<PAGE>


                                FORM 10-Q
              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, 1997
                                        -------------

-------  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 
August 31,1997 is 8,915,000 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         January 31
                                                                           1997              1997
                                                                       (UNAUDITED)
<S>                                                                   <C>               <C>

ASSETS
Current assets:
  Cash and cash equivalents                                           $    1,566       $        -  
  Accounts receivable, net of allowance for doubtful accounts of 
     $1,172 and  $278, respectively                                       27,937           19,931
  Inventories                                                             44,662           36,323
  Deferred income taxes                                                      536            1,036
  Prepaid expenses and other                                               2,095            1,375
                                                                   -------------------------------
Total current assets                                                      76,796           58,665
                    
Plant and equipment, net                                                   3,664            2,793
Other assets, primarily goodwill                                           2,824              914
                                                                   -------------------------------
                                                                      $   83,284       $   62,372
                                                                   -------------------------------
                                                                   -------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:          
  Accounts payable                                                    $   16,691       $   15,104
  Accrued compensation and related expenses                                1,796            1,948
  Other accrued liabilities                                                1,511            2,850
  Income taxes payable                                                       824                -
  Due to shareholders                                                        155              176
  Current portion of long term debt                                            -            1,100
                                                                   -------------------------------
Total current liabilities                                                 20,977           21,178
                    
Long term debt, less current portion                                      15,216           32,794
Other non-current liabilities                                              2,817            2,119
Minority interest                                                          1,006                -

Stockholders' equity:         
  Preferred stock, $0.01 par value, liquidation preference of $660
     at January 31, 1997; 5,000,000 shares authorized; none issued
     and outstanding at July 31, 1997; 33,000 shares issued and
     outstanding at January 31, 1997                                           -            1,650
  Common stock, $0.01 par value; 25,000,000 shares authorized,
      8,915,000 issued and outstanding at July 31, 1997; 3,556,665
      shares issued and outstanding at January 31, 1997                       89               36
  Additional paid in capital                                              38,129            2,125
  Retained earnings                                                        5,050            2,470
                                                                   ------------------------------
Total stockholders' equity                                                43,268            6,281
                                                                   ------------------------------
                                                                   $      83,284      $    62,372
                                                                   ------------------------------
                                                                   ------------------------------
</TABLE>
SEE ACCOMPANYING NOTES

                                           2

<PAGE>

                            First Aviation Services Inc. 
                                           
                  Consolidated Statements of Operations  (Unaudited)
                         (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                           

<TABLE>
<CAPTION>

                                                                                    Quarter ended
                                                                                      July 31
                                                                                 1997           1996
                                                                                 ----           ----
<S>                                                                            <C>            <C>

Net sales                                                                   $   38,575     $   27,772
Cost of sales                                                                   32,521         24,033
                                                                          -----------------------------
Gross profit                                                                     6,054          3,739
Selling, general and administrative expenses                                     3,691          2,038
                                                                          -----------------------------
Income from operations                                                           2,363          1,701
Interest expense                                                                   286            921
                                                                          -----------------------------
Income before provision for income taxes and extraordinary item
and preferred dividends                                                          2,077            780
Provision for income taxes                                                         519              -
                                                                          -----------------------------
Income before extraordinary item                                                 1,558            780
Extraordinary item:
    Loss on early extinguishment of debt (net of income
    tax benefit of $0)                                                               -           (864)
                                                                          -----------------------------
Net income (loss)                                                                1,558            (84)
Preferred stock dividends                                                           11             33
                                                                          -----------------------------
Net income (loss) applicable to common stock                             $       1,547       $   (117)
                                                                          -----------------------------
                                                                          -----------------------------
Net income (loss) per common share:
    Income before extraordinary item applicable
     to common stock                                                     $        0.17       $   0.14
    Extraordinary item                                                               -          (0.16)
                                                                          -----------------------------
    Net income (loss) applicable to common stock                         $        0.17       $  (0.02)
                                                                          -----------------------------
                                                                          -----------------------------
Shares used in computation of net income (loss) applicable to
   common stock                                                              9,064,850      5,261,511
                                                                          -----------------------------
                                                                          -----------------------------
</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
                                                                                 1997           1996
                                                                                 ----           ----
<S>                                                                            <C>            <C>

