AIR T INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
Form 10-K
_________________
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended March 31, 2004
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______________ to _____________

Commission file number 0-11720

Air T, Inc.
(Exact name of registrant as specified in its charter)
Delaware 52-1206400
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)

3524 Airport Road
Maiden, North Carolina 28650
(Address of principal executive offices) (Zip Code)

(704) 377-2109
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.25 per share
(Title of Class)
__________________
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an
accelerated filer (as defined in Exchange Act Rule 12G-2).
Yes No X
The aggregate market value of voting stock held by non-
affiliates of the registrant computed by reference to the average
of the closing bid and asked prices for such stock on September
30, 2003, was $3,588,724. As of May 20, 2004, 2,686,825 shares
of Common Stock were outstanding.

PART I

Item 1. Business.

Air T, Inc., incorporated under the laws of the State of
Delaware in 1980 (the "Company"), operates in two industry
segments, providing overnight air cargo services to the air
express delivery industry through its wholly owned subsidiaries,
Mountain Air Cargo, Inc. ("MAC") and CSA Air, Inc. ("CSA"), and
aviation ground support and other specialized equipment products
through its wholly owned subsidiary, Global Ground Support, LLC
("Global"). During fiscal 2003 the Company decided to dispose of
its aviation related parts brokerage and overhaul services
through its wholly owned subsidiary, Mountain Aircraft Services,
LLC ("MAS"). The Company entered into a letter of intent on June
19, 2003 to sell certain assets and a portion of the business
operations of MAS. In August 2003, the Company completed the
sale of certain assets of MAS for consideration of $1,885,000,
resulting in the recognition of losses associated with the
disposition of $1,121,000. In conjunction with the sale, MAS
changed its name to MAC Aviation Services, LLC (MACAS). The
Company's financial statements have been reclassified to reflect
the results of MAS as a discontinued operation.

For the fiscal year ended March 31, 2004 the Company's air
cargo services through MAC and CSA accounted for approximately
64.5% of the Company's consolidated revenues and aviation ground
support and other specialized equipment products through Global
accounted for approximately 35.5% of consolidated revenues. The
Company's air cargo services are provided exclusively to one
customer, Federal Express Corporation ("Customer"). Certain
financial data with respect to the Company's overnight air cargo
and ground support equipment segments are set forth in Note 16 of
Notes to Consolidated Financial Statements included under Part
II, Item 8 of this report. Such data are incorporated herein by
reference.

The principal place of business of the Company and MAC is
3524 Airport Road, Maiden, North Carolina; the principal places
of business of CSA and Global are, respectively, Iron Mountain,
Michigan and Olathe, Kansas. The principal place of business of
MACAS is in Kinston, North Carolina. The Company maintains an
Internet website at http://www.airt.net and posts links to its
SEC filings on its website.

Overnight Air Cargo Services.

MAC and CSA provide small package overnight air freight
delivery services on a contract basis throughout the eastern half
of the United States and Canada, South America, and in Puerto
Rico and the U.S. Virgin Islands. MAC and CSA's revenues are
derived principally pursuant to "dry-lease" service contracts.
Under the dry-lease service contracts, the customer leases its
aircraft to MAC (or CSA) for a nominal amount and pays an
administrative fee to MAC (or CSA). Under these arrangements,
all direct costs related to the operation of the aircraft
(including fuel, maintenance, landing fees and pilot costs) are
passed through to the customer. For the most recent fiscal year,
operations under dry-lease service contracts accounted for 98.0%
of MAC and CSA's revenues (64.5% of the Company's consolidated
revenues).

For the fiscal year ended March 31, 2004, 2003 and 2002 MAC
and CSA provided air delivery service exclusively to Federal
Express. As of March 31, 2004, MAC and CSA had an aggregate of
94 aircraft under agreements with Federal Express. MAC and CSA
currently operate in the eastern half of the United States and
Canada, South America, Puerto Rico and the Virgin Islands.
Separate agreements cover the four types of aircraft operated by
MAC and CSA for Federal Express -- Cessna Caravan, ATR-42,
Fokker F-27 and Short Brothers SD3-30. Cessna Caravan, ATR-42
and Fokker F-27 aircraft are dry-leased from Federal Express, and
Short Brothers SD3-30 aircraft are owned by the Company and
operated under "wet-lease" arrangements with Federal Express,
which provide for a fixed fee per flight regardless of the amount
of cargo carried. Pursuant to such agreements, Federal Express
determines the schedule of routes to be flown by MAC and CSA.

Agreements with Federal Express are renewable annually and
may be terminated by Federal Express any time upon 15 to 30 days'
notice. The Company believes that the short term and other
provisions of its agreements with Federal Express are standard
within the air freight contract delivery service industry. Loss
of Federal Express as a customer would have a material adverse
effect on MAC, CSA and the Company.

MAC and CSA operate under separate aviation certifications.
MAC is certified to operate under Part 121, Part 135 and Part 145
of the regulations of the Federal Aviation Administration (the
"FAA"). These certifications permit MAC to operate and maintain
aircraft that can carry up to 18,000 pounds of cargo and provide
maintenance services to third party operators. CSA is certified
to operate under Part 135 of the FAA regulations. This
certification permits CSA to operate aircraft with a maximum
cargo capacity of 7,500 pounds.

