FORM 10Q
                  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                        Quarterly or Transitional Report


                     U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                    FORM 10-Q
(Mark One)

     X             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
 ---------             OF THE SECURITIES EXCHANGE ACT OF 1934


                  For the quarterly period ended July 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 0-21995
                                                -------

                          First Aviation Services Inc.
                          (Exact name of registrant as
                            specified in its charter)

        Delaware                                    06-1419064
        --------                                    ----------
        (State or other jurisdiction                (I.R.S. Employer
        of incorporation or organization)           Identification No.)

             15 Riverside Avenue, Westport, Connecticut, 06880-4214
             ------------------------------------------------------
                    (Address of principal executive offices)


                                 (203) 291-3300
                                 ---------------
                           (Issuer's telephone number)


        -----------------------------------------------------------------
              (Former name, former address and formal fiscal year,
                          if changed since last report)


Indicate by check mark whether the registrant (1) 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__

          APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING
                        DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes __ No__

                      APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares outstanding of the registrant's common stock as of
September 1, 1999 is 9,016,032 shares.



<PAGE>



                         PART I - FINANCIAL INFORMATION


Item 1. Financial Statements
-----------------------------


                          First Aviation Services Inc.

                           Consolidated Balance Sheets
                      (in thousands, except share amounts)

<TABLE>
<CAPTION>


                                                                         July 31, 1999        January 31, 1999
                                                                         -------------        ----------------
Assets                                                                    (unaudited)
<S>                                                                       <C>                  <C>
Current assets:
   Cash and cash equivalents                                              $      288           $      149
   Trade  receivables, net of allowance for doubtful accounts of
   $600 and $608, respectively                                                30,966               28,056
   Inventories, net                                                           48,422               51,757
   Deferred income taxes                                                       2,491                2,638
   Prepaid expenses and other                                                  2,130                1,851
                                                                          ----------           ----------
Total current assets                                                          84,297               84,451

Plant and equipment, net                                                      13,640               10,729
Goodwill, net                                                                  1,807                1,840
Intangible and other assets                                                   13,061                   69
                                                                          ----------           ----------

                                                                          $  112,805           $   97,089
                                                                          ==========           ==========
Liabilities and stockholders' equity
Current liabilities:
   Accounts payable                                                       $   20,913           $   17,873
   Accrued compensation and related expenses                                   2,630                2,667
   Accrued litigation costs                                                    1,135                2,840
   Other accrued liabilities                                                   2,528                3,045
   Income taxes payable                                                        2,100                2,083
   Current portion of note payable                                             6,000                    -
   Short term credit line                                                      7,600                8,850
                                                                          ----------           ----------
Total current liabilities                                                     42,906               37,358

   Revolving line of credit                                                   18,283               13,895
   Note payable                                                                3,000                    -
   Minority interest                                                           1,041                1,041
   Obligations under capital leases                                              359                  414
                                                                          ----------           ----------
Total liabilities                                                             65,589               52,708

Stockholders' equity:
   Common stock, $0.01 par value, 25,000,000 shares authorized,
   9,016,082 and 9,001,896 shares issued and outstanding, respectively            90                   90
   Additional paid-in capital                                                 38,576               38,515
   Retained earnings                                                           8,550                5,776
                                                                          ----------           ----------
Total stockholders' equity                                                    47,216               44,381
                                                                          ----------           ----------
                                                                          $  112,805           $   97,089
                                                                          ==========           ==========

</TABLE>


See accompanying notes.



                                       2

<PAGE>


                          First Aviation Services Inc.

                Consolidated Statements of Operations (Unaudited)
                      (in thousands, except share amounts)



<TABLE>
<CAPTION>

                                                                                     Three months ended
                                                                                          July 31,
                                                                                 1999                 1998
                                                                               ----------           ----------
<S>                                                                            <C>                  <C>
Net sales                                                                      $   20,089           $   14,201
Cost of sales                                                                      16,408               11,421
                                                                               ----------           ----------
Gross profit                                                                        3,681                2,780
Selling, general and administrative expenses                                        3,348                2,383
                                                                               ----------           ----------
Operating income                                                                      333                  397
Corporate expenses                                                                    567                  560
                                                                               ----------           ----------
Loss from operations                                                                 (234)                (163)
Net interest expense                                                                  154                   65
Minority interest in subsidiary                                                        12                   10
                                                                               ----------           ----------
Loss before provision for income taxes                                               (400)                (238)
Benefit for income taxes                                                             (293)                 (72)
                                                                               ----------           ----------
Net loss from continuing operations                                                  (107)                (166)