Net sales                                                                   $   74,423      $    52,354
Cost of sales                                                                   63,065           44,608
                                                                          -----------------------------
Gross profit                                                                    11,358            7,746
Selling, general and administrative expenses                                     6,789            4,125
                                                                          -----------------------------
Income from operations                                                           4,569            3,621
Interest expense                                                                   876            1,648
                                                                          -----------------------------
Income before provision for income taxes and extraordinary item
and preferred dividends                                                          3,693            1,973
Provision for income taxes                                                         920                -
                                                                          -----------------------------
Income before extraordinary item                                                 2,773            1,973
Extraordinary item:
    Loss on early extinguishment of debt (net of income
       tax benefit of $64 and $0)                                                 (193)            (864)
                                                                          -----------------------------
Net income                                                                       2,580            1,109
Preferred stock dividends                                                           29               66
                                                                          -----------------------------
Net income applicable to common stock                                      $     2,551      $     1,043
                                                                          -----------------------------
                                                                          -----------------------------
Net income per common share:                 
    Income before extraordinary item applicable
        to common stock                                                    $      0.33      $      0.35
     Extraordinary item                                                          (0.02)           (0.16)
                                                                          -----------------------------
     Net income applicable to common stock                                 $      0.31      $      0.19
                                                                          -----------------------------
                                                                          -----------------------------
Shares used in computation of net income applicable to common stock          8,386,272        5,395,530
                                                                          -----------------------------
                                                                          -----------------------------
</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

                                                                                       1997             1996
                                                                                       ----             ----
<S>                                                                                  <C>            <C>


CASH FLOWS FROM OPERATING ACTIVITIES         
Net income                                                                       $       2,580    $     1,109
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
   Depreciation and amortization                                                           508            449
   Extraordinary item, loss on early extinguishment of debt                                193            864
Changes in operating accounts:          
    Accounts receivable                                                                 (2,618)         3,835
    Inventories                                                                         (2,411)        (2,038)
    Prepaid expenses and other current assets                                              (74)        (1,031)
    Deferred income taxes                                                                  500            344
    Other assets                                                                          (442)             -
    Accounts payable and accrued expenses                                               (2,257)        (8,304)
    Due to shareholders                                                                    (21)             -
    Income taxes payable                                                                   824              -
    Other non-current liabilities                                                          (82)          (472)
                                                                                  ----------------------------
Net cash used in operating activities                                                   (3,300)        (5,244)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of assets from former owners including acquisition costs                      (11,214)             -
Purchase of plant and equipment                                                           (693)          (519)
                                                                                  ----------------------------
Net cash used in investing activities                                                  (11,909)          (519)

CASH FLOWS FROM FINANCING ACTIVITIES         
Proceeds from borrowings on long-term debt                                              56,046         62,847
Repayments of borrowings on long-term debt                                             (74,726)       (57,084)
Proceeds from sale of preferred stock of subsidiary                                      1,100              -
Proceeds from issuance of common stock, net of expenses                                 34,514              -
Proceeds from exercise to warrants to purchase common stock                                 70              -
Preferred stock dividends paid                                                            (231)             -
                                                                                  ----------------------------
Net cash provided by financing activities                                               16,773          5,763

Net increase in cash and cash equivalents                                                1,566              -

Cash and cash equivalents at beginning of period                                             -              -
                                                                                  ----------------------------
Cash and cash equivalents at end of period                                        $      1,566    $         -
                                                                                  ----------------------------
                                                                                  ----------------------------
Supplemental cash flow disclosures:          
     Cash interest paid                                                           $        780    $       904
                                                                                  ----------------------------
                                                                                  ----------------------------
     Income taxes paid                                                            $          -    $         -
                                                                                  ----------------------------
                                                                                  ----------------------------
</TABLE>
SEE ACCOMPANYING NOTES

