FORM 10-Q
                         SECURITIES AND EXCHANGE COMMISSION
                              Washington, D. C.  20549

                     Quarterly Report Under Section 13 or 15(d)
                       of the Securities Exchange Act of 1934

        (Mark One)

        [  X  ]Quarterly  Report  Pursuant  to  Section  13  or  15(d) of the
            Securities Exchange Act of 1934

        For the quarterly period ended September 30, 1996

        [    ]Transition  Report  Pursuant  to  Section  13  or 15(d) of  the
            Securities Exchange Act of 1934

        For    the    transition    period    from    _______________________
        to________________________

        For Quarter Ended September 30, 1996

        Commission File Number  0-16572

                             AVONDALE INDUSTRIES, INC.



            Louisiana                                39-1097012

        (State or other jurisdiction of           (I.R.S. Employer
        incorporation or organization)            Identification No.)


        P. O. Box 50280, New Orleans, Louisiana   70150

        (Address of principal executive offices)  (Zip Code)

        Registrant's telephone number, including area code 504/436-2121

        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 file such filing requirements
        for the past 90 days.  YES    X     NO        .

        Indicate the number  of  shares  outstanding  of each of the issuer's
        classes of common stock as of the latest practicable date.

                                                      Outstanding  at
               Class                                  September 30, 1996
        Common stock, par value $1.00 per share       14,464,175 shares
<PAGE>
                     AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES

                                       INDEX


                                                                  Page No.

        Part I.  Financial Information

            Item 1.  Financial Statements

                Independent Accountants' Report                          

                Consolidated Balance Sheets -
                December 31, 1995 and September 30, 1996                    

                Consolidated Statements of Operations -
                Quarters  and  Nine  Months Ended September 30, 1995 and 1996

                Consolidated Statements of Cash Flows -
                Nine Months Ended September 30, 1995 and 1996

                Notes to Consolidated Financial Statements            

            Item 2.  Management's Discussion and Analysis of
                     Financial Condition and Results of Operations         

        Part II.  Other Information                                     

                Item 6.  Exhibits and Reports on Form 8-K
<PAGE>

        INDEPENDENT ACCOUNTANTS' REPORT

        To the Board of Directors and Shareholders of
          Avondale Industries, Inc.

        We  have  reviewed the condensed consolidated financial statements of
        Avondale  Industries,   Inc.  and  subsidiaries,  as  listed  in  the
        accompanying index, as of  September 30, 1996 and for the three-month
        and nine-month periods ended  September  30,  1996  and  1995.  These
        financial   statements   are  the  responsibility  of  the  Company's
        management.

        We conducted our review in  accordance  with standards established by
        the American Institute of Certified Public  Accountants.  A review of
        interim  financial  information  consists  principally   of  applying
        analytical  procedures  to financial data and of making inquiries  of
        persons responsible for financial  and  accounting  matters.   It  is
        substantially  less  in  scope  than an audit conducted in accordance
        with generally accepted auditing standards, the objective of which is
        the expression of an opinion regarding the financial statements taken
        as a whole.  Accordingly, we do not express such an opinion.

        Based on our review, we are not aware  of  any material modifications
        that  should  be  made  to  such  condensed  consolidated   financial
        statements  for  them  to  be  in  conformity with generally accepted
        accounting principles.

        We  have previously audited, in accordance  with  generally  accepted
        auditing  standards,  the  consolidated  balance  sheet  of  Avondale
        Industries,  Inc.  and subsidiaries as of December 31, 1995, and  the
        related consolidated  statements of operations, shareholders' equity,
        and cash flows for the year then ended (not presented herein); and in
        our  report dated January  19,  1996,  we  expressed  an  unqualified
        opinion  on those consolidated financial statements.  In our opinion,
        the information  set  forth  in the accompanying consolidated balance
        sheet as of December 31, 1995  is  fairly  stated,  in  all  material
        respects, in relation to the consolidated balance sheet from which it
        has been derived.




