.

 10.1.1  Employment    Incorporated  by  reference to Exhibit 10.1.1 to the
         Agreement,    1996 Form 10-K
         dated  as  of
         December   1,
         1995, between
         the
         Registrant
         and   Alexius
         A. Dyer  III,
         as amended on
         October    3,
         1996.

 10.1.2  Employment    Incorporated  by  reference to Exhibit 10.1.2 to the
         Agreement     Company's  Quarterly  Report  for  the quarter ended
         dated  as  of February 28, 1997.
         October    3,
         1996, between
         the
         Registrant
         and    George
         Murnane III.

 10.2.1  1996    Long- Incorporated by reference to Appendix B to the Proxy
         Term          Statement/Prospectus   included   in  the  Company's
         Incentive and Registration    Statement    on   Form   S-4   (File
         Share   Award No. 333-08065), filed on July 12, 1996.
         Plan.

                                 22
<PAGE>

 10.2.2  401(k) Plan.  Incorporated  by  reference  to  Exhibit 10-H to the
                       Company's Annual Report on Form 10-K  for the fiscal
                       year ended May 31, 1992 (the "1992 Form 10-K").

 10.2.3  Bonus Plan.   Incorporated  by  reference to Exhibit 10.2.4 to the
                       1992 Form 10-K.

 10.2.4  Cafeteria     Incorporated  by  reference to Exhibit 10.2.5 of the
         Plan.         Company's  Annual Report on Form 10-K for the fiscal
                       year ended May 31, 1993.

 10.2.5  Form       of Incorporated  by  reference to Exhibit 10.2.5 to the
         Option        1996 Form 10-K.
         Certificate
         (Employee
         Non-Qualified
         Stock
         Option).

 10.2.6  Form of       Incorporated  by  reference to Exhibit 10.2.6 to the
         Option        1996 Form 10-K.
         Certificate
         (Director
         Non-Qualified
         Stock
         Option).

 10.2.7  Form of       Incorporated  by  reference to Exhibit 10.2.7 to the
         Option        1996 Form 10-K.
         Certificate
         (Incentive
         Stock
         Option).

 10.14   Commission    Incorporated  by  reference  to Exhibit 10.14 to the
         Agreement     1996 Form 10-K.
         dated
         December 1,
         1995  between
         the
         Registrant
         and      J.M.
         Associates,
         Inc.

 10.15   Operating     Filed herewith.
         Agreement  of
         Air41    LLC,
         dated as of
         September 9,
         1998,  by and
         between
         AirCorp, Inc.
         and the
         Company

 10.16   Office  Lease Incorporated  by  reference  to Exhibit 10.17 to the
         Agreement     1997 Form 10-K.
         dated January
         31,      1997
         between   the
         Registrant
         and     Globe
         Corporate
         Center,    as
         amended.

 10.17   Lease         Incorporated  by  reference  to Exhibit 10.18 to the
         Agreement     1997 Form 10-K.
         dated   March
         31,      1997
         between   the
         Registrant
         and  Port 95-
         4, Ltd.

 21      Subsidiaries. Filed herewith.

 27      Financial     Filed herewith.
         Data
         Schedule.
</TABLE>

     (d)  REPORTS ON FORM 8-K.

          The  Company did not file a Current Report on Form 8-K during the
last quarter of the fiscal year covered by this Annual Report.



                                     23
<PAGE>




                                SIGNATURES


     Pursuant to  the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934,  the Company has duly caused this report on Form 10-K
to be signed on its behalf  by  the  undersigned, thereunto duly authorized
this 27{th} day of August, 1999.


                              International Airline Support Group, Inc.,
                              a Delaware corporation


                              By:     /S/ A.A. DYER III
                                     ------------------
                                    Alexius A. Dyer III
                                Chairman  of  the  Board,  Chief  Executive
                                Officer and President

      Pursuant to the requirements of the Securities Exchange Act of  1934,
this report on Form 10-K has been signed below by the following persons  on
behalf of the Company and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE                          TITLE                                    DATE
---------------------              ------------------------------      ----------------
<S>                             <C>                                  <C>


/s/ A.A. Dyer III                  Chairman of the Board, Chief        August 27, 1999
--------------------               Executive Officer and President
A.A. Dyer III                      and Director (Principal Executive
                                   Officer)

/s/ George Murnane III             Executive Vice President, Chief     August 27, 1999
--------------------               Operating Officer and Director
George Murnane III



/s/ James M. Isaacson              Chief Financial Officer, Director   August 27, 1999
--------------------               an Secretary (Principal Financial
James M. Isaacson                  Officer and Principal Accounting
                                   Officer)


/s/ Kyle R. Kirkland               Director                            August 27, 1999
--------------------
Kyle R. Kirkland


/s/ E. James Mueller               Director                            August 27, 1999
--------------------
E.  James Mueller


</TABLE>





                                     24



<PAGE>

                   [THIS PAGE INTENTIONALLY LEFT BLANK]


<PAGE>

           INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

                        INDEX TO FINANCIAL STATEMENTS


                                                                     PAGE

Report of independent certified public accountants                    F-2

Consolidated balance sheets as of May 31, 1999 and 1998               F-3

Consolidated  statements of earnings for the years ended
 May 31, 1999, 1998 and 1997                                          F-4

Consolidated statements  of  stockholders' equity (deficit)
 for the years ended May 31, 1999, 1998 and 1997                      F-5

Consolidated statements of cash flow for the years ended
 May 31, 1999, 1998 and 1997                                          F-6

Notes to consolidated financial statements                            F-7

Schedule II - Valuation and qualifying accounts                       S-1



                                   F-1

<PAGE>



                      REPORT OF INDEPENDENT CERTIFIED
                            PUBLIC ACCOUNTANTS



Board of Directors and Stockholders
International Airline Support Group, Inc.

We   have   audited   the   accompanying  consolidated  balance  sheets  of
International Airline Support Group, Inc. and Subsidiary as of May 31, 1999
and   1998,   and  the  related  consolidated   statements   of   earnings,
stockholders' equity  and  cash  flows  for  each  of the three years ended
May  31,  1999.  These financial statements are the responsibility  of  the
Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted  our  audits  in  accordance  with generally accepted auditing
standards.  Those standards require that we  plan  and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining,  on  a  test basis,
evidence   supporting   the   amounts  and  disclosures  in  the  financial
statements.  An audit also includes  assessing  the  accounting  principles
used  and  significant  estimates made by management, as well as evaluating
the overall financial statement  presentation.   We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred  to above present fairly,
in   all  material  respects,  the  consolidated  financial   position   of
International Airline Support Group, Inc. and Subsidiary as of May 31, 1999
and  1998   and   the  consolidated  results  of  its  operations  and  its
consolidated cash flows  for each of the three years ended May 31, 1999, in
conformity with generally accepted accounting principles.