Income from discontinued operations, net of income taxes of
$452 and $375, for the three months ended July 31,
1999 and 1998, respectively.                                                        1,553                  875
                                                                               ----------           ----------
Net income                                                                     $    1,446           $      709
                                                                               ==========           ==========
Basic net income per common share:

Basic net loss from continuing operations per common share                     $   (0.01)           $   (0.02)
Basic net income from discontinued operations per common share                      0.17                 0.10
                                                                               ----------           ----------

Basic net income per common share                                              $    0.16            $    0.08

Shares used in the calculation of basic net income per common share            9,007,652            8,975,840
                                                                               ==========           ==========

Net income per common share - assuming dilution:

Net loss from continuing operations per common share - assuming dilution       $   (0.01)           $   (0.02)
Net income from discontinued operations per common share - assuming dilution        0.17                 0.10
                                                                               ----------           ----------

Net income per common share - assuming dilution                                $    0.16            $    0.08
                                                                               ==========           ==========

Shares used in the calculation of net income per common
 share - assuming dilution                                                      9,007,652            8,975,840
                                                                               ==========           ==========


</TABLE>


See accompanying notes.




                                       3

<PAGE>



                          First Aviation Services Inc.

                Consolidated Statements of Operations (Unaudited)
                       (in thousands except share amounts)


<TABLE>
<CAPTION>

                                                                                      Six months ended
                                                                                          July 31,
                                                                                  1999                 1998
                                                                               ----------           -----------

<S>                                                                            <C>                  <C>
Net sales                                                                      $   38,122           $   27,747
Cost of sales                                                                      30,869               22,417
                                                                               ----------           ----------
Gross profit                                                                        7,253                5,330
Selling, general and administrative expenses                                        6,576                4,771
                                                                               ----------           ----------
Operating income                                                                      677                  559
Corporate expenses                                                                  1,202                  835
                                                                               ----------           ----------
Loss from operations                                                                 (525)                (276)
Net interest expense                                                                  296                   64
Minority interest in subsidiary                                                        24                   21
                                                                               ----------           ----------
Loss before benefit for income taxes                                                 (845)                (361)
Benefit for income taxes                                                             (338)                (108)
                                                                               ----------           ----------
Net loss from continuing operations                                                  (507)                (253)

Income (loss) from discontinued operations, net of provision/benefit
for income taxes of $644 and ($338), for the six months ended
July 31, 1999 and 1998, respectively                                                3,281                 (789)
                                                                               ----------           ----------
Net income (loss)                                                              $    2,774           $   (1,042)
                                                                               ==========           ==========
Basic net income (loss) per common share:

Basic net loss from continuing operations per common share                     $   (0.05)           $   (0.03)
Basic net income (loss) from discontinued operations per common share               0.36                (0.09)
                                                                               ----------           ----------

Basic net income (loss) per common share                                       $    0.31            $   (0.12)
                                                                               ==========           ==========

Shares used in the calculation of basic net income (loss) per
common share                                                                   9,004,821            8,957,809
                                                                               ==========           ==========
Net income (loss) per common share - assuming dilution:

Net loss from continuing operations per common share - assuming dilution       $   (0.05)           $   (0.03)

Net income (loss) from discontinued operations per common
share - assuming dilution                                                           0.36                (0.09)
                                                                               ----------           ----------
Net income (loss) per common share - assuming dilution                         $    0.31            $   (0.12)

Shares used in the calculation of net income (loss) per common
share - assuming dilution                                                      9,004,821            8,957,809
                                                                               ==========           ==========

</TABLE>

See accompanying notes.





                                       4

<PAGE>



                          First Aviation Services Inc.

                Consolidated Statements of Cash Flows (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                                      Six months ended
                                                                                          July 31,
                                                                                  1999                 1998
                                                                               ----------           ----------
<S>                                                                            <C>                  <C>
Cash flows from operating activities
Net income (loss)                                                              $    2,774           $   (1,042)
Adjustments to reconcile net income to net cash provided
   by/(used in) operating activities:
   Depreciation and amortization                                                      880                  481
   Deferred tax provision                                                             147                    -
Changes in assets and liabilities:
   Trade receivables                                                               (2,839)                (580)
   Inventories                                                                      3,335               (3,570)
   Prepaid expenses and other assets                                                 (279)                 (69)
   Accounts payable                                                                 3,084                2,534
   Accrued compensation and related expenses, and other accrued
   liabilities
   Accrued litigation costs                                                        (1,705)                   -
   Income taxes payable                                                                17               (1,019)
                                                                               ----------           ----------

Net cash provided by (used in) operating activities                                 4,745               (2,422)