        DELOITTE & TOUCHE LLP

        October 30, 1996
<PAGE>
                           PART I - FINANCIAL INFORMATION

        Item 1. Financial Statements
<TABLE>
<CAPTION>
                     AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEETS
                         (In thousands, except share data)
                                    (UNAUDITED)

                                                December 31,    September 30,
                                                   1995             1996
                                          						   ----             ----
        <S>                                       <C>             <C> 
        ASSETS
        Current Assets:
          Cash and cash equivalents ............. $ 38,524        $ 52,561
          Restricted short-term investments  ....      383             --
          Receivables (Note  2):
            Accounts receivable  ................   39,753          10,311
            Contracts in progress ...............   53,431          78,296
          Inventories:
            Goods held for sale .................    7,409          10,339
            Materials and supplies ..............    7,880           8,347
          Deferred tax assets (Note 5) ..........   23,650          14,650
          Prepaid expenses ......................    2,563           3,080
                                          						   -------     	   -------
            Total current assets ................  173,593         177,584
                                          						   -------     	   -------
        Property, Plant and Equipment:

          Land ..................................    9,161           8,733
          Construction in progress ..............    4,665          13,571
          Buildings and improvements ............   55,326          55,792
          Machinery and equipment ...............  182,547         184,333
                                          						   -------	        -------
          Total .................................  251,699         262,429

          Less accumulated depreciation ......... (121,661)       (129,146)
                                          						   -------   	     -------
          Property, plant and equipment - net ...  130,038         133,283

        Goodwill - net ..........................    8,637           8,214
        Deferred tax assets (Note 5) ............      --            9,007
        Other assets ............................    4,459           5,198
                                          						   -------	        -------
            Total assets  ....................... $316,727        $333,286
                                          						   =======     	   =======

        See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                     AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEETS
                         (In thousands, except share data)
                                    (UNAUDITED)

                                                December 31,    September 30,
                                                   1995             1996
                                           					   ----             ----
        <S>                                       <C>             <C>
        LIABILITIES AND SHAREHOLDERS' EQUITY
        Current Liabilities:
          Current portion of long-term debt ....  $   5,062       $  4,957
          Accounts payable .....................     65,517         61,338
          Accrued employee compensation ........     10,777         12,109
          Other  ...............................     11,249         10,814
                                          						    -------        -------
            Total current liabilities ..........     92,605         89,218

        Long-term debt .........................     60,593         54,866

        Other liabilities and deferred credits..     12,471         13,506
                                          						    -------        -------
          Total liabilities ....................    165,669        157,590
                                                    -------        -------
        Commitments and contingencies (Note 4)

        Shareholders' Equity:
          Common stock, $1.00 par value,
            authorized 30,000,000 shares;
            issued - 15,927,191 shares
            in 1995 and 1996  ..................     15,927         15,927
          Additional paid-in capital ...........    373,911        373,911
          Accumulated deficit ..................   (226,924)      (202,286)
                                            				    -------        -------
            Total ..............................    162,914        187,552

          Treasury stock (common: 1,463,016
            shares in 1995 and 1996) at cost ...    (11,856)       (11,856)
                                          						    -------        -------
          Total shareholders' equity ...........    151,058        175,696
                                          						    -------        -------
          Total ................................   $316,727       $333,286
                                          						    =======        =======

        See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                     AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                       (In thousands, except per share data)
                                    (UNAUDITED)

                                         Quarters              Nine Months
                                    Ended September 30,      Ended September 30,
                                     1995        1996          1995       1996
                     			             ----        ----          ----       ----
        <S>                      <C>         <C>           <C>        <C>
        Net sales .............. $ 148,785   $ 148,384     $ 435,148  $ 457,457

        Cost of sales ..........   133,992     129,336       393,131    402,957
                            				   -------     -------       -------    -------
        Gross profit ...........    14,793      19,048        42,017     54,500

        Selling, general
          and administrative
          expenses .............     7,958       9,811        23,219     28,136
                            				   -------     -------       -------    -------

        Income from operations .     6,835       9,237        18,798     26,364

        Interest expense .......    (1,119)     (1,144)       (3,676)    (3,792)

        Other - net ............       638         719         1,469      2,066
                            				   -------     -------       -------    -------
        Income before
         income taxes ..........     6,354       8,812        16,591     24,638

        Income tax benefit
          (provision)(Note 5) ..     5,700      (3,200)        7,000        --
                            				   -------     -------       -------    -------
        Net income ............. $  12,054   $   5,612     $  23,591  $  24,638
                            				   =======     =======       =======    =======
        Net income per share of
          common stock .........    $ 0.83      $ 0.39        $ 1.63     $ 1.70
                              		   =======     =======       =======    =======
        Weighted average number
          of shares outstanding.    14,464      14,464        14,464     14,464
                            				   =======     =======       =======    =======	