We have also audited Schedule  II  of  International Airline Support Group,
Inc. and Subsidiary for each of the three years ended May 31, 1999.  In our
opinion,  this schedule presents fairly,  in  all  material  respects,  the
information required to be set forth therein.




Fort Lauderdale, Florida
July 20, 1999

                                     F-2
<PAGE>


           INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS


                                    ASSETS


<TABLE>
<CAPTION>
                                                                      MAY 31,
                                                               ----------------------
                                                               1999              1998
                                                         ----------        ----------
Current assets
  <S>                                                   <C>                <C>
  Cash and cash equivalents (Note A)                      $ 892,283         $ 438,403
  Accounts receivable, net of allowance for doubtful
   accounts of approximately $342,420 in 1999 and
   $514,000 in 1998                                       2,812,500         1,179,760
  Inventories (Notes A and D)                            11,131,059        11,744,924
  Deferred tax benefit (Note G)                           1,128,302         1,202,345
  Other current assets                                      134,274           194,618
                                                         ----------        ----------
        Total current assets                             16,098,418        14,760,050

Investments (Note A)                                          -                92,194

Property and equipment (Notes A and E)
  Aircraft and engines held for lease                     4,593,854         7,347,954
  Leasehold improvements                                    157,175            65,881
  Machinery and equipment                                   988,983           931,092
                                                         ----------        ----------
                                                          5,740,012         8,344,927
  Less accumulated depreciation                           1,734,503         1,969,138
                                                         ----------        ----------
        Property and equipment, net                       4,005,509         6,375,789
                                                         ----------        ----------

Other assets
  Investment in joint venture (Note B)                    2,373,572             -
  Deferred debt costs, net (Note A)                         360,406           513,222
  Deferred tax benefit (Note G)                           1,071,959         1,760,565
  Deposits and other assets                                  66,155           134,533
                                                         ----------        ----------
                                                          3,872,092         2,408,320
                                                         ----------        ----------
                                                       $ 23,976,019      $ 23,636,353
                                                         ==========        ==========
                     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
  Current maturities of long-term obligations (Note E) $  1,455,600       $ 1,351,805
  Accounts payable                                          910,029           247,982
  Accrued liabilities (Note M)                            2,209,191         2,932,016
                                                         ----------        ----------
        Total current liabilities                         4,574,820         4,531,803

Long-term obligations, less current maturities (Note E)   8,138,059         8,296,063

Commitments and contingencies (Note F)                      -                    -

Stockholders' equity (Notes H and I)
  Preferred stock - $.001 par value; authorized
    2,000,000 shares; no shares outstanding in 1999
    and 1998, respectively                                  -                    -
  Common stock - $.001 par value; authorized 20,000,000
    shares; issued and outstanding 2,655,723 and
    2,562,667 shares in 1999 and 1998, respectively          2,655             2,562
  Additional paid-in capital                            13,936,089        13,511,610
  Unrealized loss on equity security                        -                (22,545)
  Accumulated deficit                                     (728,824)       (2,683,140)
  Common stock in treasury, at cost - 467,325
   shares in 1999                                       (1,946,780)             -
                                                        ----------        ----------
        Total stockholders' equity                      11,263,140        10,808,487
                                                        ----------        ----------
                                                    $   23,976,019     $  23,636,353
                                                        ==========        ==========

</TABLE>


The accompanying notes are an intergral part of these statement.

                                                F-3
<PAGE>


           INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>

                                                                YEARS  ENDED  MAY 31,
                                                   ---------------------------------------
                                                        1999         1998         1997
                                                    -----------  -----------  ------------
Revenues
 <S>                                              <C>           <C>          <C>
  Net sales                                      $   24,344,083 $ 25,647,782  $ 20,123,196
  Lease and service revenue                           3,327,859    2,314,830     1,108,702
                                                    -----------  -----------  ------------
        Total revenues                               27,671,942   27,962,612    21,231,898

Cost of sales, parts                                 18,196,982   16,781,517    12,679,915
Selling, general and administrative expenses          5,062,525    5,344,171     3,951,419
Depreciation                                          1,146,912    1,060,397       791,517
                                                    -----------  -----------  ------------
        Total costs                                  24,406,419   23,186,085    17,422,851

Equity in net earnings of unconsolidated
  joint venture (Note B)                              1,026,359       -              -
                                                    -----------  -----------  ------------

        Income from operations                        4,291,882   4,776,527      3,809,047

Interest expense                                      1,314,503   1,647,770      1,610,590
Interest and other (income) expense                     (13,082)    286,018        (60,632)
                                                    -----------  -----------  ------------
        Earnings before income taxes and
          extraordinary loss                          2,990,461   2,842,739      2,259,089

Provision (benefit) for income taxes (Note G)         1,036,145  (2,819,933)         -
                                                    -----------  -----------  ------------

        Earnings before extraordinary loss            1,954,316   5,662,672      2,259,089

Extraordinary loss on debt restructuring (Note C)        -           -             530,596
                                                    -----------  -----------  ------------

        Net earnings                                $ 1,954,316 $ 5,662,672    $ 1,728,493
                                                    =========== ===========   ============

Per share data:
  Earnings per common share - basic
    before effect of extraordinary item                   $ .77      $ 2.29         $ 1.37
    Extraordinary item                                      -           -             (.32)
                                                    -----------  -----------  ------------
        Net earnings                                      $ .77      $ 2.29         $ 1.05
                                                    =========== ===========   ============
  Weighted average shares outstanding used in basic
    calculation                                       2,550,940   2,471,025      1,646,629
                                                    =========== ===========   ============
  Earnings per common share - diluted
    before effect of extraordinary item                   $ .72      $ 2.03         $ 1.25
    Extraordinary item                                      -           -             (.29)
                                                    -----------  -----------  ------------
        Net earnings                                      $ .72      $ 2.03          $ .96
                                                    =========== ===========   ============
  Weighted average shares outstanding used in diluted
    calculation                                       2,720,513   2,793,414      1,806,938
                                                    =========== ===========   ============

</TABLE>

The accompanying notes are an intergral part of these statement.
                                         F-4
<PAGE>


           INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>

                                                                  Unrealized                 Common
                                   COMMON STOCK      Additional    Loss on                  Stock in
                          ------------------------
                          Number of          Par      Paid-In       Equity     Accumulated  Treasury,
                           SHARES           VALUE     CAPITAL      SECURITY     DEFICIT      AT COST        TOTAL
                          ----------       --------   ----------   --------    ------------  -------     -----------
<S>                       <C>              <C>      <C>            <C>        <C>             <C>        <C>
Balance at June 1,
  1997                    4,041,779        $ 4,042  $ 2,654,332     $ -      $ (10,074,305)   $   -      $(7,415,931)