Cash flows from investing activities
Purchases of plant and equipment                                                   (3,758)              (2,779)
Increase in other assets                                                           (3,992)                   -
                                                                               ----------           ----------

Net cash used in investing activities                                              (7,750)              (2,779)

Cash flows from financing activities
Net borrowings on revolving line of credit                                          4,388                2,501
Net borrowings (repayments) on short term line of credit                           (1,250)               2,494
Principal payments on capital lease obligations                                       (55)                 (29)
Other                                                                                  61                   68
                                                                               ----------           ----------

Net cash provided by financing activities                                           3,144                5,034

Net increase (decrease) in cash and cash equivalents                                  139                 (167)

Cash and cash equivalents at beginning of period                                      149                  237
                                                                               ----------           ----------
Cash and cash equivalents at end of period                                     $      288           $       70
                                                                               ==========           ==========
Supplemental cash flow disclosures:
   Interest paid                                                               $      762           $      771
                                                                               ==========           ==========
   Income taxes paid                                                           $       92           $      600
                                                                               ==========           ==========
   Acquisition of equipment through capital lease obligation                   $        -           $      150
                                                                               ==========           ==========
   Increase in other assets through issuance of note payable                   $    9,000           $        -
                                                                               ==========           ==========

</TABLE>



See accompanying notes.





                                       5

<PAGE>


                          First Aviation Services Inc.

             Notes to Consolidated Financial Statements (Unaudited)
                      (in thousands, except share amounts)

                                  July 31, 1999

1.  Basis of Presentation
First Aviation Services Inc. ("First Aviation") and its subsidiaries, Aerospace
Products International, Inc. ("API") and National Airmotive Corporation ("NAC"),
(collectively, the "Company"), are headquartered in Westport, Connecticut. The
Company is a worldwide leader in providing services to aircraft operators of
some of the most widely used military, commercial, and general aviation aircraft
engines in the world, including the Lockheed Martin C-130 Hercules and P3C Orion
aircraft, and a large variety of aircraft and helicopters powered by light
turbine engines. The Company's operations include repair and overhaul of gas
turbine engines and accessories, remanufacturing of engine components and
accessories, and redistribution of new and remanufactured parts and components.
The Company has become one of the leading suppliers of aircraft engine parts and
other aircraft parts and components to the general aviation industry worldwide,
while at the same time extending its third party logistics and inventory
management services to the commercial airline market. Customers of the Company
include passenger and cargo airlines, foreign governments, U.S. and foreign
military services, fleet operators, fixed base operators, certified repair
facilities and industrial companies. The accompanying unaudited consolidated
financial statements of First Aviation and its subsidiaries have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all material adjustments,
consisting only of the elimination of intercompany balances and transactions,
and normal recurring accruals considered necessary for a fair presentation, have
been included in the accompanying unaudited financial statements. Operating
results for the three and six months ended July 31, 1999 are not necessarily
indicative of the results that may be expected for the full year ending January
31, 2000. For further information, refer to the financial statements and
footnotes thereto included in the Company's Form 10-K/A for the year ended
January 31, 1999. As described in Note 7, the Company has entered into an
agreement to sell the stock of NAC subsequent to the quarter ended July 31,
1999. Accordingly, NAC has been accounted for as a discontinued operation and
its results have been reported separately in the accompanying Consolidated
Statements of Operations. Prior periods have been restated to reflect NAC as a
discontinued operation.


2.  Inventories

Inventories consist of the following:

<TABLE>
<CAPTION>

                                                                         July 31, 1999        January 31, 1999
                                                                        ------------         -----------------
<S>                                                                     <C>                  <C>
Parts held for manufacturing or resale                                  $     33,588         $     37,320
Work in-process                                                               11,052               11,628
Finished goods                                                                 5,800                4,663
                                                                        ------------         -----------------
                                                                              50,440               53,611

Less:  allowance for obsolete and slow moving inventory                       (2,018)              (1,854)
                                                                        ------------         -----------------
                                                                        $     48,422         $     51,757
                                                                        ============         =================

</TABLE>


3.  Note Payable, Short Term Credit Line and Long Term Debt

During the quarter NAC was the successful bidder whereby Pratt & Whitney Canada
("PWC") appointed NAC as an authorized Distributor and Designated Overhaul
Facility ("DDOF"), pursuant to an agreement between the two parties. The cost of
the DDOF, $13 million, has been included in Intangible and Other Assets in the
accompanying consolidated balance sheets, and was funded, in part, by entering
into a note payable with PWC. As a result of the sale of NAC, as described in
Note 7, the DDOF was voided and amounts due under the note payable, $9 million,
will be terminated.