        See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                     AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
                                   (In thousands)
                                    (UNAUDITED)
                                                            1995         1996
                                                 							    ----         ----
        <S>                                              <C>          <C>
        CASH FLOWS FROM OPERATING ACTIVITIES:
          Net income ............................        $ 23,591     $ 24,638
          Adjustments to reconcile net income to net
            cash provided by operating activities:
            Depreciation and amortization .......           7,207        8,063
            Deferred income taxes ...............          (7,000)         --
            Gain on sale of assets ..............            (813)         --
            Changes in operating assets and
              liabilities, net of dispositions:
              Receivables .......................         (11,368)       4,577
              Inventories .......................            (700)      (3,397)
              Prepaid expenses ..................           3,237         (517)
              Accounts payable ..................           5,203       (4,179)
              Accrued employee compensation .....            (239)       1,332
              Other - net .......................           3,548         (307)
                                                 							  -------      -------
             Net Cash Provided by Operating Activities     22,666       30,210
                                                  						  -------      -------
        CASH FLOWS FROM INVESTING ACTIVITIES:
          Capital expenditures ..................         (18,392)     (11,179)
          Change in restricted short-term
             investments - net ..................          (1,874)         383
          Proceeds from sale of assets ..........           3,248          455
                                                 							  -------      -------
          Net Cash Used for Investing Activities.         (17,018)     (10,341)
                                                 							  -------      -------
        CASH FLOWS FROM FINANCING ACTIVITIES:
          Payment of long-term borrowings .......          (5,866)      (5,832)
          Proceeds from long-term borrowings ....          17,780          --
                                                 							  -------      -------
          Net Cash Provided by (Used for)
            Financing Activities ................          11,914       (5,832)
                                                 							  -------      -------
        Net increase in cash and cash equivalents          17,562       14,037
        Cash and cash equivalents at
            beginning of period .................          15,414       38,524
                                                 							  -------      -------
        Cash and cash equivalents at end of period       $ 32,976     $ 52,561
                                                 							  =======      =======
        Supplemental Disclosures of Cash Flow Information:
        Cash paid during the period for:
        Interest ................................        $  3,532     $  3,536
                                                 							  =======      =======
        Note issued in litigation settlement (Note 4)    $  2,000
                                                 							  =======	
        Income taxes ............................                     $  1,560
                                                        								       =======
        See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>

        AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

        1.  BASIS OF PRESENTATION

            The  accompanying  unaudited  consolidated  financial  statements
            include the accounts of Avondale Industries, Inc. and its wholly-
            owned subsidiaries ("Avondale" or the "Company").  In the opinion
            of   the   management  of  the  Company,  all  adjustments  (such
            adjustments   consisting  only  of  a  normal  recurring  nature)
            necessary for a  fair  presentation  of the operating results for
            the interim periods presented have been  included  in the interim
            financial statements.  These  interim financial statements should
            be  read  in  conjunction  with  the  December  31,  1995 audited
            financial statements and related notes filed on Form 10-K for the
            year ended December 31, 1995 (the "1995 Form 10-K").

            The financial statements required by Rule 10-01 of Regulation S-X
            have been reviewed by independent public accountants as stated in
            their report included herein.

         2. RECEIVABLES

            The following information presents the elements of receivables at
            December 31, 1995 and September 30, 1996 (in thousands):
<TABLE>
<CAPTION>
                                                      1995        1996
                                          						      ----        ---- 
           <S>                                     <C>         <C>
           Long-term contracts:
                U.S. Government:
                  Amounts billed .............     $ 30,151    $  1,155
                  Unbilled costs and estimated
                     profits on contracts in
                     progress ................       41,119      53,524
                                          						    -------     ------- 
                 Total .......................       71,270      54,679

                Commercial:
                  Amounts billed .............        4,364       2,792
                  Unbilled costs and estimated
                     profits on contracts in
                     progress ................       12,312      24,772
                                          						    -------     -------
                Total from long-term contracts      87,946       82,243
            Trade and other current
                     receivables .............       5,238        6,364
                                          						   -------      -------
            Total ............................    $ 93,184     $ 88,607
                                          						   =======      =======
</TABLE>
            Unbilled  costs  and  estimated  profits on contracts in progress
            were not billable to customers at  the  balance sheet dates under
            terms of the respective contracts.  As discussed in Note 2 of the
            Company's  Annual  Report  included in the 1995  Form  10-K,  the
            Company  settled in December,  1995  its  Request  for  Equitable
<PAGE>
            Adjustment  ("Minehunter  REA")  filed  with  the  U.S.  Navy  in
            connection  with  the Company's contract to construct four MHC-51
            Coastal Minehunters.  As a result of this settlement, the Company
            submitted to the U.S.  Navy  invoices  totaling  $30.7 million in
            December  1995.  These  invoices  were paid in full by  the  Navy
            during the first quarter of 1996.