MAC and CSA, together, owned, operated or were in the
process of converting the following aircraft as of March 31,
2004:

Form of Number of
Type of Aircraft Model Year Ownership Aircraft

Cessna Caravan, 208A and 208B
(single turbo prop) 1985-1996 dry lease 71

Fokker F-27 (twin turbo prop) 1968-1981 dry lease 17

ATR-42 (twin turbo prop) 1992 dry lease 4

Short Brothers SD3-30
(twin turbo prop) 1981 owned 2

Beech King Air C90A 1990 owned 1
(twin turbo prop)
Total 95

Of the 95 aircraft fleet, 92 aircraft (the Cessna Caravan,
ATR-42 and Fokker F-27 aircraft) are owned by Federal Express and
operated by MAC and CSA under dry-lease service contracts. Under
the dry-lease service contracts, certain maintenance expense,
including cost of parts inventory, and maintenance performed by
personnel not employed by the Company, is passed directly to the
customer. The expense of daily, routine maintenance and aircraft
service checks is charged to the customer on an hourly basis.
Accordingly, the Company does not anticipate maintenance expense,
such as engine overhauls, to be material to the Company's
operating results. In May 2000, MAC completed its FAA
certification to commence operation of a Part 145 maintenance
facility at its Kinston, N.C. location to conduct these
maintenance services.

All FAA Part 135 aircraft, including Cessna Caravan models
208A and 208B, and Short Brothers SD3-30 aircraft are maintained
on FAA approved inspection programs. The inspection intervals
range from 100 to 200 hours. The engines are produced by Pratt &
Whitney, and overhaul periods are based on FAA approved
schedules. The current overhaul period on the Cessna aircraft is
7,500 hours. The Short Brothers manufactured aircraft are
maintained on an "on condition" maintenance program (i.e.,
maintenance is performed when performance deviates from certain
specifications) with engine inspections at each phase inspection
and in-shop maintenance at predetermined intervals.

The Fokker F-27 aircraft are maintained under a FAA Part 121
maintenance program. The program consists of A, B, C, D and I
service checks which are inspections designed to ensure the
Company's maintenance procedures are in compliance with the
applicable FAA regulations. The engine overhaul period is 6,700
hours.

The ATR-42 aircraft which are not yet operational, will be
maintained under a FAA Part 121 maintenance program, final
requirements of which are still pending. The program consist of
A and C service checks. The engine overhaul period is "on
condition".

King Air is maintained under a FAA Part 91 maintenance
program. The program consists of a phase inspection program.
The engine overhaul period is 3,600 hours.

The Company operates in highly competitive markets and
competes with approximately 50 other contract cargo carriers in
the United States based on safety, reliability, compliance with
Federal and State regulations, price and other service related
measurements set by their customer. MAC and CSA's contracts with
its customer are renewed on an annual basis. Accurate industry
data is not available to indicate the Company's position within
its marketplace (in large measure because most of the Company's
competitors are privately held), but management believes that MAC
and CSA, combined, constitute one of the largest contract
carriers of the type described immediately above.

The Company's air cargo operations are not materially
seasonal.

Aircraft Deice and Other Equipment Products.

In August 1997, the Company organized Global to acquire the
Simon Deicer Division of Terex Aviation Ground Equipment, and the
acquisition was completed that month. Global is located in
Olathe, Kansas and manufactures, sells and services aircraft
ground support and other specialized equipment sold to domestic
and international passenger and cargo airlines, the U.S. Air
Force, airports and industrial customers. During the past six
fiscal years, Global diversified its product line to include
additional models of aircraft deicers, scissor type lifts,
military and civilian decontamination units and other specialized
types of equipment. Global is organized as a limited liability
company and is 100 % owned by Air T.

In the manufacture of its ground service equipment, Global
assembles components acquired from third party suppliers.
Components are readily available from a number of different
suppliers. The primary components are the chassis (which is
similar to the chassis of a medium to heavy truck), fluid
storage, a boom mounted delivery system, heating and pumping
equipment.

Global manufactures five basic models of mobile deicing
equipment ranging from 700 to 3,200 gallon capacity models, in
addition to fixed-pedestal-mounted deicers. Each model can be
customized as requested by the customer, including the addition
of twin engine deicing systems, fire suppressant equipment,
modifications for open or enclosed cab design, a patented forced-
air deicing nozzle to substantially reduce glycol usage, and
color and style of the exterior finish. Global also manufactures
three models of scissor-lift equipment, for catering, cabin
service and maintenance service of aircraft, and has developed a
line of decontamination equipment and other special purpose
mobile equipment. Global competes primarily on the basis of
reliability of its products, prompt delivery, service and price.
The market for aviation ground service equipment is highly
competitive and directly related to the financial health of the
aviation industry, weather patterns and changes in technology.

Global's mobile deicing equipment business, in addition to
being highly seasonal, was significantly impacted by the
softening economy and effect of the September 11, 2001 terrorist
attacks on the United States. Historically, the bulk of Global's
revenues have occurred during the second and third fiscal
quarters, and comparatively little revenue has occurred during
the first and fourth fiscal quarters. The Company has continued
its efforts to reduce Global's seasonal fluctuation in revenues
and earnings by broadening its product line to increase revenues
and earnings in the first and fourth fiscal quarters. In June
1999, Global was awarded a four-year contract to supply deicing
equipment to the United States Air Force, and in June 2003 Global
was awarded a three-year extension on the contract. In January
2001 and March 2003 Global received two large-scale, fixed-stand
deicer contracts, which the Company believes contributed to
management's plan to reduce seasonal fluctuation in revenues
during fiscal 2004 and 2002. However, as these contracts are
completed, seasonal trends for Global's business may resume.

Revenue from Global's contract with the U.S. Air Force
accounted for approximately 16.4%, 19.9% and 22.9% of the
Company's consolidated revenue for the years ended March 31,
2004, 2003 and 2002, respectively.

Aviation Related Parts Brokerage and Overhaul Services.