1 - for - 27 reverse
  Stock Split (Note C)   (3,892,084)        (3,892)       -           -              -            -           (3,892)

Issuance of Common
  Stock in exchange
  for extinguishment
  of Subordinated
  Debentures
  (Note C)                2,245,400          2,245   11,224,755       -              -            -       11,227,000

Costs incurred related
  to stock issuance
  (Note C)                   -                 -       (875,401)      -              -            -         (875,401)

Net earnings                 -                 -          -           -          1,728,493        -         1,728,493
                          ----------       --------   ----------   --------    ------------  -------     -----------

Balance at May 31,
  1997                    2,395,095          2,395   13,003,686       -         (8,345,812)       -         4,660,269

Exercise of stock
  options                   167,572            167      507,924       -              -            -           508,091

Unrealized loss on
  equity security              -               -          -        (22,545)          -            -            (22,545)

Net earnings                   -               -          -           -          5,662,672        -          5,662,672
                          ----------       --------   ----------   --------    ------------  -------     -----------

Balance at May 31,
  1998                    2,562,667          2,562   13,511,610    (22,545)     (2,683,140)       -         10,808,487

Exercise of stock
  options                    93,056             93      288,394       -               -           -            288,487

Tax benefit from exercise
  of stock options             -               -        136,085       -               -           -            136,085

Repurchase of common
  stock                        -               -           -          -               -      (1,946,780)    (1,946,780)

Sale of equity security        -               -           -        22,545            -           -             22,545

Net earnings                   -               -           -          -          1,954,316        -          1,954,316

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

Balance at May 31,
  1999                    2,655,723       $ 2,655  $  13,936,089   $  -         $ (728,824) $(1,946,780)   $11,263,140
                          ==========      =========   ==========   =========    ===========   =========   ============

</TABLE>
The accompanying notes are an intergral part of these statement.
                                           F-5
<PAGE>


           INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                    YEARS ENDED MAY 31,
                                                           -----------------------------------
                                                              1999        1998        1997
                                                          ----------    ---------   ----------
Cash flows from operating activities:
<S>                                                     <C>          <C>           <C>
  Net earnings                                           $ 1,954,316  $ 5,662,672  $ 1,728,493
  Adjustments to reconcile net earnings to net cash
    provided by operating activities:
    Depreciation and amortization                          1,299,728    1,159,731    1,010,302
    Gain on sale of aircraft and engines held for lease     (865,276)    (267,109)       -
    Unrealized loss on equity securities                      22,545         -           -
    Loss on restructuring                                       -            -         530,596
    Earnings of joint venture                             (1,026,339)        -           -
    (Increase) decrease in deferred tax benefit              898,734   (2,890,247)     (66,428)
    (Increase) decrease in accounts receivable            (1,632,740)     374,270      640,461
    Decrease (increase) in inventories                       613,865      (99,640)  (2,433,481)
    Decrease (increase) in other current assets               60,324      (95,833)     (29,487)
    Decrease (increase) in other assets                       68,378      220,467     (303,500)
    Increase (decrease) in accounts payable and
      accrued liabilities                                    (60,778)     104,669     (494,754)
                                                          -----------   ----------   ----------

        Net cash provided by operating activities          1,332,857    4,168,980      582,202

Cash flows from investing activities:
  Distributions received from joint venture                  240,000         -            -
  Capital expenditures                                    (3,786,356)  (1,126,085)  (6,197,955)
  Sale (purchase) of investments                              92,194   (  114,729)        -
  Investment in  joint venture                            (1,587,213)        -            -
  Proceeds from sale of aircraft and engines held
   for lease                                               5,875,000      667,000         -

  Proceeds from sale of land and building                       -            -         750,000
                                                          -----------   ----------   ----------

        Net cash provided by (used in) investing
         activities                                          833,625     (573,814)  (5,447,955)

Cash flows from financing activities:
  Net borrowings (payments) under line of credit           2,047,754   (2,391,856)   7,397,930
  Borrowings under term loans                              2,576,000    3,100,000    6,750,000
  Payments under term loans                               (4,677,963)  (4,807,347)    (403,331)
  Purchase of treasury stock                              (1,946,780)        -            -
  Proceeds from the exercise of stock options                288,487      508,091         -
  Increase in deferred restructuring costs                      -            -        (540,641)
  (Increase) in deferred debt costs                             -         (31,376)    (675,785)
  Repayments of debt obligations                                -            -      (8,136,969)
                                                          -----------   ----------   ----------

        Net cash (used in) provided by financing
          activities                                      (1,712,502)  (3,622,488)   4,391,204
                                                          -----------   ----------   ----------

Net increase (decrease) in cash and cash equivalents         453,880      (27,322)    (474,549)

Cash and cash equivalents at beginning of year               438,403      465,725      940,274
                                                          -----------   ----------   ----------
Cash and cash equivalents at end of year                   $ 892,283    $ 438,403    $ 465,725
                                                          ==========    =========   =========

Supplemental disclosures of cash flow information
  (Note I):
  Cash paid during the year for:
    Interest                                             $ 1,161,687  $ 1,505,630 $ 1,321,259
                                                          ==========    =========   =========
    Income taxes                                         $    58,298  $   139,995 $     1,400
                                                          ==========    =========   =========

</TABLE>

The accompanying notes are an intergral part of these statement.
                                           F-6
<PAGE>


         INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        MAY 31, 1999, 1998 AND 1997


NOTE A - DESCRIPTION OF COMPANY BUSINESS AND SIGNIFICANT
      ACCOUNTING POLICIES

   International Airline Support Group, Inc. and Subsidiary (the "Company")
   is primarily engaged in the sale of aircraft, aircraft parts, leasing of
   aircraft and engines and related services.  Since its inception in 1982,
   the  Company has become a primary source of replacement parts for widely
   operated  aircraft  models such as the McDonnell Douglas MD-80 and DC-9,
   and Embraer EMB-120.

     a) BASIS OF PRESENTATION

          The consolidated statements include the accounts of International
     Airline Support Group  and  its  wholly-owned subsidiary.  The related
     entities  are  collectively  referred  to  as  the  ("Company").   All
     material intercompany transactions  and  balances have been eliminated
     in the consolidation and combination.