         3. FINANCING ARRANGEMENTS

            In the first quarter of 1996 the Company  reached an agreement to
            extend  to May 1998 the terms of its revolving  credit  agreement
            with  various   financial   institutions.   There  have  been  no
            borrowings in 1996 under the revolving credit agreement.

         4. COMMITMENTS AND CONTINGENCIES

            Litigation

            As discussed in further detail in Note 10 of the Company's Annual
            Report included in the 1995 Form 10-K, the Company was advised in
            1986  that  it was a potentially responsible party  ("PRP")  with
            respect to an  oil  reclamation  site operated by an unaffiliated
            company in Walker, Louisiana.  To  date,  the Company and certain
            of the other PRPs for the site have funded the cost of the site's
            remediation  under  a  preliminary  cost-sharing  agreement.   At
            September  30,  1996, clean-up costs totaled  $17.7  million,  of
            which the Company  has contributed $3.7 million.  Additional work
            scheduled for the site  includes  the  completion  of  studies in
            1996, and if required by the results of these studies, subsequent
            remediation.  Following completion of such remediation,  it  will
            be  necessary  to obtain Environmental Protection Agency approval
            to close the site,  which  consent  may  require subsequent post-
            closure  activities  such  as  groundwater  monitoring  and  site
            maintenance for many years.  The Company is not  able to estimate
            the  final costs for any such additional remedial work  or  post-
            closure costs that may be required; however, the Company believes
            that its  proportionate  share of expenditures for any additional
            work will not have a material  adverse  effect  on  the Company's
            financial statements.  In addition, the Company believes that its
            proportionate responsibility for the clean-up costs will  not  be
            materially changed.

            In  1995,  the Federal District Court for the Western District of
            Louisiana  issued   a   bench   ruling  approving  the  Company's
            settlement of a class action lawsuit  involving  alleged personal
            injury   and  property  damage  arising  from  the  Walker,   La.
            reclamation  site.   In  the  first  quarter of 1996, the Federal
            District Court issued the written order  confirming  its  earlier
            bench ruling.  The period for filing appeals expired on April  7,
            1996   and  no  appeals  were  filed.  Under  the  terms  of  the
            settlement,  the Company paid $4.0 million into a settlement fund
            in the third quarter  of  1995,  using  cash from operations, and
            issued a $2.0 million unsecured note to the  plaintiff class. The
            note  bears interest at 8% per annum and is due  on  January  28,
            1997. The  Company  had previously recorded an accrual sufficient
            to provide for the $6.0  million  settlement  and  has sufficient
            liquidity to fund the note. The Company could also be responsible
            for payment to the plaintiffs of up to an additional $6.0 million
            (plus   interest   at   8%  per  annum)  if  the  plaintiffs  are
<PAGE>
            unsuccessful  in  collecting   certain  claims  under  Avondale's
            insurance policies that have been assigned to the plaintiff class
            under the settlement agreement.  With  respect  to  the potential
            contingent liability of the Company to pay additional  sums under
            the  settlement  agreement, management believes that the eventual
            resolution of this matter will not have a material adverse effect
            on the Company's results  of  operations,  financial  position or
            cash  flows.  Furthermore,  the  Company has initiated litigation
            against  its  insurer  for  a  declaration  of  coverage  of  the
            liability,  if  any,  that  may  arise  in  connection  with  the
            remediation of the site referred to  above.  The  court has ruled
            that the insurer has the duty to defend the Company,  but has not
            yet  ruled  on  whether  the carrier has a duty to indemnify  the
            Company if any liability is ultimately assessed against it. After
            consultation with counsel,  the  Company is unable to predict the
            eventual outcome of this litigation  or  the degree to which such
            potential  liability  would  be  indemnified  by   its  insurance
            carrier.

            In  addition  to  the  above,  the  Company  is also named  as  a
            defendant in numerous other lawsuits and proceedings  arising  in
            the   ordinary   course   of  business,  some  of  which  involve
            substantial damage claims.

            The Company has established  accruals  as appropriate for certain
            of the matters discussed above.  While the  ultimate  outcome  of
            lawsuits  and proceedings against the Company cannot be predicted
            with certainty,  management  believes, based on current facts and
            circumstances and after review  with  counsel,  that the eventual
            resolution  of  these  matters  will not have a material  adverse
            effect on the Company's financial statements.