MAS provided aircraft maintenance and parts and other
aviation related services to the commercial and military aviation
industries. MAS's principal offices and primary overhaul
facilities were located at the Global TransPark in Kinston, North
Carolina and Miami,

During the fourth quarter of fiscal 2003, Company management
agreed to a plan to sell the assets of Mountain Aircraft
Services, LLC (MAS) and to discontinue the operations of the
Company's aviation service sector business. The Company entered
into a letter of intent on June 19, 2003 to sell certain assets
and the business operations of MAS to an investor group, which
included former management of MAS. In August 2003, the Company
completed the sale of certain assets of MAS for consideration of
$1,885,000, resulting in the recognition of losses associated
with the disposition of $1,121,000. The loss associated with
the disposal is reflected in discontinued operations. In
conjunction with the above sale, the Company agreed to indemnify
the buyer and its affiliates with respect to certain matters
related to contractual representations and warranties and the
operation of the business prior to closing.

In connection with this sale, the Company also entered into
a three-year consignment agreement granting the buyer an
exclusive right to sell the majority of the remaining MAS
inventory included in the Company's consolidated balance sheet as
of that date. Upon termination of the consignment agreement the
buyer will return all unsold inventory, if any, to the Company.
Such consigned inventory is stated at the lower of cost or market
at March 31, 2004 in the accompanying financial statements. The
accompanying consolidated financial statements reflect the sale
of certain MAS assets and reclassify the net operations of MAS as
discontinued operations, net of tax, for all periods presented.

Backlog.

The Company's backlog for its continuing operations consists
of "firm" orders supported by customer purchase orders for the
equipment sold by Global. At March 31, 2004, the Company's
backlog of orders was $13.5 million attributable to Global, all
of which the Company expects to be filled in the fiscal year
ending March 31, 2005.

Governmental Regulation.

The Department of Transportation ("DOT") has the authority
to regulate economic issues affecting air service. The DOT has
authority to investigate and institute proceedings to enforce its
economic regulations, and may, in certain circumstances, assess
civil penalties, revoke operating authority and seek criminal
sanctions.

In response to the terroist attacks of September 11, 2001,
Congress enacted the Aviation and Transportation Security Act
("ATSA") of November 2001. ATSA created the Transportation
Security Administration ("TSA"), an agency within the DOT, to
oversee, among other things, aviation and airport security. In
2003, TSA was transferred from the DOT to the Department of
Homeland Security, however the basic mission and authority of TSA
remain unchanged. ATSA provided for the federalization of
airport passenger, baggage, cargo, mail, and employee and vendor
screening processes.

Under the Federal Aviation Act of 1958, as amended, the FAA
has safety jurisdiction over flight operations generally,
including flight equipment, flight and ground personnel training,
examination and certification, certain ground facilities, flight
equipment maintenance programs and procedures, examination and
certification of mechanics, flight routes, air traffic control
and communications and other matters. The Company has been
subject to FAA regulation since the commencement of its business
activities. The FAA is concerned with safety and the regulation
of flight operations generally, including equipment used, ground
facilities, maintenance, communications and other matters. The
FAA can suspend or revoke the authority of air carriers or their
licensed personnel for failure to comply with its regulations and
can ground aircraft if questions arise concerning airworthiness.
The FAA also has power to suspend or revoke for cause the
certificates it issues and to institute proceedings for
imposition and collection of fines for violation of federal
aviation regulations. The Company, through its subsidiaries,
holds all operating airworthiness and other FAA certificates that
are currently required for the conduct of its business, although
these certificates may be suspended or revoked for cause. The
FAA periodically conducts routine reviews of MAC and CSA's
operating procedures and flight and maintenance records.

The FAA has authority under the Noise Control Act of 1972,
as amended, to monitor and regulate aircraft engine noise. The
aircraft operated by the Company are in compliance with all such
regulations promulgated by the FAA. Moreover, because the
Company does not operate jet aircraft, noncompliance is not
likely. Such aircraft also comply with standards for aircraft
exhaust emissions promulgated by the Environmental Protection
Agency pursuant to the Clean Air Act of 1970, as amended.

Because of the extensive use of radio and other
communication facilities in its aircraft operations, the Company
is also subject to the Federal Communications Act of 1934, as
amended.

Maintenance and Insurance.

The Company, through its subsidiaries, maintains its
aircraft under the appropriate FAA standards and regulations.

The Company has secured public liability and property damage
insurance in excess of minimum amounts required by the United
States Department of Transportation. The Company has also
obtained all-risk hull insurance on Company-owned aircraft.

The Company maintains cargo liability insurance, workers'
compensation insurance and fire and extended coverage insurance,
for leased as well as owned facilities and equipment.

Risk Factors Related to the Company and to the Commercial
Aviation Industry

The following risk factors, as well as others, should be
considered by investors as well as other information included in
the Company's Annual Report on Form 10-K in connection with any
investment in the Company's common stock.

Economic conditions in the Company's markets;
The continuing impact of the events of September 11, 2001,
or any subsequent terrorist activities on United States soil or
abroad;
The Company's ability to manage its cost structure for
operating expenses, or unanticipated capital requirements, and
match them to shifting customer service requirements and
production volume levels;
Market acceptance of the Company's new commercial and
military equipment and services;
Competition from other providers of similar equipment and
services;
Changes in government regulation and technology;
Mild winter weather conditions reducing the demand for
deicing equipment.

Employees.

At May 7, 2004, the Company and its subsidiaries had 396
full-time and full-time-equivalent employees, of which 29 are
employed by the Company, 253 are employed by MAC, 52 are employed
by CSA and 62 are employed by Global. None of the Company's
employees are represented by a union. The Company believes its
relations with its employees are good.

Item 2. Properties.

The Company leases the Little Mountain Airport in Maiden,
North Carolina from a corporation whose stock is owned in part by
William H. Simpson and John J. Gioffre, officers and directors of
the Company, and the estate of David Clark, of which, Walter
Clark, the Company's chairman and Chief Executive Officer, is a
co-executor and beneficiary, and Allison Clark, a director, is a
beneficiary. The facility consists of approximately 68 acres
with one 3,000 foot paved runway, approximately 20,000 square
feet of hangar space and approximately 12,300 square feet of
office space. The operations of the Company and MAC are
headquartered at this facility. The two leases for this facility
extend through May 31, 2006, and the total monthly lease payments
are $11,255. The Company has the option to renew the two leases
for an additional five-year period ending May 31, 2011.