                                       6
<PAGE>

On September 2, 1999, Fleet Bank extended the term of API's short-term credit
line until December 31, 1999.

NAC's long-term credit agreement, which had an expiration date of May 15, 1999,
automatically renewed under its present terms and conditions on February 16,
1999 for an additional one-year period. Upon the closing of the sale of NAC, the
Company will utilize a portion of the proceeds from the sale to repay any
outstanding balance of the NAC borrowings and terminate the credit facility.

4.  Non-recurring Charges

On April 6, 1998, the Company announced that it had initiated a plan to
streamline operations at NAC. In connection with this plan, the Company recorded
$2.8 million of pre-tax non-recurring charges. The non-recurring charges
included a reduction of facilities and severance and other employee termination
costs related to a reduction in NAC's workforce of 92 people. During the three
and six months ended July 31, 1998, approximately $- million and $0.9 million,
respectively, was charged against the reserve for severance and other employee
costs. The reserve had been fully utilized as of April 30, 1999.

During the fourth quarter of the fiscal year ended January 31, 1999, the Company
recorded a $3.1 million pre-tax charge for costs incurred in connection with the
defense of the Company and its Directors from the claims brought on by a former
director and manager. The charge included legal fees incurred through the
conclusion of the trial and out of pocket costs, including expert testimony and
the cost of defending against an appeal by the plaintiff.

During the second quarter the Company and the former director and manager
settled the case. No additional charges were incurred by the Company as a result
of the settlement. The decrease in the accrual since the beginning of the fiscal
year is due to charges against the accrual, primarily for legal fees. The
balance of the accrual is expected to be utilized by the end of the fiscal year.

The Company continues to pursue recovery of the costs incurred in accordance
with the terms and conditions of a Directors and Officers insurance policy
maintained by the Company. The amount of recovery, if any, is not ascertainable
at this time.


5.  Earnings (Loss) per Common Share

The following sets forth the computation of basic earnings (loss) per share and
earnings (loss) per share - assuming dilution:


<TABLE>
<CAPTION>

                                                                  Three months ended                   Six months ended
                                                           ----------------------------------   ------------------------------
                                                            July 31, 1999     July 31, 1998     July 31, 1999    July 31, 1998
                                                            -------------    ---------------    --------------   -------------
<S>                                                         <C>               <C>               <C>              <C>
Numerator:
   Numerator for earnings (loss) per share:
  Loss from continuing operations                           $        107      $       (166)     $       (507)    $       (253)
   Income (loss) from discontinued operations                      1,553               875             3,281             (789)
                                                            -------------    ---------------    --------------   -------------
   Net income (loss)                                        $      1,446      $        709      $      2,774     $     (1,042)
                                                            =============    ===============    ==============   =============

Denominator:
   Denominator for basic earnings (loss) per share -
     weighted average shares                                   9,007,652         8,975,840         9,004,821        8,957,809

   Effect of dilutive warrants and employee stock
     options                                                           -                 -                 -                -
                                                            -------------    ---------------    --------------   -------------
   Denominator for earnings per share - assuming
     dilution - adjusted weighted average shares
     and assumed conversions                                   9,007,652         8,975,840         9,004,821        8,957,809
                                                            =============    ===============    ==============   =============
</TABLE>


For the three and six months ended July 31, 1999 and 1998, respectively, loss
per share - assuming dilution was the same as basic loss per share because the
effect of warrants and options would have been antidilutive.



                                       7
<PAGE>

6.  Contingent Liability

On July 28, 1997, the Company liquidated NAC's qualified defined benefit
retirement plan (the "Plan"). The Company previously had purchased guaranteed
annuities for all retirees who were receiving benefits under the Plan and
provided for distributions in cash or rollovers to an IRA or other qualified
retirement plan for all other participants in the Plan. The Company used an
outside consulting firm for assistance in calculating the amount of benefits or
distributions due, and in terminating the Plan. The Company believes that the
Plan was liquidated according to regulatory guidelines.

In 1998, the Pension Benefit Guarantee Corporation ("PBGC") audited the
liquidation of the plan. The PBGC disagreed with certain of the assumptions used
by the consultants in calculating benefits due to the Plan participants. As a
result, the PBGC has assessed the Company approximately $0.5 million, including
interest. The Company is vigorously appealing the findings of the PBGC and
believes it has recourse against the consultants. The appeal is expected to be
heard by the end of the fiscal year. The amount of any liability to the Company
in this matter, if any, is not ascertainable at this time.