            Letters of Credit

            In the normal course of its business  activities,  the Company is
            required  to provide letters of credit to secure the  payment  of
            workers' compensation  obligations,  other  insurance obligations
            and  to  provide  a  debt service reserve fund related  to  $36.3
            million of Series 1994  industrial  revenue bonds.  Additionally,
            under certain contracts the Company may  be  required  to provide
            letters  of  credit to secure certain performance obligations  of
            the Company thereunder. Outstanding letters of credit relating to
            these  business   activities   amounted  to  approximately  $11.3
            million and $25.4 million at September  30, 1996 and December 31,
            1995, respectively.

        5.  INCOME TAXES

            During  1995  and  the  first nine months of  1996,  the  Company
            provided  for income taxes  based  on  the maximum statutory rate
            for U.S. corporations.  These provisions, however, were offset by
            certain adjustments  related to deferred  income  taxes.   During
            the  second  quarters  of  1996 and 1995 and the third quarter of
            1995,  the deferred tax valuation  allowance  decreased  by  $9.0
            million,  $10.0 million, and $8.0 million, respectively, based on
            current  evaluations   of   the  Company's  expectations  of  the
            likelihood  of  future  taxable  income  that  would  permit  the
            utilization of its net operating  loss carry forwards.  The first
            $5.0 million of the second quarter  1995 decrease was recorded as
<PAGE>
            a reduction in goodwill in accordance with Statement of Financial
            Accounting Standards No. 109, "Accounting for Income Taxes."  The
            remaining $13.0 million for 1995 and  the entire $9.0 million for
            1996 were recorded as a reduction of income  tax  expense.   Such
            benefits  in  the  current  and prior year periods recognized for
            financial reporting purposes  the  availability  of net operating
            loss  carry  forwards  to  offset estimated future earnings.   At
            September 30, 1996, the benefits  related to substantially all of
            the  Company's  net  operating  loss  carry  forwards  have  been
            recognized for financial reporting purposes.

        Item 2:  Management's Discussion and Analysis  of Financial Condition
                 and Results of Operations

        The  following  discussion  should  be read in conjunction  with  the
        Company's unaudited consolidated financial statements for the periods
        ended  September 30, 1996 and 1995 and  Management's  Discussion  and
        Analysis  of  Financial  Condition and Results of Operations included
        under Item 7 of the Company's Annual Report on Form 10-K for the year
        ended December 31, 1995 (the "1995 Form 10-K").

        Overview

        The Company continued the  trend  of  improvement  in  its  operating
        results  by  recording  significant  increases  compared  to the same
        periods  in the prior year.  Income before income taxes increased  by
        39%  for the  third  quarter  of  1996 and by 49%  for the first nine
        months  of  1996 compared to the same  periods  in  the  prior  year.
        Further, net  income increased by approximately 4%  on a year to date
        basis over the  same  period in 1995.  Net income in both the current
        and prior year periods  include  the  effects  of deferred income tax
        benefits as discussed below.

        The Company's firm backlog at September 30, 1996 was approximately $1
        billion  ($1.5  billion including options).  During  the  first  nine
        months of 1996, the  Company  delivered  a  double-hulled T-AO Oiler,
        representing  the last of 16 built by the Company,  a  third  Landing
        Ship Dock - Cargo Variant ("LSD-CV") and the second and third of four
        MHC-51 Class Coastal  Minehunters  ("MHC")  to  the  U.S.  Navy.  The
        fourth  MHC  is scheduled for delivery in early 1997.  Shortly  after
        the end of the second quarter the Company delivered the first of four
        commercial product  tankers  that  the  Company  is retrofitting with
        double hulls in compliance with the Oil Pollution Act of 1990.