     b) CASH AND CASH EQUIVALENTS

          The Company considers all highly liquid investments with original
     maturities of three months or less at the  time of purchase to be cash
     equivalents.  Included in cash and cash equivalents  at  May  31, 1999
     and May 31, 1998 is $0 and $225,496, respectively, of restricted  cash
     representing  maintenance  reserves  received on certain aircraft held
     for lease.

     c) INVENTORIES

          Inventories are stated at the lower  of cost or market.  The cost
     of  aircraft  and  aircraft  parts  is  determined   on   a   specific
     identification basis.

     d) PROPERTY AND EQUIPMENT

          Property  and  equipment  are  stated  at  cost, less accumulated
     depreciation.  Depreciation is provided for in amounts  sufficient  to
     relate  the  cost  of  depreciable  assets  to  operations  over their
     estimated  life utilizing straight-line and accelerated methods.   The
     estimated lives  of  the  depreciable  assets range from 3 to 7 years.
     Overhaul  costs  on  aircraft  held  for  lease  are  capitalized  and
     depreciated  over the estimated service life  of  the  overhaul.   For
     income tax purposes, accelerated methods of depreciation are generally
     used.  Deferred  income  taxes are provided for the difference between
     depreciation expense for tax and financial reporting purposes.

     e) DEFERRED DEBT COSTS

          The deferred debt costs  relate  to  the  costs  associated  with
     obtaining  the  Senior  Secured Revolving Credit Loan Facility and the
     Senior Secured Term Loans.   These costs are being amortized using the
     interest method over five years,  the  life  of  the  respective  debt
     issue.   Accumulated  amortization  at  May  31,  1999  and  1998, was
     $391,743 and $238,927, respectively.

     f) EARNINGS PER SHARE

          The  Company adopted Financial Accounting Standards No. 128  (FAS
     128), "Earnings  Per  Share"  in  fiscal  1998.  FAS 128 requires dual
     presentation of basic and diluted earnings  per  share  on the face of
     the statement of earnings as well as the restatement of prior  periods
     presented.

                                                                (continued)
                                  F-7
<PAGE>

         INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        MAY 31, 1999, 1998 AND 1997

NOTE A - DESCRIPTION OF COMPANY BUSINESS AND SIGNIFICANT
      ACCOUNTING POLICIES - Continued

     f) EARNINGS PER SHARE - Continued

          Basic  net earnings per share equals net earnings divided by  the
     weighted average  shares outstanding during the year.  The computation
     of diluted net earnings  per  share  includes  dilutive  common  stock
     equivalents   in   the   weighted  average  shares  outstanding.   The
     reconciliation between the computations is as follows:

                                Basic        Basic  Diluted    Diluted
            NET  EARNINGS       SHARES        EPS   SHARES       EPS
            -------------     ---------     ------  ---------   ------
    1999    $ 1,954,316       2,550,940     $  .77  2,720,513   $  .72
    1998    $ 5,662,672       2,471,025     $ 2.29  2,793,414   $ 2.03
    1997    $ 1,728,493       1,646,629     $ 1.05  1,806,938   $  .96

          Included  in diluted shares are common stock equivalents relating
     to options of 169,573,  322,389,  and 160,309 for 1999, 1998 and 1997,
     respectively.

          Basic and diluted earnings per  share  for  1997  are  $1.37  and
     $1.25,  respectively,  before  and $1.05 and $.96, respectively, after
     the effect of the extraordinary  charge  of $530,596 or $.29 per share
     related to the loss on debt restructuring (Note C).

     g) REVENUE RECOGNITION

          Revenue from the sale of parts is recognized  when  products  are
     shipped  to  the  customer.  Revenue from aircraft and engine sales is
     recognized when the  Company  has received consideration for the sales
     price and the risk of ownership  has  passed  to the buyer.  Lease and
     service   revenue   are   recognized  on  an  accrual  basis,   unless
     collectibility is uncertain.

     h) EMPLOYEE BENEFIT PLAN

          In fiscal 1992, the Company  established  a  contributory  401(K)
     plan.   The  plan is a defined contribution plan covering all eligible
     employees  of  the   Company,  to  which  the  Company  makes  certain
     discretionary matching  contributions  based  upon  the  level  of its
     employees'  contributions.   The  amount charged to earnings in fiscal
     1999, 1998 and 1997 was insignificant.  The  Company  does not provide
     any health or other benefits to retirees.

     i) FAIR VALUE OF FINANCIAL INSTRUMENTS

          The   carrying   value   of  cash  and  cash  equivalents,  trade
     receivables, and accounts payable  approximate  fair  value due to the
     short-term maturities of these instruments.  The carrying value of the
     debt  under  the  Senior  Facility approximates fair value  as  it  is
     floating rate debt.

     j) INCOME TAXES

          Income taxes are provided  based  on  earnings  reported  for tax
     return  purposes in addition to a provision for deferred income taxes.
     Deferred  income  taxes  are  provided  in  order  to  reflect the tax
     consequences  in  future  years  of differences between the  financial
     statement and tax basis of assets and liabilities at each year end.
                                                                (continued)
                              F-8
<PAGE>


NOTE A - DESCRIPTION OF COMPANY BUSINESS AND SIGNIFICANT
      ACCOUNTING POLICIES - Continued

     k) MANAGEMENT ESTIMATES

          The preparation of the financial  statements  in  conformity with
     generally accepted accounting principles requires management  to  make
     estimates  and  assumptions that affect the reported amounts of assets
     and  liabilities  and   the   disclosure   of  contingent  assets  and
     liabilities at the date of the financial statements  and  revenues and
     expenses  during  the reporting periods.  Actual results could  differ
     from those estimates.

     l) NEW ACCOUNTING PRONOUNCEMENT

          In 1998, the AICPA  issued  Statement  of  Position  (SOP)  98-1,
     "Accounting  for  the Costs of Computer Software Developed or Obtained
     for Internal Use."   SOP 98-1 establishes standards for accounting for
     internal use software  projects.   This  Statement  is  effective  for
     financial  statements  for  fiscal  years beginning after December 15,
     1998  for  costs  incurred in those fiscal  years  for  all  projects,
     including projects  in  progress when the SOP was adopted.  Management
     does not expect this Statement  to  have  a  material  impact  on  the
     Company's financial statements.

          In  1998,  the  AICPA  issued  Statement  of Position (SOP) 98-5,
     "Reporting on the Costs of Start-Up Activities."   SOP  98-5  provides
     guidance  on  accounting  for  start-up  costs and organization costs,
     which must be expensed as incurred.  This  Statement  is effective for
     financial  statements  for  fiscal years beginning after December  15,
     1998.  Management does not expect  this  Statement  to have a material
     impact on the Company's financial statements.