7.  Subsequent Event

On September 9, 1999, the Company entered into an agreement to sell the stock of
NAC to Rolls-Royce North America for $73 million. The sale price may be
increased or decreased by an amount not to exceed $3 million based upon the
change in net assets as defined in the agreement, from July 31, 1999 to the
closing date. Pursuant to the transaction Rolls-Royce North America will acquire
substantially all of the assets and assume certain liabilities of NAC, excluding
income tax liabilities and debt. The transaction is expected to be closed late
in the third or fourth quarter. The Company estimates that it will realize a net
gain on the sale, after income taxes and transaction fees and expenses.
Accordingly, the Company will record the gain when the sale is finalized and the
gain is realized.


Summarized balance sheet and results of operations information for NAC is as
follows. Balance sheet information includes only those assets to be sold and the
liabilities to be assumed.


                                                    July 31, 1999
                                                  ------------------
Current assets                                      $     54,265
Current liabilities                                       14,976
                                                  ------------------
     Net current assets                                   39,289
Plant and equipment, net                                   9,938
Intangible and other assets                                   47
                                                  ------------------
                                                    $     49,274
                                                  ==================


<TABLE>
<CAPTION>

                                                                      Three months ended                   Six months ended
                                                                -------------------------------    -------------------------------
                                                                July 31, 1999     July 31, 1998    July 31, 1999     July 31, 1998
                                                                -------------     -------------    -------------     -------------
<S>                                                             <C>               <C>              <C>               <C>
Net sales                                                       $    28,801       $    23,236      $    56,821       $    44,115
Earnings (loss) before interest & taxes                               2,886             1,667            4,732              (338)
Net interest expense                                                    440               417              806               790
Earnings (loss) before income taxes                                   2,446             1,250            3,926            (1,128)
Net income (loss)                                               $     1,553       $       875      $     3,281       $      (789)

</TABLE>



                                       8
<PAGE>


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

Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995.
--------------------------------------------------------------

Statements which are not historical facts in this report constitute forward
looking statements, within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward looking statements, including those concerning
the Company's expectations, all involve risk and uncertainties, which may cause
the actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievement expressed or
implied by such forward looking statements. Such factors include, among others,
the Company's ability to obtain parts from its principal suppliers on a timely
basis, the ability to consummate suitable acquisitions, and other items that are
beyond the Company's control and may cause actual results to differ from
management's expectations.


General

On September 9, 1999, the Company announced that it had reached an agreement
with Rolls-Royce North America to sell the stock of its NAC subsidiary for $73
million. The purchase may be increased or decreased by an amount not to exceed
$3 million based upon the change in net assets as defined in the agreement, from
July 31, 1999 to the closing date. Accordingly, NAC had been accounted for as a
discontinued operation. Amounts reported herein have been restated to reflect
NAC as a discontinued operation.

The Company's net sales consist of sales of parts and components, and provision
of third party logistics and inventory management services. Net sales are
recorded when spare parts and components are shipped.


Results of Operations

Net Sales

Net sales for the three months ended July 31, 1999 increased $5.9 million, or
41.5%, to $20.1 million from $14.2 million for the three months ended July 31,
1998. Net sales increased as a result of improved service levels, increased
market share and growth in the logistics and inventory management services
business.

Net sales for the six months ended July 31, 1999 increased $10.4 million, or
37.5%, to $38.1 million from $27.7 million in the six months ended July 31,
1998. Net sales increased as a result of improved service levels, increased
market share and growth in the logistics and inventory management services
business.



                                       9
<PAGE>

Cost of Sales

Cost of sales for the three months ended July 31, 1999 increased $5.0 million,
or 43.9%, to $16.4 million from $11.4 million for the three months ended July
31, 1998. As a percentage of net sales, cost of sales increased 1.3% to 81.6%
from 80.3% for the three months ended July 31, 1998. The increase in cost of
sales was due principally to competitive market pressures.

Cost of sales for the six months ended July 31, 1999 increased $8.5 million, or
37.9%, to $30.9 million from $22.4 million for the six months ended July 31,
1998. As a percentage of net sales, cost of sales decreased 0.1% to 80.8% from
80.9% for the six months ended July 31, 1998.

Gross Profit

Gross profit for the three months ended July 31, 1999 increased $0.9 million, or
32.1%, to $3.7 million from $2.8 million for the three months ended July 31,
1998. Gross profit as a percentage of net sales decreased to 18.4% from 19.7% as
a result of competitive market pressures.

Gross profit for the six months ended July 31, 1999 increased $2.0 million, or
37.7%, to $7.3 million from $5.3 million in the six months ended July 31, 1998.
Gross profit as a percentage of net sales increased slightly to 19.2% from
19.1%.