        The Company continues to pursue the U.S. Navy's program  for  the LPD
        17, the Navy's new class of amphibious transport dock vessel, through
        its  previously  disclosed  alliance  formed  with  Bath  Iron  Works
        Corporation, Hughes Aircraft Company and Intergraph Corporation.  The
        proposal  was  submitted on June 28, 1996.  The award of the contract
        for the design and  construction  of  the  first  ship,  in  what  is
        anticipated  to  be a multi-ship project, is expected by the close of
        1996.   If the alliance  is  successful  in  securing  the  contract,
        Avondale would be the prime contractor with ships constructed in both
        the Avondale and Bath yards.  Hughes Aircraft will be responsible for
        total ship  system integration while the team will utilize Intergraph
        technology  for the design and manufacture of the ship.  The alliance
        will be further  strengthened  by the technical staff of the Electric
        Boat Division of General Dynamics Corporation which recently acquired
        Bath Iron Works.
<PAGE>
        With  a  substantial  portion  of  Avondale's  current  firm  backlog
        scheduled for completion in 1998, it  is important that Avondale be a
        successful  bidder  for the LPD-17 vessels  or  other  U.S.  Navy  or
        commercial  work  if  it   is   to  maintain  its  current  level  of
        shipbuilding activity beyond 1998.  Other U.S. Navy programs that may
        offer shipbuilding opportunities  to  Avondale  include  the possible
        construction   of   two   additional  Sealift  vessels;  a  class  of
        prepositioning vessels for  the  U.S.  Marine Corps; up to six of the
        U.S.  Navy's planned Arsenal Ship (a new  concept  of  warship  which
        could  act  as  a  floating  remote-controlled  missile  launcher  by
        utilizing  integrated  communications  and  electronics) the first of
        which is expected to be awarded in 1997; and  up to 14 ADC(X) vessels
        (a  class of auxiliary vessels designed to deliver  fuel,  ammunition
        and other  supplies  to the U.S. Navy Fleet with capabilities similar
        to  the  T-AOs constructed  at  Avondale).  Commercial  opportunities
        include constructing  vessels  with national defense features for the
        Ready  Reserve fleet and the retrofitting  of  existing  tankers  and
        construction  of  new  double-hulled  tankers  in response to the Oil
        Pollution  Act  of  1990  which required the phase-in  transition  of
        single-hulled tankers and product  carriers  to double-hulled vessels
        beginning January 1, 1995.  As noted above, the  Company is currently
        retrofitting four double-hulled forebodies to product  carriers.   In
        addition,  the  Company  announced  in  the  fourth quarter of 1995 a
        contract  for  the  construction  of  four  42,000 DWT  double-hulled
        product carriers.  The contract is subject to  the receipt of a Title
        XI financing guarantee from the U.S. Maritime Administration  and  to
        the  satisfaction of certain other conditions.  In the second quarter
        of 1996  the  Company announced that, at the request of the customer,
        the delivery date  was  extended  from  1998  to the year 2000.  This
        contract is not included in the Company's backlog  at  September  30,
        1996.

        As  previously  disclosed,  certain  of the Company's operations were
        closed  in 1994 upon the completion of  their  respective  contracts.
        Two of these  facilities  are  currently  offered  for sale while the
        Company  continues  to  seek  alternative uses for these  facilities.
        Shortly after the close of the  third quarter, the Company executed a
        purchase  agreement  with  respect to  one  of  the  two  sites.  The
        agreement  is  subject  to  the   purchaser's   completing  its   due
        diligence, but the terms of the purchase agreement call for a closing
        to occur before year end. It is envisioned that the  Company will not
        incur  any significant additional gain or loss on the disposition  of
        these assets.

        With respect  to  environmental matters, the Company currently is not
        aware  of  any  material   liabilities   to   be  incurred  for  site
        restoration,  post  closure, monitoring commitments,  or  other  exit
        costs that may occur or result from the sale, disposal or abandonment
        of any of these properties.

        Results of Operations

        The Company recorded  net income of $5.6 million, or $0.39 per share,
        for the third quarter of 1996 compared to $12.1 million, or $0.83 per
        share, for the third quarter  of  1995.   The  results  for the third
        quarter  of 1995 include an $8.0 million, or $0.55 per share,  income
        tax benefit  as  discussed  in  Note  5  of the Notes to Consolidated
        Financial Statements contained elsewhere in  this  Form  10Q. For the
        first nine months of 1996, the Company recorded net income  of  $24.6
<PAGE>
        million, or $1.70 per share, compared to $23.6 million, or $1.63  per
        share,  for  the  same  period  in  1995.  Such 1996 and 1995 results
        include a $9.0 million, or $0.62 per  share,  and a $13.0 million, or
        $0.90  per share, respectively, income tax benefit  as  discussed  in
        Note 5.

        The increases  in  the  Company's  operating  results  in the current
        quarter  and  first  nine months of 1996 primarily reflect  increased
        operating profits recognized  on  certain multi-vessel contracts with
        the U.S. Navy.  These profits were  made  possible by improvements in
        production  efficiencies  resulting  in   significant   cost  savings
        during  the  latter  stages  of  completion  of  these contracts.  In
        addition,  the Company began profit recognition on  the  contract  to
        construct four  Strategic  Sealift  vessels  for  the U.S. Navy. Also
        contributing to the 1996 operating results were profits  recorded  by
        the  Company's  marine  repair,  wholesale  steel  and  modular steel
        construction operations.