                                              5



<PAGE>


                             First Aviation Services Inc.
                                           
                Notes to Consolidated Financial Statements (Unaudited)
                                           
                                    July 31, 1997
                                           
1.  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of First 
Aviation Services Inc. ("First Aviation" or the "Company")  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.  The preparation of the 
consolidated financial statements also requires management to make estimates 
and assumptions that affect the amounts reported in the consolidated 
financial statements.  Actual results could differ from those estimates.  In 
the opinion of management, all material adjustments, consisting only of 
normal recurring accruals, considered necessary for a fair presentation have 
been included in the accompanying unaudited consolidated financial 
statements.  In addition, certain amounts for prior periods have been 
reclassified to be comparable with the current period presentation.  
Operating results for the quarter and six months ended July 31, 1997 are not 
necessarily indicative of the results that may be expected for the full year 
ending January 31, 1998. For further information, refer to the financial 
statements and footnotes thereto included in the Company's Form 10-K for the 
year ended January 31, 1997.

2.  INITIAL PUBLIC OFFERING

The Company completed an initial public offering on March 5, 1997 of 
3,900,000 shares of common stock, $0.01 par value per share ("the Offering"). 
 The Company received proceeds of approximately $34.5 million net of expenses 
of approximately $4.5 million.  The net proceeds were used for, among other 
things, the repayment of term and subordinated debt, and a paydown on the 
Company's credit facility ($22.6 million), payment of accrued dividends on 
the preferred stock ($0.2 million), and the acquisition of Aircrafts Parts 
International (the "API Business") from AMR Combs Inc. ("AMR Combs") ($11.2 
million) (see below).  

Immediately prior to the closing of the Offering, the following transactions 
were completed: (i) all outstanding shares of the Series A Preferred Stock of 
the Company were converted into 165,000 shares of common stock at the 
offering price, (ii) all outstanding warrants to purchase the 1,293,335 
shares of the Company's common stock were exercised in full, (iii) the 
Company's certificate of incorporation was amended to increase the authorized 
common stock of the Company to 25,000,000 shares, and (iv) a 6.4549-to-1 
stock split with respect to common stock was effected.  Accordingly, all 
common share amounts have been restated to give effect to the 6.4549-to-1 
stock split.

The Company's common stock is quoted on The NASDAQ - National Market System 
under the symbol FAVS. 

3.  ACQUISITION OF THE API BUSINESS

On March 5, 1997 (the "Acquisition Date"), Aircraft Parts International 
Combs, Inc., a majority owned subsidiary of the Company ("API Combs"), 
completed the acquisition of the API Business from AMR Combs.  The purchase 
price for the API Business was $11.2 million in cash, subject to further 
payment or reduction on a dollar-for-dollar basis depending upon whether the 
net value of the assets for the API Business as of the Acquisition Date (the 
"Net Asset Value") was greater or less than $10,500,000. In conjunction with 
the acquisition of the API Business, AMR Combs purchased from API Combs 
11,000 shares (the "API Shares") of Series A Cumulative Convertible Preferred 
Stock, $0.001 par value, of API Combs at a price of $100 per share.  Such 
shares were issued on the Acquisition Date. The purchase price for the API 
Shares is subject to adjustment as follows: if the Net Asset Value was 
greater than $10,500,000, AMR Combs will pay API Combs 10% of the amount of 
such excess, and if the Net Asset Value was less than $10,500,000, API Combs 
will pay AMR Combs 10% of the amount of such shortfall, and in either case, 
the number of API Shares will be adjusted to maintain the $100 per share 
purchase price for the API Shares. 