Selling, General and Administrative Expenses


Selling, general and administrative expenses for the three months ended July 31,
1999 increased $0.9 million, or 37.5%, to $3.3 million from $2.4 million for the
three months ended July 31, 1998. The increase is attributable to and
proportional to the growth in net sales.

Selling, general and administrative expenses for the six months ended July 31,
1999 increased $1.8 million, or 37.5%, to $6.6 million from $4.8 million in the
six months ended July 31, 1998. The increase is attributable to and proportional
to the growth in net sales.


Corporate Expenses


Corporate Expenses for the three months ended July 31, 1999 and for the three
months ended July 31, 1998 was $0.6 million, respectively.

Corporate Expenses for the six months ended July 31, 1999 increased $0.4
million, or 50%, to $1.2 million from $0.8 million for the six months ended July
31, 1998. The increase is attributable to increased expenditures in connection
with potential acquisitions and other corporate overheads.


Net Interest Expense and Other

Net interest expense and other for the three months ended July 31, 1999
increased $0.1 million, to $0.2 million from $0.1 million for the three months
ended July 31, 1998. The increase was attributable to an increase in the average
borrowings under the Company's credit facilities to support the Company's growth
and fund capital improvements.

Net interest expense and other for the six months ended July 31, 1999 increased
$0.2 million, to $0.3 million from $0.1 million in the six months ended July 31,
1998. The increase was attributable to an increase in the average borrowings
under the Company's credit facilities to support the Company's growth and fund
capital improvements.

Provision/(Benefit) for Income Taxes

The Company expected to realize the tax benefit of certain financial statement
accruals, principally relating to NAC, not previously realized for income tax
purposes. The Company had established a valuation reserve of approximately $3
million (the "Valuation Allowance"). The Company anticipates all of the income
tax benefits of the remaining financial accruals will be realized upon the close
of the pending sale transaction. As a result the Valuation Allowance will be
eliminated in its entirety during the current fiscal year. Management estimates
that the Company's effective income tax rate on continuing operations for the
fiscal year ended January 31, 2000, will approximate 40%. Management's estimate
is reflected in the Consolidated Statement of Operations for the six




                                       10
<PAGE>

months ended July 31, 1999. The effective tax rate for the three months ended
July 31, 1999 is 73%. The Company's effective tax rate differs from the
statutory rates due to the intraperiod allocation of income taxes between
continuing operations and the income from discontinued operations. The Company's
effective income tax rate on continuing operations for the three and six months
ended July 31, 1998 was approximately 30%. The Company's effective tax rate for
the prior fiscal year was less than statutory rates due to benefits that the
Company derived from the implementation of certain tax planning strategies.

Net Income/(Loss)

For the three months ended July 31, 1999, the Company incurred a net loss from
continuing operations of approximately $0.1 million. This compares to a net loss
from continuing operations of approximately $0.2 million for the comparable
period of the prior fiscal year.

For the six months ended July 31, 1999, the Company incurred a net loss from
continuing operations of approximately $0.5 million. This compares to a net loss
from continuing operations of approximately $0.3 million for the comparable
period of the prior fiscal year.


Liquidity and Capital Resources

The Company's liquidity requirements arise primarily from its working capital
needs, principally inventory and trade receivables.

The Company's cash provided by operations for the six months ended July 31, 1999
was $4.7 million, compared to a use of cash of $2.4 million for the six months
ended July 31, 1998. Cash used for investing activities during these same
periods was $7.8 million and $2.8 million, respectively. Cash used for investing
activities for the six months ended July 31, 1999 includes $4.0 million paid in
connection with the acquisition of the DDOF. Cash provided by financing
activities during the six months ended July 31, 1999 was $3.1 million, compared
to $5.0 million for the six months ended July 31, 1998.

The Company has not declared or paid any cash dividends or distributions on its
common stock since its inception. The Company anticipates that, for the
foreseeable future, all earnings will be retained for use in the Company's
business and no cash dividends will be paid on its Common Stock. Any payment of
cash dividends in the future on the Common Stock will be dependent upon the
Company's financial condition, results of operations, current and anticipated
cash requirements, plans for expansion, the ability of its subsidiaries to pay
dividends or otherwise make cash payments or advances to it and restrictions, if
any, under any future debt obligations, as well as other factors that the Board
of Directors deems relevant. Further, the Company's current credit facilities
prohibit the payment of cash dividends from either subsidiary to First Aviation,
except with the lender's consent, and contain other covenants and restrictions.