The Company also leases approximately 800 square feet of
office space and approximately 6,000 square feet of hangar space
at the Ford Airport in Iron Mountain, Michigan. CSA's operations
are headquartered at these facilities. These facilities are
leased, from a third party, under an annually renewable agreement
with a monthly rental payment, as of March 31, 2004, of
approximately $1,761.

On November 16, 1995, the Company entered into a twenty-one
and one-half year premises and facilities lease with Global
TransPark Foundation, Inc. to lease approximately 53,000 square
feet of a 66,000 square foot aircraft hangar shop and office
facility at the North Carolina Global TransPark in Kinston, North
Carolina. In August 1996, the maintenance, repair and parts
brokerage operation of MAC and MAS were relocated to this
facility. Rent under this lease increases over time as follows:
the first 18 months, no rent; the next 5-year period, $2.25 per
square foot; the next 5-year period, $3.50 per square foot; the
next 5-year period, $4.50 per square foot; and the final 5-year
period, $5.90 per square foot. This lease is cancelable under
certain conditions at the Company's option. The Company currently
considers the lease to be non-cancelable for eight and one-half
years and has calculated rent expense on a straight-line basis
over this portion of the lease term. The Company began
operations at this facility in August 1996.

Global leases a 112,500 square foot production facility in
Olathe, Kansas. The facility is leased, from a third party,
under a five-year lease agreement, which expires in August 2006.
The monthly rental payment, as of March 31, 2004, was $30,279 and
the monthly rental will increase to no more than $30,842 over the
life of the lease, based on increases in the Consumer Price
Index.

As of March 31, 2004, the Company leased hangar space from
third parties at 35 other locations for aircraft storage. Such
hangar space is leased, from third parties, at prevailing market
terms.

The table of aircraft presented in Item 1 lists the aircraft
operated by the Company's subsidiaries and the form of ownership.

Item 3. Legal Proceedings.

Global and one of its employees are defendants in a lawsuit
filed in March 2002 in the United States District Court for the
District of Columbia, Catalyst & Chemical Services et al v.
Terex, et al. In this action, the plaintiffs allege that they
provided to Global and the employee certain trade secrets
regarding aircraft de/anti-icing systems that were then disclosed
by Global and the employee to third parties. The plaintiffs
allege misappropriation of trade secrets, breach of contract and
violation of the federal Racketeer Influenced and Corrupt
Organizations Act and seek monetary damages. The Company and its
employee have filed an answer in this action denying all
liability. Upon Global's motion, the court has dismissed the
plaintiff's claims under the Racketeer Influenced and Corrupt
Organizations Act. The Company does not believe that the action
has any merit and intends to continue to defend the lawsuit
vigorously. In November 2002, Global and the Company filed suit
in North Carolina state court against affiliates of the
plaintiffs in the Catalyst & Chemical Services et al v. Terex, et
al action alleging defamation. This action has been removed to,
and is pending before, the United States District Court for the
Western District of North Carolina.

The Company currently has outstanding certain intellectual
property, personal injury and environmental matters, which
involve actual or pending lawsuits. Management believes the
results of these actual or pending lawsuits will not have a
material adverse effect on the Company.

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

No matter was submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.

PART II

Item 5. Registrant's Common Equity and Related Stockholder
Matters.

The Company's common stock is publicly traded in the over-
the-counter market under the NASDAQ symbol "AIRT."

As of May 20, 2004 the number of holders of record of the
Company's Common Stock was approximately 351. Over-the-counter
market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not necessarily
represent actual transactions. The range of high and low bid
quotations per share for the Company's common stock from April
2002 through March 2004 is as follows:
Common Stock
Quarter Ended High Low

June 30, 2002 $3.97 $2.99
September 30, 2002 3.46 2.94
December 31, 2002 3.00 1.90
March 31, 2003 2.20 1.41

June 30, 2003 $2.50 $1.41
September 30, 2003 5.20 2.05
December 31, 2003 6.19 4.12
March 31, 2004 6.65 4.72

The Company's Board of Directors has adopted a policy to pay
a regularly scheduled annual cash dividend in the first quarter
of each fiscal year. On May 4, 2004, the Company declared a
fiscal 2005 cash dividend of $0.20 per common share payable on
June 25, 2004 to stockholders of record on June 11, 2004. Due to
losses sustained in fiscal 2003, the Company did not declare or
pay a common share dividend in fiscal 2004.

The following table sets forth certain information with respect
to purchases by the Company of shares of its Common Stock in the
quarter ended March 31, 2004.

Total Number Maximum number
of Shares of shares that
Purchased as May yet be
Total number Average Part of Pubilicly Purchased under
of Shares Price Paid Announced plans the Plans
Period Purchased per Share or programs or programs

01/01/04 to 01/31/04 39,493 $ 4.54 39,493 118,480
02/01/04 to 02/29/04 - - - -
03/01/04 to 03/31/04 - - - -
total 39,493 $ 4.54 39,493 118,480

In conjunction with the resignation of an executive officer the
Company, on January 12, 2004, agreed to repurchase 118,480 shares
of the Company's common stock, at $4.54 per share, 80% of the
fair value of the stock on the date of the agreement. The stock
repurchase will take place in three installments over a one-year
period, this table reflects the first installment.

Item 6. Selected Financial Data

The operations of MAS have been reclassified as discontinued
operations for all years presented below.