        These  profits  were  offset,  in  part,  by  losses recorded on  two
        commercial marine construction  contracts. A $4.5  million   loss  on
        the  contract  to  construct  river hopper barges, representing costs
        incurred in connection with the Company's entry into this competitive
        market,  was recognized in the  first  three  months  of  1996 as the
        Company  experienced  a  higher  than  expected level of cost at  the
        inception of this contract.  In addition,  in  the  third  quarter of
        1996,  Avondale  recorded  a  $10  million loss  with respect to  the
        contract to retrofit four single-hull  commercial  tankers  with  new
        double  hulls.  This  loss  resulted  from  several factors, the most
        important  of  which  was  a  significantly  compressed  construction
        schedule because the customer's financing was  delayed  significantly
        without  a  corresponding  extension  of the delivery schedules.   In
        addition, as the first project through  the  Company's  new automated
        production  facility,   these forebodies were negatively impacted  as
        this new facility was in  the start-up phase and did not benefit from
        the efficiencies which would  have  been  realized from the completed
        factory.   Finally,  the pre-delivery testing  of  the  first  vessel
        revealed  a  condition which  required  certain  modifications  which
        resulted in the Company incurring incremental costs.

        The impact of  these  losses  was  mitigated  by  the fact that these
        contracts absorbed a substantial amount of  overhead  expenses which,
        in the absence of these contracts, would have been allocated to other
        contracts.  In addition, these contracts have been important  in  the
        Company's reemergence in the  competitive commercial tanker and barge
        markets.   The  tanker  contract  has  also  enabled  the  Company to
        construct  four forebodies which are patterned after the forebody  of
        Avondale's standard  tanker,  providing   experience  in constructing
        this portion of the vessel, enabling the Company to refine the design
        and  construction  techniques, and furthering the Company's  progress
        toward achieving its  stated goal of a  more balanced mix of military
        and commercial work.  The  first  double hull tanker was delivered on
        October  3,  1996, and the remaining  vessels  are  scheduled  to  be
        delivered  in 1997.  The  loss  recorded  includes  some  anticipated
        savings due  to   production  efficiencies  to  be  realized on later
        vessels.

        Net  sales  for  the third quarter of 1996 were consistent  with  the
        third quarter of 1995  while  net  sales for the first nine months of
        1996 reflected an increase of $22.3   million,  or  approximately 5%.
<PAGE>
        The  increase in the first nine months of 1996 was primarily  due  to
        increased  net  sales  recorded  on  the  contracts  to construct the
        Strategic   Sealift  ships,  the  forebodies  for  the  four  product
        carriers, the  Coast  Guard  Icebreaker  ship  and  the  contract  to
        construct  the  river  hopper barges.  These increases were partially
        offset by reduced net sales  recorded  on  the contracts to construct
        the  LSD-CV 52, three LSD-CVs, seven T-AOs and  four  MHCs  as  these
        contracts  are near completion, and by reduced net sales  recorded on
        paddle-wheeled gaming vessels (the last of which was delivered in the
        second quarter of 1995).

        Gross profit  for  the  third  quarter  and first nine months of 1996
        increased  $4.3  million,  or  29%,  and  $12.5   million,   or  30%,
        respectively, compared to the same periods in 1995.  The increase  is
        due  primarily to profits recognized on the contract to construct the
        seven  T-AOs  and  the  commencement  of  profit  recognition  on the
        contract  to  construct  four  Strategic Sealift vessels for the U.S.
        Navy.  These incremental profits  were offset, in part, by the losses
        recorded on the Company's commercial contracts as discussed above.

        Selling, general and administrative  ("SG&A") expenses increased $1.9
        million, or 23%, in the third quarter  of  1996  and $4.9 million, or
        21%, for the first nine months of 1996 compared to  the  same periods
        in the prior year.  The increases in SG&A expenses were due primarily
        to expenses incurred in association with the preparation of  the LPD-
        17 proposal including the engagement of outside consultants.

        Net  income   for  the  first nine months of 1996 included a deferred
        income tax benefit of $9.0  million  which was recorded in the second
        quarter of 1996. Similar deferred income tax benefits of $5.0 million
        and $8.0 million were previously recorded  in  the  second  and third
        quarters  of  1995, respectively.  These deferred income tax benefits
        recognize for financial  reporting  purposes  the availability of net
        operating  loss carry forwards to offset estimated  future  earnings.
        At September  30,  1996, the benefits related to substantially all of
        the Company's net operating  loss carry forwards have been recognized
        for financial reporting purposes.