During the quarter, NAC was the successful bidder whereby they were appointed by
PWC as an authorized DDOF. NAC signed a note payable to PWC to finance the cost
of the DDOF. As a result of the sale of NAC, the DDOF agreement with PWC was
voided and the note payable to PWC will be terminated.

Borrowings under API's $10.0 million revolving credit facility approximated $7.6
million at July 31, 1999. Borrowings under NAC's $40.0 million credit facility
totaled approximately $18.3 million at July 31, 1999. Upon the closing of the
sale of NAC, the Company will utilize a portion of the proceeds from the sale to
repay any outstanding balance of NAC's borrowings and terminate the credit
facility.

On September 2, 1999, Fleet Bank extended the term of API's short-term credit
line until December 31, 1999. NAC's long-term credit agreement, which had an
expiration date of May 15, 1999 automatically renewed under its present terms
and conditions on February 16, 1999 for an additional one-year period.

In connection with the acquisition of the API Business, AMR Combs purchased
10,407 shares of API Series A Cumulative Convertible Preferred Stock, $0.001 par
value, with dividends payable quarterly at $4.00 per share (the "Preferred
Stock"). In addition, First Aviation, API and AMR Combs entered into a
Stockholders Agreement.





                                       11
<PAGE>

Pursuant to this agreement, AMR Combs agreed that it would not sell its shares
of the Preferred Stock or the shares of API common stock into which the
Preferred Stock is convertible (collectively the "API Acquisition Shares") for a
minimum period of three years. API has the right to redeem the API Acquisition
Shares at any time. After March 5, 2000, AMR Combs has the right to cause API to
repurchase the API Acquisition Shares. The Company has, under certain
circumstances, the ability to defer AMR Combs' ability to cause API to
repurchase the API Acquisition Shares. The redemption price is equal to the fair
market value of the API Acquisition Shares as determined by an independent
appraisal. The Stockholders Agreement also contains certain other rights,
including: (i) a right of first refusal on the part of First Aviation with
respect to any proposed sale of the API Acquisition Shares, (ii) the right of
First Aviation to require AMR Combs to participate, on a pro rata basis, with it
in the sale of the capital stock of API to a third party, (iii) the right of AMR
Combs to elect to participate, on a pro rata basis, in the sale of the capital
stock of API to a third party, and (iv) piggyback and demand registration rights
granted to AMR Combs with respect to the API Acquisition Shares. The demand
registration rights are not exercisable until three years after the closing of
the acquisition of the API Business, and, if API has not previously closed an
underwritten public offering of its common stock at the time AMR Combs elects to
exercise its demand registration rights, API may elect to treat the demand as an
exercise by AMR Combs of its put option with respect to the API Acquisition
Shares. First Aviation has no plans to cause API to conduct a public offering of
its securities.

Based upon current and anticipated levels of operations, the Company believes
that its cash flow from operations, combined with borrowings available under the
existing lines of credit, will be sufficient to meet its current and anticipated
cash operating requirements for the foreseeable future, including scheduled
interest and principal payments, capital expenditures, minority interest
requirements and working capital needs.


Year 2000

The Company continues to work on resolving the potential impact of the Year 2000
on the processing of date-sensitive information by the Company's computerized
information systems. The Year 2000 problem is the result of computer programs
being written using two digits (rather than four) to define the applicable year.
Any of the Company's programs and systems that have time-sensitive software may
be unable to interpret dates beyond the year 1999. This could result in
miscalculations and/or system failures, causing disruptions of operations
controlled by such systems or devices.

The Company and each of its operating subsidiaries have conducted comprehensive
reviews of their systems and have developed plans to address any possible issues
related to the impact of the Year 2000 problem on both information technology
("IT") and non-IT systems (e.g., embedded technology). These plans address the
Year 2000 issue in multiple phases, including (i) determining an initial
inventory of the Company's systems, equipment, vendors, customers and third
party administrators that may be vulnerable to system failures or processing
errors as a result of Year 2000 issues, (ii) assessing and prioritizing of
inventoried items to determine risks associated with their failure to be Year
2000 compliant, (iii) testing of systems and equipment to determine Year 2000
compliance, and (iv) remediating and implementing systems and equipment. For
those systems which the Company determines are not currently Year 2000
compliant, implementation of the required changes is expected to be completed
during this fiscal year.