(In thousands except per share data)
Year Ended March 31,

2004 2003 2002 2001 2000

Operating Revenues $55,997 $42,872 $59,603 $61,668 $49,546

Earnings from continuing
operations 2,164 366 2,016 1,418 102
(Loss) earnings
from discontinued operations (426) (1,590) (738) (129) 260

Net (loss) earnings 1,738 (1,224) 1,278 1,289 362

Basis (loss) earnings per share
Continuing operations 0.80 0.13 0.74 0.52 0.04
Discontinued operations (0.16) (0.58) (0.27) (0.05) 0.09
Total basic net (loss) earnings per
share 0.64 (0.45) 0.47 0.47 0.13

Diluted (loss) earnings per share:
Continuing operations 0.80 0.13 0.72 0.51 0.04
Discontinued operations (0.16) (0.58) (0.26) (0.05) 0.09
Total diluted net (loss) earnings
per share 0.64 (0.45) 0.46 0.46 0.13

Total assets 19,574 21,328 22,903 28,533 23,936

Long-term obligations, including
current portion 279 2,509 4,158 5,969 1,486

Stockholders' equity 11,677 9,611 11,100 10,170 9,383

Average common shares outstanding-
Basic 2,716 2,726 2,717 2,733 2,758

Average common shares outstanding-
Diluted 2,728 2,726 2,789 2,781 2,837

Dividend declared per common
share (1) $ - $ 0.12 $ 0.15 $ 0.10 $ 0.08

Dividend paid per common
share (1) $ - $ 0.12 $ 0.15 $ 0.10 $ 0.08

(1) )n May 11, 2003, the company declared a fiscal 2005 cash dividend of $0.20
per common share, payable on June 25, 2004 to stockholders' of record on June
11, 2004. Due to losses sustained in fiscal 2003 no common share dividend
was paid in fiscal 2004.

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations

Overview

The Company's most significant component of revenue, which
accounted for 64.5% of revenue in fiscal 2004, was generated
through its air cargo subsidiaries, Mountain Air Cargo, Inc.
(MAC) and CSA Air, Inc. (CSA).

MAC and CSA are short-haul express air freight carriers.
MAC and CSA's revenue contributed approximately $36,168,000 and
$29,899,000 to the Company's revenues in fiscal 2004 and 2003,
respectively, a current year increase of 21.0%. Approximately
$4,456,000 (or 71.9%) of the increase in revenue in fiscal 2004
was related to maintenance services, which were primarily
attributed to customer fleet modernization, associated with
conversion of ATR aircraft from passenger to cargo configuration,
and route expansion. The remainder of the increase was
attributable to administration and other direct operating revenue
associated with route expansion.

Under the terms of the dry-lease service agreements, which
currently cover approximately 98% of the revenue aircraft
operated, the Company passes through to its customer certain cost
components of its operations without markup. The cost of fuel,
flight crews, landing fees, outside maintenance, parts and
certain other direct operating costs are included in operating
expenses and billed to the customer as cargo and maintenance
revenue, at cost.

Separate agreements cover the four types of aircraft
operated by MAC and CSA for their customer-Cessna Caravan, ATR-
42, Fokker F-27, and Short Brothers SD3-30. Cessna Caravan, ATR-
42 and Fokker F-27 aircraft (a total of 92 aircraft at March 31,
2004) are owned by and dry-leased from Customer, and Short
Brothers SD3-30 and King Air aircraft (respectively, two and one
aircraft at March 31, 2004) are owned by the Company. The SD3-
30's are operated periodically under wet-lease arrangements with
the Customer. Pursuant to such agreements, the Customer
determines the type of aircraft and schedule of routes to be
flown by MAC and CSA, with all other operational decisions made
by the Company.

Agreements are renewable annually and may be terminated by
the Customer at any time upon 15 to 30 days' notice. The Company
believes that the short term and other provisions of its
agreements with the Customer are standard within the air freight
contract delivery service industry. The Company is not
contractually precluded from providing such services to other
firms, and has done so in the past. Loss of its contracts with
the Customer would have a material adverse effect on the Company.

Global manufactures, services and supports aircraft deicers
and ground support equipment on a worldwide basis. Global's
revenue contributed approximately $19,829,000 and $12,973,000 to
the Company's revenues in fiscal 2004 and 2003, respectively.
The increase in revenues in 2004 was primarily due to increased
commercial and military equipment orders and the near completion
of a large scale airport deicer system contract by March 2004.

During fiscal 2003, the Company decided to discontinue and
dispose of its aircraft component parts brokerage and repair
services business operated by its Mountain Aircraft Services, LLC
(MAS) subsidiary and accordingly, the Company's financial
statements have been reclassified to reflect the results of MAS
as a discontinued operation. See Note 10 of notes to
consolidated financial statements.

The Company's continuing operations operate in two business
segments, providing overnight air cargo services to the express
delivery services industry and aviation ground support equipment
products to passenger and cargo airlines and airports. Each
business segment has separate management teams and
infrastructures that offer different products and services. The
subsidiaries make up the following reportable segments: air cargo
and ground equipment in the accompanying consolidated financial
statements.

The following table summarizes the changes and trends in the
Company's operating expenses for continuing operations as a
percentage of revenue:

Fiscal Year Ended March 31,
2004 2003 2002
Operating revenue (in thousands) $ 55,997 $ 42,872 $ 59,603
Expense as a percentage of revenue:
Flight operations 27.62% 33.67% 24.19%
Maintenance 24.76 24.09 16.74
Ground equipment 26.44 23.62 39.41
General and administrative 14.11 15.70 12.91
Depreciation and amortization 1.00 1.46 0.96