The acquisition was accounted for using the purchase method of accounting. 
Accordingly, the purchase price has been preliminarily allocated to the 
assets acquired and liabilities assumed based on their estimated fair values, 
and the balance of the purchase price has been included in other assets, 
primarily goodwill, and is being amortized over 30 years.  In addition, the 
Company's consolidated statements of operations include the operations of the 
API Business from the Acquisition Date.

                                   6

<PAGE>

                             First Aviation Services Inc.
                                           
                Notes to Consolidated Financial Statements (Unaudited)
                                           
                                   July 31, 1997
                                           
3.  ACQUISITION OF THE API BUSINESS (CONTINUED)

The following unaudited pro-forma summary has been prepared assuming that the 
acquisition of the API Business had taken place at the beginning of the 
respective periods after giving effect to certain pro-forma adjustments, 
including, among others, amortization of intangibles arising from the 
acquisition and the related income tax effects.  

                                        Quarter ended           Six Months ended
                                          July 31                    July 31

IN THOUSANDS, EXCEPT SHARE AMOUNTS
(UNAUDITED)
                                             1996              1997        1996

Net sales                                $   36,974       $  77,648    $  71,376
                                           ---------       ---------   ---------
                                           ---------       ---------   ---------
Income before extraordinary item         $      728       $    2,763   $   1,776
                                           ---------       ---------   ---------
                                           ---------       ---------   ---------
Net income                               $     (136)      $    2,570   $     912
                                           ---------       ---------   ---------
                                           ---------       ---------   ---------
Net income per share applicable to
  common stock                           $    (0.03)      $     0.31   $    0.17
                                           ---------       ---------   ---------
                                           ---------       ---------   ---------
Shares used in computation of net income
  applicable to common stock               5,261,511       8,386,272   5,395,530
                                           ---------       ---------   ---------
                                           ---------       ---------   ---------
                              
4.  INVENTORIES
Inventories consist of the following:
                                                                                
                                            JULY 31             JANUARY 31
                                             1997                       1997
                                           -------------------------------------
                                                      (IN THOUSANDS)

Raw materials                              $  21,787                $ 18,857
Work-in-process                               12,064                  11,067
Finished goods                                10,811                   6,399
                                          ----------                --------
                                           $  44,662                $ 36,323
                                          ----------                --------
                                          ----------                --------

5.  NET INCOME PER COMMON SHARE AND SUPPLEMENTAL NET INCOME PER SHARE

Net income per common share is computed using the treasury stock method based 
on the weighted average number of common shares and common stock equivalent 
shares outstanding during the period, as adjusted retroactively for the 
aforementioned stock split.   Shares from the assumed exercise of options and 
warrants granted by the Company have been included in the computations of 
earnings per share for all periods unless their inclusion would be 
anti-dilutive.  However, for purposes of computing net income per common 
share for the period prior to the Company's initial public offering, options 
and warrants granted by the Company during the 12 months preceding the 
initial public offering date have been included in the calculation of common 
stock and common stock equivalent shares outstanding as if they were 
outstanding for all periods presented using the treasury stock method and the 
public offering price of $10.00 per share

Supplemental net income per share for the quarter and six months ended July 
31, 1997 was $0.17 and $0.35 respectively.  Supplemental net income per share 
is computed using the "if converted" method based on the pro forma weighted 
average number of shares of common stock and common stock equivalents as 
defined above, and preferred shares that were exchanged for common stock on a 
1 for 6.4549 basis upon the closing of the Company's initial public offering, 
adjusted retroactively for the aforementioned stock split.  Net income per 
share used in the supplemental net income per share calculation was adjusted 
to reduce dividends on preferred shares exchanged and decreased for interest 
expense and the extraordinary item on subordinated debentures, which were 
redeemed with the proceeds of the Company's initial public offering.