          In  June 1998, the FASB issued Statement of Financial  Accounting
     Standards  (FAS)  No.  133, "Accounting for Derivative Instruments and
     Hedging Activities."  FAS No. 133 establishes standards for accounting
     and   reporting  for  derivative   instruments,   and   conforms   the
     requirements  for  treatment of different types of hedging activities.
     This statement is effective  for all fiscal years beginning after June
     15,  2000.   Management  does not  expect  this  standard  to  have  a
     significant impact on the Company's operations.

     m) INVESTMENTS

          Investments at May 31,  1998 represent equity securities, and are
     classified as available-for-sale  as  of  May  31,  1998.  Investments
     classified  as available-for-sale are recorded at fair value  and  any
     temporary difference  between an investment's costs and its fair value
     is presented as a separate component of stockholders' equity.

     n) RECLASSIFICATIONS

          Certain amounts in  the prior year financial statements have been
     reclassified to conform to the current year presentation.

     o) COMPREHENSIVE INCOME

          In June 1997, the Financial  Accounting  Standards  Board  issued
     Statement  of  Financial  Accounting  Standard  No.  130  (SFAS  130),
     "Reporting  Comprehensive  Income."   This  statement is effective for
     fiscal years commencing after December 15, 1997  and  has no impact on
     the Company's fiscal 1999 financial statements.

                                                                (continued)
                                F-9
<PAGE>

         INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        MAY 31, 1999, 1998 AND 1997

NOTE A - DESCRIPTION OF COMPANY BUSINESS AND SIGNIFICANT
      ACCOUNTING POLICIES - Continued

     p) BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION

          The  Company  sells  aircraft  and  aircraft  parts,  and  leases
     aircraft  to  foreign  and  domestic customers.  Most of the Company's
     sales take place on an unsecured  basis,  and  a majority of the sales
     are  to  aircraft  operators.   The  Company's  revenues  are  derived
     primarily from customers located in the United States  and  all of the
     Company's  long  lived  assets  are located in the United States.   No
     customer accounted for more than  10% of the Company's sales in fiscal
     1999, 1998 and 1997.

     q) ACCOUNTING FOR STOCK BASED COMPENSATION

          Commencing June 1, 1996, the Company  accounts  for non-qualified
     options issued to non-employees, under SFAS 123, "Accounting for Stock
     Based Compensation."  The exercise price of all options granted by the
     Company  equals  the  market  price  at the date of grant.   Thus,  no
     compensation  expense  is recognized.  The  Company's  employee  stock
     option plans are accounted  for using the intrinsic value method under
     APB  25.   The  Company  provides  disclosure  of  certain  pro  forma
     information as if the fair  value-based  method  had  been  applied in
     measuring compensation expense (see Note H).

NOTE B - INVESTMENT IN JOINT VENTURE

   On  September  16,  1998, the Company entered into a joint venture  (the
   "Air41 Joint Venture")  for the acquisition of 20 DC-9-41H aircraft from
   Scandinavian Airlines System  ("SAS").  The aircraft were leased back to
   SAS and the leases had an average  term  of  39  months.   The Company's
   original  investment in the Air41 Joint Venture was $1.4 million,  which
   represents  a 50% ownership interest.  The Company's Air41 Joint Venture
   partner is AirCorp,  Inc.,  a privately held company which is controlled
   by officers of one of the Company's  largest  customers.   The  aircraft
   purchases  were  financed  through  the  joint  venture,  utilizing non-
   recourse  debt to the partners.  In connection with this financing,  the
   Company had  to  post  a $1.5 million letter of credit.  The Company and
   its joint venture partner  are  collectively  guarantors  on  the  Air41
   Joint  Venture's  obligation  as the lessor of the aircraft.  The  Air41
   Joint Venture is accounted for  under  the  equity method and the leases
   are treated as operating leases.

   The Company is exploring opportunities for the aircraft after the end of
   the term of the leases with SAS.  Such opportunities  include  releasing
   the  aircraft  with  SAS,  leasing the aircraft to one or more different
   lessee(s), selling the aircraft,  parting  out the aircraft, or directly
   placing the aircraft into either passenger or cargo service, whereby the
   Company may have a principal interest in an  airline.  At this time, the
   Company has no firm commitment for the aircraft  after  the  SAS  leases
   expire.  A condensed summary of the joint venture's operations follows:

                                                   As of
                                               MAY 31, 1999
                                               ------------

          Partners' capital accounts           $ 4,747,144
                                               ============

                                             Period from September 16,
                                              1998 (Date of Inception)
                                               THROUGH MAY 31, 1999
                                               -------------------

          Revenues                           $ 10,200,000
          Expenses                              8,147,282
                                               ----------
          Net earnings                       $  2,052,718
                                               ==========


                                    F-10
<PAGE>

         INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        MAY 31, 1999, 1998 AND 1997

                                    F-11
<PAGE>

         INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        MAY 31, 1999, 1998 AND 1997

   NOTE B - INVESTMENT IN JOINT VENTURE - Continued

   Included   in   the   Company's   consolidated   retained   earnings  is
   approximately $670,000 relating to this joint venture.

NOTE C - RESTRUCTURING OF CAPITAL

   On October 3, 1996, the Company completed a restructuring of its capital
   structure. Pursuant to the restructuring, the Company effected  a 1-for-
   27  reverse  split  of  its common stock, issued approximately 2,245,400
   shares of common stock in  exchange for the entire $10 million principal
   amount outstanding and related  accrued  interest  of its 8% Convertible
   Debentures of $1,227,000, and redeemed the entire $7.7 million principal
   amount  outstanding  of  its 12% Senior Notes with the  proceeds  of  an
   advance under a credit agreement  entered  into  on October 3, 1996 with
   the  Bank of New York (See Note E).  Consummation of  the  restructuring
   cured  all defaults with respect to the Debentures and the Senior Notes.
   Upon completion  of  the  restructuring,  costs  incurred related to the
   restructuring and issuance of common stock of $875,401  were recorded as
   an offset to paid in capital.  The transaction resulted in  an after tax
   charge of $530,596, which has been recorded as an extraordinary item.