Total costs and expenses 93.93% 98.54% 94.21%

As indicated in Item 14. Principal Accountants and
Accounting fees, the Company incurred greater professional fees
in fiscal 2004 than in fiscal 2003. The Company anticipates that
as additional requirements of the Sarbanes-Oxley Act of 2002
become effective, in particular the requirements under Section
404(b) of that act with respect to auditor attestation with
respect to internal controls which will apply to the Company in
fiscal 2006, professional fees will continue to increase and may
materially reduce the Company's net income. Under applicable
federal law, Section 404(b) and certain other requirements of the
Sarbanes-Oxley Act and other federal regulations would not apply
to the Company if the number of stockholders is reduced below 300
and, upon application to the Securities and Exchange Commission,
the Company elects to cease filing annual and quarterly reports
with the SEC. The Board of Directors has considered, and may
likely consider in the future, corporate transactions that would
have the effect of reducing the number of stockholders below 300,
including a reverse split of the Company's common stock in which
holders of fewer than a specified number of shares would receive
cash for their shares, while holders of greater amounts of shares
would continue to hold equity interests in the Company in the
same approximate relative proportion. If the number of
stockholders is reduced below 300 and the Company elects to cease
filing periodic reports with the SEC, the Company's common stock
would no longer be eligible for listing on the Nasdaq Small Cap
Market and any alternative trading system for the common stock
may not provide the same liquidity as the Nasdaq Small Cap
Market. The Board of Directors has not approved, and may not in
the future approve, any such corporate transaction to effect a
reduction in the number of stockholders below 300.

Outlook

The Company's current forecast for fiscal 2005 suggests
that, due to higher fuel cost and losses sustained since
September 11, 2001, the commercial aviation market will grow at a
rate that is substantially less than the rest of the economy.
Increased military and Homeland Security budgets, pending funding
approvals, may help offset the expected lower than normal order
levels from commercial customers. Company management currently
anticipates that its air cargo segment will continue to benefit
from its customer's aircraft fleet modernization and route
expansion through fiscal 2005, however, future terrorist attacks,
competition or inflation may cause delays or termination of the
certain projects. Given the uncertainties associated with the
above factors, the Company continues to operate in a highly
unpredictable environment.

As stated above, during the third quarter of fiscal 2004,
Company management closed on its agreement to sell MAS assets and
to discontinue the operations of the Company's aviation service
sector business. The completion of this sale and resulting
decrease in losses experienced by this business segment is
expected to substantially improve the Company's future operating
results and financial position. However, there is no guarantee
that this improvement can be sustained due to the other external
factors described above.

Based on the current general economic and industry outlook
and cost cutting measures implemented over the past twenty four
months, the Company believes its existing cash and cash
equivalents, cash flow from operations, and funds available from
current and renewed credit facilities will be adequate to meet
its current and anticipated working capital requirements through
2005. If these sources are inadequate or become unavailable, then
the Company may pursue additional funds through the financing of
unencumbered assets, although there is no assurance these
additional funds will be sufficient to replace the sources that
are inadequate or become unavailable.

Actual results for fiscal 2005 will depend upon a number of
factors beyond the Company's control, including, in part, future
significant increases in rate of inflation, including fuel
prices, the timing, speed and magnitude of the economic recovery,
military funding of pending future equipment orders, future
levels of commercial aviation capital spending, future terrorists
acts and weather patterns.

Critical Accounting Policies and Estimates

The preparation of the Company's financial statements in
conformity with accounting principles generally accepted in the
U.S. requires the use of estimates and assumptions to determine
certain assets, liabilities, revenues and expenses. Management
bases these estimates and assumptions upon the best information
available at the time of the estimates or assumptions. The
Company's estimates and assumptions could change materially as
conditions within and beyond our control change. Accordingly,
actual results could differ materially from estimates. The most
significant estimates made by management include allowance for
doubtful accounts receivable, reserves for excess and obsolete
inventories, deferred tax asset valuation, retirement benefit
obligations, valuation of revenue recognized under the percentage
of completion method and valuation of long-lived assets.

During the fourth quarter of fiscal 2003, Company management
agreed to a plan to sell MAS assets and to discontinue the
operations of the Company's aviation service sector business. In
August 2003, the Company completed the sale of certain assets of
MAS totaling $3,006,000 for consideration of $1,885,000. The
loss associated with this disposition is reflected in
discontinued operations. The operations of MAS have been
reclassified as discontinued operations and, therefore, are not
included in the Results of Continuing Operations discussed below.

Following is a discussion of critical accounting policies
and related management estimates and assumptions. A full
description of all significant accounting policies is included in
Note 1 to our consolidated financial statements included
elsewhere in this report.

Allowance for Doubtful Accounts. An allowance for doubtful
accounts receivable in the amount of $368,000 and $449,000,
respectively, in fiscal 2004 and 2003, was established based on
management's estimates of the collectability of accounts
receivable. The required allowance is determined using
information such as customer credit history, industry
information, credit reports and customer financial condition.
The estimates can be affected by changes in the financial
strength of the aviation industry, customer credit issues or
general economic conditions.

Inventories. The Company's parts inventories are valued at
the lower of cost or market. Provisions for excess and obsolete
inventories in the amount of $1,425,000 and $1,094,000,
respectively, in fiscal 2004 and 2003, are based on assessment of
slow-moving and obsolete inventories. Historical part usage,
current period sales, estimated future demand and anticipated
transactions between willing buyers and sellers provide the basis
for estimates. Estimates are subject to volatility and can be
affected by reduced equipment utilization, existing supplies of
used inventory available for sale, the retirement of aircraft or
ground equipment and changes in the financial strength of the
aviation industry.

Deferred Taxes. Deferred tax assets and liabilities, net of
valuation allowance in the amount of $83,000 in fiscal 2004 and
2003, reflect the likelihood of the recoverability of these
assets. Company judgment of the recoverability of these assets
is based primarily on estimates of current and expected future
earnings and tax planning.

Retirement Benefits Obligation. The Company currently
determines the value of retirement benefits assets and
liabilities on an actuarial basis using a 5.75% discount rate.
Long-term deferred retirement benefit obligations amounted to
$1,624,000 and $2,139,000, respectively, in fiscal 2004 and 2003.
Values are affected by current independent indices, which
estimate the expected return on insurance policies and the
discount rates used. Changes in the discount rate used will
affect the amount of pension liability as well as pension gain or
loss recognized in other comprehensive income.