                                   7

<PAGE>

                           First Aviation Services Inc.
                                           
                Notes to Consolidated Financial Statements (Unaudited)
                                           
                                    July 31, 1997
                                           
6.  IMPACT OF NEW ACCOUNTING STANDARD

In February, 1997, the Financial Accounting Standards Board ("FASB") issued 
Statement No. 128, EARNINGS PER SHARE, which specifies a change in the 
computation, presentation and disclosure requirements for earnings per share 
and requires the restatement of all prior periods.  The Statement is required 
to be adopted for periods ending after December 15, 1997.  Accordingly, the 
Company will comply with the requirements of this standard; however, the 
Company does not expect that the impact of applying this standard will be 
material.


                                   8

<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GENERAL

First Aviation Services Inc. 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.  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.  With the acquisition of the API Business, the 
Company has also become one of the leading suppliers of aircraft engine parts 
and other aircraft parts to the general aviation industry worldwide.

First Aviation was formed in March 1995 to acquire all of the stock of 
National Airmotive Corporation (NAC).  The acquisition was completed on June 
1, 1995. Through NAC, the Company provides repair and overhaul services for 
several engine types, including the Allison Engine Company ("Allison"), a 
subsidiary of Rolls Royce USA.  The engines that NAC repairs and overhauls 
include: (i) the engines that power the Lockheed Martin C-130 "Hercules" 
cargo aircraft, the most popular cargo aircraft in the world; (ii) the 
engines employed on most light helicopters; and (iii) industrial turbine 
engines primarily used for power co-generation and gas transmission.  The 
Company has also established itself as a leader in the remanufacturing of 
serviceable engine parts and components for use in engine overhauls.

On March 5, 1997, the Company completed an initial public offering of 
3,900,000 shares of common stock, $0.01 par value per share. The Company 
received proceeds of approximately $34.5 million net of expenses of 
approximately $4.5 million. The net proceeds were used for, among other 
things, the repayment of term and subordinated debt, and a paydown on the 
Company's credit facility ($22.6 million), payment of accrued dividends on 
preferred stock ($0.2 million), and the acquisition of the API Business 
($11.2 million).  Through the API Business, the Company supplies aircraft 
parts primarily to the general aviation market.

The Company believes it is positioned to benefit from certain industry trends 
that favor independent repair and overhaul and aircraft providers including: 
(i) increased outsourcing of repair and overhaul services by engine operators 
as engine operators seek to reduce operating costs and turnaround time; (ii) 
increasing consolidation among repair and overhaul and parts providers as 
engine operators reduce the number of providers used for these services; 
(iii) increased emphasis on the traceability of aircraft parts which has, in 
turn, increased the required sophistication of information systems used by 
parts distributors; (iv) growing demand for remanufactured parts as engine 
operators seek to lower costs of repair and overhaul services; (v) increasing 
aviation activity which, in turn, increases the demand for repair and 
overhaul services; and (vi) increased demand by aircraft operators for third 
parties to manage and maintain parts inventories so that aircraft operators 
may reduce their parts' inventory.

NET SALES

Net sales for the quarter ended July 31, 1997 increased by $10.8 million or 
38.8% to $38.6 million from $27.8 million in the quarter ended July 31, 1996. 
Net sales for the six months ended July 31, 1997 increased by $22 million or 
42% to $74.4 million from $52.4 million in the six months ended July 31, 
1996.  Net sales from repair and overhaul activities decreased 11.7% while 
revenues from parts sales increased by 275% for the quarter ended July 31, 
1997 from the quarter ended July 31, 1996.  However, net sales from repair 
and overhaul activities increased 3.9% and revenues from parts sales 
increased by 226% for the six months ended July 31, 1997 from the six months 
ended July 31, 1996. The decline in revenues from the overhaul and repair 
business is primarily attributable to the shifting of work into other 
quarters and may not be indicative of future trends.  The increase in parts 
sales is primarily attributable to the acquisition of  the API Business 
coupled with an increase in parts sales at NAC.