        Liquidity and Capital Resources

        The  Company's cash and cash equivalents  totaled  $52.6  million  at
        September 30, 1996 as compared to $38.5 million at December 31, 1995.
        Included  in  the  cash  balance  at  September  30, 1996 are amounts
        collected as a result of the settlement of the Company's  Request for
        Equitable  Adjustment  ("Minehunter  REA")  filed with the U.S.  Navy
        related to the four MHCs currently under contract  (as  discussed  in
        further  detail  in Note 2 of the Company's Annual Report included in
        the  1995  Form  10-K).    The  Company's  operations  represented  a
        significant source of cash thus  far in 1996 generating approximately
        $30.2 million.  The Company's primary  uses  of  cash  in the current
        year consisted of capital expenditures of $11.2 million and principal
        payments on long term borrowings of $5.8 million.

        In the first quarter of 1996, the term of the Company's $42.5 million
        revolving credit agreement was  extended to May 1998, and the Company
        recently executed an amendment to the revolving credit facility which
        increased   the  annual  limitation  on  capital  expenditures.    At
        September 30,  1996,  there  were  approximately  $11.3   million  of
        letters  of  credit  issued  against  the  revolving  credit facility
<PAGE>
        leaving  approximately  $31.3   million  of  liquidity  available  to
        Avondale for operations and other purposes. Continuing access  to the
        revolving  credit  facility is conditioned upon the Company remaining
        in compliance with the  covenants  which  include  certain  financial
        ratios.  At September 30, 1996 the Company was in compliance with the
        covenants  contained  therein.  The Company believes that its capital
        resources  will  be  sufficient  to  finance  current  and  projected
        operations.

        If Avondale is successful  in  its  efforts  to  acquire  the  LPD-17
        contract,  the Company will be required to spend a significant amount
        on capital improvements,  particularly, to enhance its 3-D design and
        product modeling capabilities.   The Company currently has sufficient
        cash  and  available  lines  of  credit   to   fund   these   capital
        expenditures.  Nevertheless,  the Company is in discussions with  its
        banks  in order to increase the size of the revolving credit facility
        by an amount sufficient to allow the Company to fund the expenditures
        on an interim  basis  with borrowings under the line while preserving
        the  current  level of available  liquidity.   The  banks  have  been
        receptive to these  discussions  and have indicated, on a preliminary
        basis, their willingness to support  this increase on terms which are
        no  more restrictive than the current terms.   The  Company  is  also
        exploring  numerous other options  to finance these expenditures on a
        long-term basis.

        The Company's  estimated  net operating loss carry forward for income
        tax reporting purposes was  approximately  $81.8  million at December
        31, 1995.  This amount, plus available income tax credits  from prior
        years  of  $5.3 million, and $1.5 million of alternative minimum  tax
        credits will  be  used  to reduce the income tax liabilities for 1996
        and later years.  The $1.5  million  cash  paid   to  date for income
        taxes reflects payments for alternative minimum tax.
<PAGE>
                            PART II - OTHER INFORMATION


        Item 6.  Exhibits and Reports on Form 8-K

                 (a)  Exhibits

                      3.1 Articles of Incorporation of the Company(1).

                      3.2 Bylaws of the Company(2).

                      15   Letter re: unaudited interim financial information.

                      27   Financial Data Schedule

                 (b) Reports on Form 8-K:

                          Not applicable.

        _______________

        (1)      Incorporated  by  reference  from  the  Company's  Quarterly
                 Report  on  Form 10-Q for the  fiscal quarter ended June 30,
                 1993.

        (2)      Incorporated  by  reference  from  the  Company's  Quarterly
                 Report  on  Form 10-Q for the fiscal quarter ended September
                 30, 1995.
<PAGE>

                                     SIGNATURES



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



                                              AVONDALE INDUSTRIES, INC.


        Date: November 14, 1996           By:/s/ ALBERT L. BOSSIER, JR.
                                   					     --------------------------		
                                             Albert L. Bossier, Jr.
                                             Chairman, President &
                                              Chief Executive Officer





        Date: November 14, 1996           By:/s/ THOMAS M. KITCHEN
                                   					     ---------------------
                                            Thomas M. Kitchen
                                            Vice President &
                                              Chief Financial Officer

<PAGE>
                                   EXHIBIT INDEX

        Number                  Description

         3.1    Articles of Incorporation of the Company(1).

         3.2    Bylaws of the Company(2).

         15     Letter re: unaudited interim financial information.

         27     Financial Data Schedule


        _______________

        (1) Incorporated by reference from the  Company's Quarterly Report on
            Form 10-Q for the fiscal quarter ended June 30, 1993.

        (2) Incorporated by reference from the Company's  Quarterly Report on
            Form 10-Q for the fiscal quarter ended September 30, 1995.