Revenue Recognition. Cargo revenue is recognized upon
completion of contract terms and maintenance revenue is
recognized when the service has been performed. Revenue from
product sales is recognized when contract terms are completed and
title has passed to customers. Revenues from overhaul contracts
on customer owned parts, certain labor service contracts and long
term fixed price manufacturing projects are recognized on the
percentage-of-completion method. Billings in excess of cost and
estimated earnings for contracts under percentage of completion
in the amount of $80,000 and $761,000, respectively, in fiscal
2004 and 2003. Revenues are measured by the percentage of cost
incurred to date, to estimated total cost for each contract or
work order; unanticipated changes in job performance, job
conditions and estimated profitability may result in revisions to
costs and income, and are recognized in the period in which the
revisions are determined.

Valuation of Long-Lived Assets. The Company assesses long-
lived assets used in operations for impairment when events and
circumstances indicate the assets may be impaired and the
undiscounted cash flows estimated to be generated by those assets
are less than their carrying amount. In the event it is
determined that the carrying values of long-lived assets are in
excess of the fair value of those assets, the Company then will
write-down the value of the assets to fair value. The Company
has applied the discontinued operations provisions of SFAS No.
144 for the MAS operations and has reflected any remaining long-
lived assets associated with the discontinued MAS subsidiary at
zero fair market value at March 31, 2004.

Resignation of Executive Officer

Effective December 31, 2003, an executive officer and
director of the Company resigned his employment with AirT.

In consideration of approximately $300,000, payable in three
installments over a one-year period starting January 12, 2004,
the executive agreed to forgo certain retirement and other
contractual benefits for which the Company had previously accrued
aggregate liabilities of $715,000. The Company has accounted
for the resignation as a settlement under the provisions of SFAS
No. 88 "Employers Accounting for Settlements and Curtailments of
Defined Benefit Plans and for Termination Benefits."

The above-mentioned cancellation of contractual retirement
benefits reduced recorded liabilities by $715,000. The
difference between the recorded liability and ultimate cash
payment of $300,000 resulted in the recording of a $305,000
reduction in actuarial losses, recorded in other comprehensive
loss, a $90,000 reduction in intangible assets and a net $12,000
reduction in executive compensation charges included in the
accompanying consolidated statement of operations.

The Company also agreed to purchase from the former
executive officer 118,480 shares of AirT common stock held by him
(representing approximately 4.3% of the outstanding shares of
common stock at December 31, 2003) for $4.54 per share (80% of
the January 5, 2004 closing price). The stock repurchase will
take place in three installments over a one-year period, starting
January 12, 2004, and will total approximately $538,000. The
repurchase of the former executive's stock will be recorded in
the period that the repurchase occurs as treasury stock
transactions. All installment payments required to be made on
January 12, 2004, have been made.

Seasonality

Global's business has historically been highly seasonal.
Due to the nature of its product line, the bulk of Global's
revenues and earnings have typically occurred during the second
and third fiscal quarters in anticipation of the winter season,
and comparatively little has occurred during the first and fourth
fiscal quarters. The Company has continued its efforts to reduce
Global's seasonal fluctuation in revenues and earnings by
broadening its product line to increase revenues and earnings in
the first and fourth fiscal quarters. In June 1999, Global was
awarded a four-year contract to supply deicing equipment to the
United States Air Force, and in June 2003 Global was awarded a
three-year extension on the contract. In January 2001 and March
2003 Global received two large scale, fixed-stand deicer
contracts, which the Company believes contributed to management's
plan to reduce seasonal fluctuation in revenues during fiscal
2004 and 2002. However, as these contracts are completed,
seasonal trends for Global's business may resume. The remainder
of the Company's business is not materially seasonal.

Fiscal 2004 vs. 2003

Consolidated revenue from continuing operations increased
$13,125,000 (30.6%) to $55,997,000 for the fiscal year ended
March 31, 2004 compared to the prior fiscal year. The increase
in 2004 revenue primarily resulted from an increase in Global
revenue of $6,856,000 (52.9%) to $19,829,000, combined with a
$6,269,000 (21.0%) increase in air cargo revenue to $36,168,000
in fiscal 2004, as described in the Overview section of Item 7.

Operating expenses from continuing operations increased
$10,352,000 (24.5%) to $52,595,000 for fiscal 2004 compared to
fiscal 2003. The net increase in operating expenses consisted of
the following changes: cost of flight operations increased
$1,033,000 (7.2%) as a result of customer schedule changes and
route expansion which increased pilot cost and costs associated
with pilot travel, and increases in landing fees; maintenance
expenses increased $3,534,000 (34.2%) primarily as a result of
increases associated with additional maintenance personnel and
the cost of travel, contract service cost, and cost of parts and
supplies related to customer fleet modernization and route
expansion; ground equipment costs increased $4,679,000 (46.2%),
as a result of higher cost of parts and labor associated with
increased sales at Global; depreciation and amortization
decreased $69,000 (11.0%) as a result of purchases of capital
assets; general and administrative expense increased $1,174,000
(17.5%) primarily as a result of increased profit sharing
accruals, settlement of an executive employment contract (as
discussed above), staffing, facilities cost and professional
fees.

On a continuing operations segment basis, significant
impacts on the Company's operating results comparing the fiscal
year ended March 31, 2004 to its prior fiscal year resulted from
changes in both the ground equipment and air cargo sectors. In
the fiscal year ended March 31, 2004, Global had operating income
of $2,040,000 compared to prior period income of $205,000.
Several factors contributed to the increases in Global's
operating results. Global's current fiscal year operating income
increased compared to its prior fiscal year primarily due to
progress on a large-scale airport contract, higher sales volume
due to increased delivery of units on its U.S. Air Force contract
and a 22.2% increase in increased commercial equipment orders.
Unless replaced by an additional large-scale airport contract or
increased commercial equipment orders, the pending completion of
Global's current large-scale airport contract would result in
decreased revenues in fiscal 2005. Operating income for the
Company's overnight air cargo operations was $3,989,000 in the
fiscal year ended March 31, 2004, an increase of 52.2% from
$2,621,000 in the prior fiscal year. The increase primarily
resulted from increased levels of aircraft maintenance revenue
and administrative fees related to the customer's ATR aircraft
fleet modernization program and route expansion, which is
expected to continue through fiscal 2005, as, described in the
Overview Section of Item 7.