COST OF SALES

Cost of sales for the quarter ended July 31, 1997 increased by $8.5 million 
or 35.4% to $32.5 million from $24 million in the quarter ended July 31, 
1996. This increase was due to higher sales volume.  As a percentage of net 
sales, cost of sales decreased by 2.1% to 84.2% from 86.3% in the quarter 
ended July 31, 1996.  The reduction was attributable primarily to the 
increase in higher margin parts sales by API offset by an increase in the 
cost of Allison gas turbine parts sold and used in engine overhauls by NAC.  
Cost of sales for the six months ended July 31, 1997 increased by $18.5 
million or 41.5% to $63.1 million from $44.6 million and as a percentage of 
net sales remained relatively constant at 85% with that of the six months 
ended July 31, 1996.



                                   9

<PAGE>


GROSS PROFIT

Gross profit for the quarter ended July 31, 1997 increased by $2.3 million or 
62% to $6.1 million and as a percentage of net sales increased to 15.8% from 
13.3% in the quarter ended July 31, 1996. Gross profit for the six months 
ended July 31, 1997 increased by $3.6 million or 46.6% to $11.4 million and 
as a percentage of net sales increase to 15.3% from 14.7% in the six months 
ended July 31, 1996. Gross profit has increased as a result of the increased 
sales volume noted above.  The increased percentage of gross profit was 
attributable primarily to the increase in higher margin parts sales by API 
which offset an increase in the cost of Allison gas turbine parts.

SELLING GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses  for the quarter ended July 31, 
1997 increased by $1.7 million or 85% to $3.7 million from $2 million in the 
quarter ended July 31, 1996. Selling, general and administrative expenses  
for the six months ended July 31, 1997 increased by $2.7 million or 65.9% to 
$6.8 million from $4.1 million in the quarter ended July 31, 1996.  The 
increases are primarily attributable to the acquisition of the API Business 
and the increase in sales noted above.

INTEREST EXPENSE

Interest expense for the quarter ended July 31, 1997 decreased by $0.6 
million or 66% to $0.3 million from $0.9 million in the quarter ended July 
31, 1996. Interest expense for the six months ended July 31, 1997 decreased 
by $0.7 million or 43.8% to $0.9 million from $1.6 million in the six months 
ended July 31, 1996. The decrease was attributable to a reduction in the 
average borrowings under the Company's credit facility, which was a direct 
result of using a portion of the proceeds of the Company's initial public 
offering to pay down such borrowings and because such proceeds were also used 
to retire subordinated debentures.

PROVISION FOR INCOME TAXES

Management estimates that the Company's effective income tax rate for the 
quarter and six-month periods ended July 31, 1997 is 25%.  The effective 
income tax rate for the corresponding periods for fiscal 1996 was 0%.  The 
increase in the effective rate is primarily attributable to adjustments in 
the valuation allowance utilized to offset deferred tax benefits.  The 
Company's effective tax rate is less than statutory rates, due to benefits 
that the Company expects to derive from the implementation of certain tax 
saving strategies including but not limited to the use of a Foreign Sales 
Corporation.

NET INCOME

Net income before extraordinary items for the quarter ended July 31, 1997 
increased by 100% to $1.6 million from $0.8 million in the quarter ended July 
31, 1996. Net income before extraordinary items for the six months ended July 
31, 1997 increased by 40% to $2.8 million from $2 million in the six months 
ended July 31, 1996.   The increases in profitability reflect the increased 
level of sales and gross profit, and decreased interest expense noted above, 
offset by an increase in the provision for income taxes.

EXTRAORDINARY ITEM

Extraordinary charges during the quarter ended July 31, 1997 were $0 compared 
to $0.9 million recorded in the quarter ended July 31, 1996.  Extraordinary 
charges during the six months ended July 31, 1997 declined by 78% to $0.2 
million (net of income tax benefit of $0.06 million) from $0.9 million 
recorded during the six months ended July 31, 1996.  The extraordinary 
charges reflect a write-off of costs associated with the early extinguishment 
of certain debt.