NOTE D - INVENTORIES

   Inventories at May 31, 1999 and 1998 consisted of the following:

                                                  1999         1998
                                            -----------  -----------
     Aircraft parts                         $ 8,679,059 $ 11,294,924
     Aircraft and engine available for sale   2,452,000      450,000
                                            -----------  -----------
                                           $ 11,131,059 $ 11,744,924
                                            ===========   ==========

NOTE E - LONG-TERM OBLIGATIONS

   Long-term  obligations  at  May  31,  1999  and  1998  consisted  of the
   following:

                                                  1999         1998
                                           -----------  -----------
     Senior Secured Revolving Credit Loans $ 7,053,829 $ 5,006,075
     Senior Secured Term Loan - A            1,654,230   2,081,793
     Senior Secured Term Loan - B               -        2,560,000
     Senior Secured Term Loan - C and D        885,600        -
                                             9,593,659   9,647,868
     Less:  Current maturities               1,455,600   1,351,805
                                           -----------  -----------
                                           $ 8,138,059 $ 8,296,063
                                           =========== ===========


                                                                (continued)
                                    F-12
<PAGE>
         INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        MAY 31, 1999, 1998 AND 1997

NOTE E - LONG-TERM OBLIGATIONS - Continued

   In  October  1996  the  Company entered into a Credit Agreement with the
   Bank of New York, which provides  for a $3 million term loan (Term Loan-
   A) and up to an $11 million revolving  credit.   The  Credit Facility is
   secured  by  substantially  all  of  the  assets  of  the  Company   and
   availability  of amounts for borrowing is subject to certain limitations
   and restrictions.   The  interest  rate  on  the  Credit  Facility which
   fluctuates  based  on certain financial ratios of the Company,  was  the
   lenders prime rate less  .25%  at  May  31, 1999 (7.50%).  The revolving
   line of credit was increased to $13 million  in  March  1997  and to $14
   million  in  fiscal  1998.   As  of May 31, 1999, the available line  of
   credit is approximately $5.7 million.   The  credit  agreement  includes
   certain  covenants  which  provide,  among  other  things,  restrictions
   relating  to  the  maintenance  of  consolidated  net  worth  and  other
   financial ratios, as well as a restriction on the payment of dividends.

   In March 1997, the Company entered into a Second Term Loan (Term Loan-B)
   with  the  Bank  of New York under the Credit Facility for an additional
   $3,750,000.   The  Term  Loan  is  collateralized  by  certain  aircraft
   purchased by the Company  with  the proceeds from the loan.  The Company
   repaid this term loan in full in fiscal 1999.

   During fiscal 1998, the Credit Agreement was amended twice to create two
   additional term loan facilities (term  loans  C and D) in the amounts of
   $1.5  million  and  $1.6  million  and  to add $1 million  (for  capital
   expenditures) to the revolving credit line.   The  two  additional  term
   loans  were  repaid in full in fiscal 1998.  In fiscal 1999, the Company
   borrowed an additional  $1.8  million  on these additional term loans of
   which $900,000 was paid prior to end of fiscal 1999.

   The scheduled maturities of long-term obligations  in  each  of the next
   four  years  until  maturity  subsequent to May 31, 1999 are as follows:
   2000 - $1,455,600, 2001 - $698,641 and 2002 - $7,439,418.

   Subsequent to year-end, the Company borrowed $5,500,000 under a new term
   loan under the credit facility  to  finance the purchase of two aircraft
   under lease.  The Company borrowed an  additional  $1  million under the
   Senior  Secured  Revolving  Credit Loan to make a $1 million  refundable
   deposit related to the purchase of a third aircraft.

NOTE F - COMMITMENTS AND CONTINGENCIES

   LEASES

   The Company leases warehouse  facilities  as  well  as certain equipment
   under long-term operating lease agreements.  Rental expense  under these
   leases for the years ended May 31, 1999, 1998 and 1997 was approximately
   $286,900,  $280,000  and  $36,000,  respectively.  At May 31, 1999,  the
   future  minimum  payments on non-cancellable  operating  leases  are  as
   follows:  2000 - $276,500, 2001 - $232,961, and 2002 - $223,619.

   The Company currently  leases  aircraft  and  engines to customers under
   long-term  operating  lease  agreements.  In addition  to  minimum  base
   rentals,  the  lease  agreement  requires  additional  rent  based  upon
   aircraft and engine usage.  The net  investment  in aircraft and engines
   held  for  or  leased  to  customers  was approximately  $3,749,380  and
   $4,330,000 at May 31, 1999 and 1998, respectively.



                                     F-13
<PAGE>

         INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        MAY 31, 1999, 1998 AND 1997

NOTE G - INCOME TAXES

   The provision (benefit) for income taxes  for  the  years  ended May 31,
   1999, 1998 and 1997 is as follows:

                                       1999          1998        1997
                                   ----------    ---------   ---------
     Current provision:
       Federal                       $ 76,138     $ 69,906    $ 72,663
       State                             -            -           -
                                   ----------   -----------  ---------
                                       76,138       69,906      72,663
     Deferred provision               960,007   (2,889,839)    (72,663)
                                   ----------    ---------   ---------
                                  $ 1,036,145 $ (2,819,933)   $   -
                                   ==========   ==========   =========


   The  tax effect of the Company's temporary differences and carryforwards
   is as follows:

                                                  1999         1998
                                              ----------   ----------
      Deferred tax (benefits) - current:
        Reserve for overhaul costs            $    -       $ (82,000)
        Bad debt reserve                       (129,000)    (193,000)
        Inventory capitalization               (311,000)    (191,000)
        Accrued payroll                        (169,000)    (358,000)
        Accrued vacation                        (15,000)     (15,000)
        Reserve for inventory                  (504,000)    (363,000)
                                              ----------   ----------
                                           $ (1,128,000) $ (1,202,000)
                                             ===========  ============


                                                    1999           1998
                                                 ------------  ------------
      Deferred tax liabilities (benefits)
        - non-current:
        Air41 Joint Venture                         $ 210,000    $    -
        Depreciation and amortization                 513,000      553,000
        Net operating loss carryforward - federal  (1,327,000)  (1,806,000)
        Net operating loss carryforward - state      (256,000)    (307,000)
        Minimum tax credit - federal                 (303,000)    (227,000)
        Other, net                                     91,000       26,000
                                                 ------------  ------------
                                                 $ (1,072,000)$ (1,761,000)
                                                 ============ =============

   The Company  recorded  a  valuation allowance equal to the amount of the
   deferred tax benefits at May  31,  1997.   In  fiscal  1998, the Company
   completely   relieved   the  $2,586,000  valuation  allowance  as   they
   determined that it was more  likely  than  not  that  the  Company would
   recognize  the  deferred  tax  benefits  based  on  the Company's recent
   earnings history and management's estimate that future  profits  will be
   sufficient to realize these benefits.