As of July 31, 1999, all critical hardware and software systems utilized by the
Company had been tested and/or verified as either Year 2000 compliant or
appropriate remediation was taken or will be taken to effect compliance. Certain
non-critical software systems were determined not to be Year 2000 compliant and
had been or will be modified or converted to compliant systems. Conversion of
additional non-critical systems is in process. Testing systems utilized to
verify compliance include the posting to the systems of a date on or after
January 1, 2000 as though the date were effective. The Company has tested nearly
all of its critical IT and non-IT systems. Any necessary additional
modifications or replacements are scheduled to be completed during the balance
of the fiscal year.

The Company is in the process of contacting its customers, major suppliers and
vendors to assess their status relating to Year 2000 readiness and/or
compliance, and the potential impact on operations if such third parties are not
successful in ensuring that their systems are Year 2000 compliant in a timely
manner. The Company could suffer potential business interruptions and/or incur
costs, damages or losses related thereto if other third parties, such as
governmental agencies (e.g., Federal Aviation Administration), are not Year 2000
compliant. The Company is unable to determine at this time whether it will be
materially affected by the failure of any of its customers, suppliers, vendors
or other third parties to be Year 2000 compliant.



                                       12
<PAGE>

A failure by the Company, its customers, major suppliers or vendors, or any
third party with which the Company interacts, to resolve a material Year 2000
issue could result in the interruption in, or failure of, certain normal
business activities or operations and could materially and adversely affect the
Company's financial condition, results of operations and cash flows. The Company
is currently assessing those scenarios in which unexpected failures could have a
material adverse effect on the Company and anticipates that it will develop
contingency plans, as deemed appropriate, designed to deal with such scenarios.
Based on current plans and assumptions, the Company does not expect that the
Year 2000 issue will have a material adverse impact on the Company as a whole.
Due to the general uncertainty inherent in the Year 2000 issue, however, there
can be no assurance that all Year 2000 issues will be foreseen and corrected on
a timely basis, or that no material disruption to the Company's business
operations will occur. Further, the Company's expectations are based on the
assumption that there will be no general failure of external local, national or
international systems (including power, communications, postal, transportation,
or financial systems) necessary for the ordinary conduct of business.

Costs associated with the Company's Year 2000 compliance effort, including
consulting costs and costs associated with internal resources used to modify
existing systems in order to achieve Year 2000 compliance, are charged to
expense as incurred. Management estimates that the expenditures relating to the
Company's Year 2000 compliance effort will total approximately $500,000. Through
July 31, 1999, management estimates that approximately $325,000 has been spent
addressing this issue. The remainder is expected to be spent over the balance of
the fiscal year. The Company does not separately track internal costs of the
Year 2000 compliance effort. 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 all relevant systems.
Management does not expect the financial impact of making the required system
changes to be material to the Company's overall consolidated financial position.



                                       13

<PAGE>


                           PART II - OTHER INFORMATION
                           ---------------------------

Item 1. Legal Proceedings
-------------------------
NONE

Item 2. Changes in Securities
-----------------------------
NONE

Item 3. Defaults Upon Senior Securities
---------------------------------------
NONE

Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------

At the Company's Annual Meeting of Shareholders held on July 15, 1999, the
following proposals were adopted by the margins indicated.

         (1)  To elect two directors for a three-year term to expire at the
              Annual Meeting of Shareholders in the year 2002.

                                            Votes For           Votes Withheld
                                            ---------           --------------
                  John A. Marsalisi         8,880,425              14,825
                  Charles B. Ryan           8,880,425              14,825

              Michael C. Culver, Joshua S. Friedman, Aaron P. Hollander, and
              Robert L. Kirk continued to serve as directors of the Company
              after the annual meeting of shareholders.

         (2)  To ratify the appointment of Ernst & Young LLP as the Company's
              independent auditors for the fiscal year ended January 31, 2000.

                     Votes For         Votes Against          Votes Abstained
                     ---------         -------------          ---------------
                     8,881,550            10,100                  3,600

Item 5. Other Information
-------------------------
NONE

Item 6. Exhibits and Reports on Form 8-K
----------------------------------------
(a) Exhibits.

Exhibit
Number                       Description of Exhibit
------                       ----------------------
27.1              Financial Data Schedule

(b) Reports on Form 8-K.

NONE



                                       14
<PAGE>


                                   SIGNATURES


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

                                   First Aviation Services Inc.
                                               (Registrant)




Date: September 14, 1999              /s/ Michael C. Culver
                                   -------------------------------------------
                                   Michael C. Culver,
                                   President, Chief Executive Officer and
                                   Director (Principal Executive Officer)


Date: September 14, 1999              /s/ John A. Marsalisi
                                   -------------------------------------------
                                   John A. Marsalisi,
                                   Vice President, Secretary, Director and
                                   Chief Financial Officer (Principal Financial
                                   and Accounting Officer)



                                       15