NET INCOME PER COMMON SHARE

Net Income per common share is computed using the treasury stock method based 
on the weighted average number of common shares and common stock equivalent 
shares outstanding during the period, as adjusted  for the stock split that 
occurred in conjunction with the initial public offering.  Shares from the 
assumed exercise of options and warrants granted by the Company and shares 
issuable in connection with the Company's convertible preferred stock have 
been included in the computations of earnings per share for all periods 
unless their inclusion would be anti-dilutive.  However, for purposes of 
computing net income per share, options and warrants granted by the Company 
during the 12 months preceding the initial public offering date, including 
those shares issuable in connection with

                                   10

<PAGE>

the anti-dilution provisions of certain warrant agreements, have been 
included in the calculation of common stock and common stock equivalent 
shares outstanding as if they were outstanding for all periods presented 
using the treasury stock method and the public offering price of $10.00 per 
share.
               
LIQUIDITY AND CAPITAL RESOURCES

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

To that end, the Company completed an initial public offering on March 5, 
1997 of 3,900,000 shares of common stock, $0.01 par value per share.  The 
Company received proceeds of approximately $34.5 million net of expenses of 
approximately $4.5 million.  The net proceeds were used for, among other 
things, the repayment of term and subordinated debt and a paydown on the 
Company's credit facility ($22.6 million); payment of accrued dividends ($.2 
million) on the preferred stock ($.2 million), and the acquisition of the API 
Business ($11.2 million).

In addition, the Company's cash used in operations for the six months ended 
July 31, 1997, was $3.3 million compared to $5.2 million in the six months 
ended July 31, 1996.  Cash used for investing activities during these same 
periods was $11.9 million and $0.5 million, respectively.  Cash generated by 
financing activities during these same periods was $16.8 million, and $5.8 
million,  respectively.

Further, in connection with the acquisition of the API Business, API Combs 
issued 11,000 shares (the "API Shares") of Series A Cumulative Convertible 
Preferred Stock, subject to adjustment.  Such shares are convertible solely 
into shares of common stock of API Combs.  The API Shares carry a $4.00 per 
share annual dividend, payable quarterly.

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 the 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 expansions, 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 facility prohibits the payment of cash dividends, 
except with the lender's consent, and contains other covenants and 
restrictions.

The Company is in the process of negotiating with major institutions to 
establish a larger and less restrictive revolving credit and acquisition 
facility.  Borrowings under the Company's current $40.0 million credit 
facility were $15.2 million at July 31, 1997.

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

SAFE HARBOR STATEMENT

Statements which are not historical facts in this report are forward looking 
statements, made on a good faith basis.  Such forward looking statements, 
including those concerning the Company's expectations, all involve risk and 
uncertainties including the Company's ability to obtain parts from its 
principal supplier on a timely basis, the ability to consummate suitable 
acquisitions, the ability to expand its remanufacturing capabilities and 
other items that are beyond the Company's control and may cause actual 
results to differ from management's expectations. 


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<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

NONE

ITEM 5. OTHER INFORMATION 

NONE

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

EXHIBIT
NUMBER                        DESCRIPTION OF EXHIBIT


10.32               Employment Agreement dated as of July 1, 1997 by and
                    between Gerald S. Schlesinger and the Company.

11.01               Statement re: Computation of per share earnings
                    (historical basis)

11.02               Statement re: Computation of per share earnings
                    (supplemental basis)

27.1                Financial Data Schedule


(b) Reports on Form 8-K.

NONE


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<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 11, 1997             /s/ Michael C. Culver
                                   --------------------------------------
                                   Michael C. Culver,
                                   President, Chief Executive Officer and
                                   Director (Principal Executive Officer)


Date: September 11, 1997             /s/ John A. Marsalisi
                                   --------------------------------------
                                   John A. Marsalisi,
                                   Vice President, Secretary, Director and 
                                   Chief Financial Officer (Principal Financial
                                   and Accounting Officer)



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