                                                                (continued)
                                  F-14
<PAGE>

         INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        MAY 31, 1999, 1998 AND 1997


NOTE G - INCOME TAXES - Continued

   The  following  table  summarizes  the differences between the Company's
   effective tax rate and the statutory federal rate as follows:

                                             1999       1998       1997
                                            -----      ------     -----
     Statutory federal rate                 34.0%       34.0%     34.0%
     Tax benefit from net operating
       loss carryforward                      -       (134.2)    (30.7)
     State income taxes                      1.7         -          -
     Other                                  (1.1)        1.0      (3.3)
                                            -----      ------     -----
     Effective tax rate                     34.6%      (99.2)%     -. %
                                            ====       ======     =====

   The  Company  has  net  operating  loss carryforwards  for  federal  tax
   purposes of approximately $3.5 million.   The  net operating losses will
   expire in years 2010 and 2011.  The Company also  has  a federal minimum
   tax credit carryover of approximately $303,000 which may  be utilized in
   future  years  to the extent that the regular tax liability exceeds  the
   alternative minimum  tax.   Certain  provisions of the tax law may limit
   the net operating loss and credit carryforwards available for use in any
   given year in the event of a significant change in ownership interest.

NOTE H - STOCK OPTIONS

   Under the terms of the Company's 1996 Stock Option Plan, the Company has
   836,782 shares of common stock reserved.   The  exercise  price  of  all
   options  granted by the Company to the employees equals the market price
   at the date  of the grant.  No compensation expense has been recognized.
   The options, other  than  those  issued  to the executive officers, vest
   immediately and expire 10 years from the date of the grant.

   On  December  3,  1998, the Company's Board of  Directors  approved  and
   ratified the repricing  of  certain  unexercised  employee stock options
   granted under the Company's stock option plans.  As  a  result,  options
   granted  to  purchase  131,173 shares of the Company's common stock were
   repriced from $4.50 - $6.94  per  share to $3.31 per share.  The 131,173
   shares are reflected in both the granted  and  cancelled captions in the
   accompanying  table.   The  pro  forma  effect  on  earnings  from  this
   repricing is included in the pro forma net earnings shown below.

   Had  compensation  expense  for the Stock Option Plan and  non-qualified
   options to employees been determined  based  on  the  fair  value of the
   options at the grant dates consistent with the method of SFAS  123,  the
   Company's net earnings and earnings per share would have been changed to
   the pro forma amounts below.

                                            1999         1998         1997
                                       ----------- ----------- -----------
          Net earnings
             As reported               $ 1,954,316 $ 5,662,672 $ 1,728,493
             Pro forma                 $ 1,743,076 $ 5,400,656 $ 1,150,122

          Basic earnings per share
             As reported               $       .77 $      2.29 $      1.05
             Pro forma                 $       .68 $      2.19 $       .70

          Diluted earnings per share
             As reported               $       .72 $      2.03 $       .96
             Pro forma                 $       .64 $      1.93 $       .63

                                                                (continued)

                                           F-15
<PAGE>

         INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        MAY 31, 1999, 1998 AND 1997

   NOTE H - STOCK OPTIONS - Continued

   The above pro forma disclosures may not be representative of the effects
   on  reported  net earnings for future years as certain options vest over
   several  years  and  the  Company  may  continue  to  grant  options  to
   employees.

   The fair value of  each  option  grant is estimated on the date of grant
   using the binomial option-pricing  model  with  the  following weighted-
   average  assumptions  used  for  grants in fiscal 1999, 1998  and  1997,
   respectively: dividend yield of 0.0  percent  for  all  years;  expected
   volatility  of 40 percent, 40 percent and 30 percent; risk-free interest
   rates of 5.50  percent; 5.50 percent and 6 percent; and expected holding
   periods of 4 years.

   A summary of the  status  of the Company's fixed stock options as of May
   31, 1999, 1998 and 1997, and  changes  during  the years ending on those
   dates is as follows:

<TABLE>
<CAPTION>

                          MAY   31,1999          MAY    31, 1998          MAY 31, 1997
                         ------------------      ------------------       --------------
                                  Weighted-               Weighted-            Weighted-
                                   Average                 Average              Average
                                  Exercise                 Exercise            Exercise
                       SHARES      PRICE           SHARES    PRICE    SHARES     PRICE
                       -------    --------         -------   -----    ------    -------
<S>                   <C>        <C>             <C>       <C>      <C>       <C>
   Outstanding at
     beginning of year 563,210    $ 3.42          598,609  $ 2.99    269,500     $ .70
   Granted             254,173      3.31          137,173    4.82    598,609      2.99
   Exercised           (93,056)     3.10         (167,572)   3.03       -
   Cancelled          (131,173)     4.78           (5,000)   3.00   (269,500)      .70
   Outstanding at
     end of year       593,154      3.12          563,210    3.42    598,609      2.99
                       -------    --------        -------   -----    -------    -------

   Options exercisable
     at end of year    437,174                    415,012            392,430
   Weighted-average
     fair value of options
     granted during
     the year           $ 1.28                     $ 1.90             $  .97


   The  following  information applies to options outstanding at May 31, 1999:

                                     OPTIONS  OUTSTANDING          OPTIONS EXERCISABLE
                                   ----------------------------    ------------------------
                                    Weighted -
                                    Average
                                    Remaining     Weighted -                   Weighted -
     Ranges of                      Contractual     Average                     Average
   EXERCISE PRICES    SHARES          LIFE        EXERCISE PRICE    SHARES   EXERCISE PRICE
   ---------------    ------          ----        --------------   -------   --------------
   $2.75 - $3.31     593,154          8.21           $ 3.12        437,174       $ 3.16

</TABLE>
                                            F-16
<PAGE>

 INTERNATIONAL AIRLINE SUPPORT GROUP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        MAY 31, 1999, 1998 AND 1997

   NOTE I - STOCK REPURCHASE

   In the third quarter of 1999, the Company began  acquiring shares of its
   common stock in connection with a stock repurchase  program  approved by
   the  Board  of Directors in December 1998.  During the six months  ended
   May 31, 1999, the Company repurchased 467,325 shares of its common stock
   at an average price of $4.16 for a total expenditure of $1,946,780.  The
   Company does  not  currently have a formal plan in place to purchase any
   additional shares; however,  the  Company  is authorized by the Board to
   make  further purchases if deemed to be in the  best  interests  of  the
   Company.   Any  such  purchases  must  be also approved by the Company's
   bank.  In June 1999 and July 1999, the Company  purchased  an additional
   4,200 shares of the Company's common stock for approximately $19,000.

NOTE J - SUPPLEMENTAL CASH FLOW DISCLOSURE

   In  fiscal  1997,  the Company completed a restructuring of its  capital
   (See  Note C).  In conjunction  with  this  restructuring,  the  Company
   incurred the following noncash financing activity:

              Decrease in Subordinated Debentures   $ 10,000,000
              Decrease in Accrued Interest             1,224,755
              Decrease in Common Stock                     2,245
              Increase in Paid in Capital            (10,892,140)
              Decrease in Deferred Restructuring Fees   (334,860)

   In fiscal  1997, the Company exchanged an aircraft with a net book value
   of $237,552  for certain inventory.  No gain or loss was recorded on the
   exchange.

   The net change in inventory in fiscal 1999 and 1998, as derived from the
   change in balance  sheet  amounts,  has  been adjusted for the following
   items:

                                            1999         1998        1997
                                          ----------- --------  ----------
          Net (decrease) increase in
            inventory                     $ (613,865) $ 99,640 $ 2,367,969
          Transfer of aircraft from
            inventory to held for lease         -         -        303,064
          Exchange of aircraft held
            for lease for inventory             -         -       (237,552)
                                          ----------- --------  ----------
          Cash flow impact from
            change in inventory           $ (613,865) $ 99,640 $ 2,433,481
                                          =========== ======== ===========

NOTE K - RELATED PARTY TRANSACTIONS

   Under  the commission agreement entered into  with  the  Company  during
   fiscal 1994,  an  outside  director  is  entitled  to  3-4%  of revenues
   generated  from  sales  to  customers brought in by the director plus  a
   fixed monthly fee.  The Company  paid the outside director approximately
   $96,000, $96,000 and $6,000 for the  years  ended May 31, 1999, 1998 and
   1997.  This agreement expires in fiscal 2000, but is renewable annually.





                                                                (continued)
                                 F-17
<PAGE>

NOTE K - RELATED PARTY TRANSACTIONS - Continued

   In connection with obtaining the Credit Agreement  with  the Bank of New
   York,  the  Company  agreed  to  pay  the   placement  agent  a $250,000
   placement  fee.   A  director  of  the  Company  was  a principal of the
   placement  agent.  In fiscal 1997, the Company paid the placement  agent
   $200,000 of this fee, and the remaining $50,000 was paid in fiscal 1998.
   In addition, the Company  paid  this director $86,000 during both fiscal
   1999 and 1998 for services rendered  to  the  Company in connection with
   the identification and evaluation of acquisition opportunities.

   An executive of one of the Company's significant  customers  is  also an
   executive  of  the  Company's partner in the Air41 Joint Venture.  Total
   sales to this customer  were approximately $1.6 million, $2 million, and
   $339,000 in fiscal 1999,  1998,  and  1997, respectively.  As of May 31,
   1999  and  1998,  the  accounts  receivable   from   this  customer  was
   approximately $109,000 and $16,000, respectively.  During  fiscal  1999,
   the  Company  purchased  three  engines from the Company's joint venture
   partner  for $3,120,000.  Currently,  these  engines  are  on  lease  to
   unrelated third parties.

   An executive  officer  of  the  Company  is  a  member  of  the Board of
   Directors of one of the Company's customers.  The Company both purchases
   and sells inventory to this customer.  Total sales to this customer were
   $33,847, $0 and $0 in fiscal 1999, 1998 and 1997, respectively.   As  of
   May  31,  1999  and 1998, the accounts receivable from this customer was
   approximately $69,000  and  $0, respectively.  Total purchases from this
   customer were approximately $1.2 million, $0 and $0 in fiscal 1999, 1998
   and 1997, respectively.  In fiscal  1999,  the Company received $250,000
   of consulting income from this customer.  As  of  May 31, 1999 and 1998,
   the  Company  has  a  payable  to  this  customer  of $756,049  and  $0,
   respectively.

NOTE L - FOURTH QUARTER ADJUSTMENTS

   In  fiscal 1998, the Company recorded a fourth quarter  tax  benefit  of
   approximately   $1,100,000  as  a  result  of  adjusting  the  Company's
   estimated deferred tax assets.

   In fiscal 1997, the  Company  recorded  a  fourth quarter tax benefit of
   approximately $102,000 as a result of adjusting  the estimated effective
   tax rate used during the year.

NOTE M - ACCRUED LIABILITIES

   Accrued liabilities consist of the following items:

                                                      1999         1998
                                                 -----------   ----------
          Customer deposits                        $ 350,097    $ 110,902
          Accrued repair costs                     1,124,859      582,319
          Accrued legal costs                          -          209,550
          Accrued payroll                            597,442    1,019,883
          Accrued property taxes                      48,214       13,270
          Accrued offering expenses                     -         129,032
          Reserve for repair of leased aircraft         -         698,818
          Other                                       88,579      168,242
                                                 -----------   ----------
                                                 $ 2,209,191  $ 2,932,016




                                    F-18
<PAGE>


   NOTE N - YEAR 2000

   The  Year  2000  issue  relates to limitations in computer  systems  and
   applications that may prevent  proper recognition of the Year 2000.  The
   potential effect of the Year 2000  issue on the Company and its business
   partners  will  not  be  fully determinable  until  the  Year  2000  and
   thereafter.   If Year 2000  modifications  are  not  properly  completed
   either by the Company  or  entities  with  which  the  Company  conducts
   business,  the  Company's  revenues  and  financial  condition  could be
   adversely impacted.

NOTE O - EMPLOYMENT AGREEMENTS

   In October 1996, the Company entered into employment agreements with two
   of  its  executive  officers for a period of five years.  The agreements
   provide the employees  with  a certain minimum annual salary plus bonus.
   The agreements provide the employees  with  an option to terminate their
   agreements  and  receive  a  lump sum payment equal  to  the  employee's
   average annual compensation paid  by the Company for the most recent two
   years upon a change in control of the Company.

NOTE P - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
                                First       Second        Third         Fourth
    YEAR                       QUARTER      QUARTER      QUARTER       QUARTER    TOTAL
------------------------       -------      -------      ------        -------   -------

                   (IN THOUSANDS, EXCEPT FOR PER SHARE INFORMATION)
   1999
   <S>                         <C>          <C>         <C>            <C>       <C>
   Revenues                    $ 5,575      $ 5,836     $ 5,729       $ 10,532  $ 27,672
   Operating income              1,017        1,226       1,246            803     4,292
   Net earnings available
     for common shareholders       442          529         555            418     1,954
   Earnings per share - basic      .17          .21         .22            .17       .77
   Earnings per share - diluted    .16          .20         .21            .15       .72

   1998
   Revenues                    $ 5,567      $ 6,092     $ 6,429        $ 9,875  $ 27,963
   Operating income              1,184        1,166       1,219          1,208     4,777
   Net earnings available
     for common shareholders       985          912       1,713          2,053     5,663
   Earnings per share - basic      .41          .37         .70            .90      2.29
   Earnings per share - diluted    .36          .33         .61            .73      2.03

</TABLE>
                                        F-19
<PAGE>