Non-operating income increased a net $109,000 due to current
year gain on sale of marketable securities and decreased interest
expense as a result of the pay-down of approximately $2,198,000
in debt from the proceeds from the sale of MAS assets and
increased cash flow from operations.

Provision for income taxes increased $1,085,000 (391.4%)
primarily due to increased earnings. The provision for income
taxes for the fiscal years ended March 31, 2004, 2003 and 2002
were different from the Federal statutory rates primarily due to
state tax provisions.

Fiscal 2003 vs. 2002

Consolidated revenue from continuing operations decreased
$16,731,000 (28.1%) to $42,872,000 for the fiscal year ended
March 31, 2003 compared to the prior fiscal year. The decrease
in 2003 revenue primarily resulted from a decrease in Global
revenue of $17,372,000 (57.3%) to $12,973,000, associated with
the completion of a large-scale airport contract and decreased
deicer orders partially offset by a $641,000 (2.2%) increase in
air cargo revenue to $29,899,000 related to increased maintenance
billings in fiscal 2003.

The business of Global has been adversely affected by
reduced orders from commercial airlines and aviation related
companies, due principally to the continued severe downturn in
the commercial aviation industry, which started in early 2001 and
significantly increased after September 11, 2001. Although this
business also derives a significant portion of its revenue from
sale of products for military applications, certain military
programs that use the Company's products were not fully funded in
2003.

Operating expenses from continuing operations decreased
$13,915,000 (24.8%) to $42,243,000 for fiscal 2003 compared to
fiscal 2002. The net decrease in operating expenses consisted of
the following changes: cost of flight operations increased
$15,000 (0.1%) as a result of decreases in personnel cost and
costs associated with pilot travel partially offset by increases
in fuel and landing fees; maintenance expenses increased $350,000
(3.5%) primarily as a result of increases associated with
contract service costs, partially offset by decreases in contract
services related to the operations of MAC; ground equipment costs
decreased $13,366,000 (56.9%), as a result of decreased sales at
Global; depreciation and amortization increased $54,000 (9.4%) as
a result of purchases of certain assets; general and administra
tive expense decrease of $968,000 (12.6%) primarily as a result
of decreased profit sharing expense, staffing, contract labor,
rent and related facilities cost, partially offset by increases
in professional fees.

On a continuing operations segment basis, the most
significant impact on the Company's operating results comparing
the fiscal year ended March 31, 2003 to the prior period resulted
from changes in the ground equipment operation at Global. In the
fiscal year ended March 31, 2003, Global had operating income of
$205,000 compared to prior period income of $3,335,000. Several
factors contributed to the changes in Global's operating results.
Global's 2003 fiscal year operating income decreased compared to
its prior fiscal year primarily due to completion of a large
scale airport contract, lower sales volume on its U.S. Air Force
contract and declines in commercial equipment orders. Operating
income for the Company's overnight air cargo operations was
$2,621,000 in the fiscal year ended March 31, 2003, an increase
of 18.3% from $2,216,000 in the prior fiscal year. The majority
of the increase resulted from increased levels of aircraft
maintenance revenue.

Non-operating expense decreased a net $160,000 due to
decreased current year interest expense related to decreased
borrowing on the Company's line of credit, partially offset by an
other than temporary impairment charge on marketable securities
totaling $161,000.

Provision for income taxes decreased $1,006,000 (78.4%)
primarily due to decreased earnings at Global. The provision for
income taxes for the fiscal years ended March 31, 2003, 2002 and
2001 were different from the Federal statutory rates primarily
due to state tax provisions and a reduction in the Company's
excise tax accrual due to a favorable tax ruling.

Liquidity and Capital Resources

As of March 31, 2004 the Company's working capital amounted
to $8,328,000, a decrease of $1,186,000 compared to March 31,
2003. The net decrease primarily resulted from a $1,137,000
decrease in accounts receivable due to increased collections, a
$1,950,000 decrease in assets held for sale associated with the
discontinued operations of MAS, partially offset by an
$1,154,000 decrease in accounts payable, resulting from increased
cash flow from operations.

On August 31, 2003 the Company amended its $7,000,000
secured bank financing line to extend its expiration date to
August 31, 2005. During fiscal 2004, the Company reduced the
line of credit balance by $2,197,880 primarily with proceeds from
the sale of MAS.

The credit facility contains customary events of default, a
subjective clause and restrictive covenants that, among other
matters, require the Company to maintain certain financial
ratios. There is no requirement for the Company to maintain a
lock-box arrangement under this agreement. Under the provisions
of the revolving credit line, the sale of MAS, as described in
Note 10, would be considered an event of default. However, the
Company has obtained a waiver under the revolving credit line for
the sale of MAS. As of March 31, 2004, the Company was in
compliance with all of the restrictive covenants under the
revolving credit line.

The amount of credit available to the Company under the
agreement at any given time is determined by an availability
calculation, based on the eligible borrowing base, as defined in
the credit agreement, which includes the Company's outstanding
receivables, inventories and equipment, with certain exclusions.
The credit facility is secured by substantially all of the
Company's assets. At March 31, 2004 and 2003, the amounts
outstanding against the line were $132,000 and $2,217,000,
respectively. At March 31, 2004, an additional $3,175,000 was
available under the terms of the credit facility. The Company has
classified the $132,000 outstanding balance on its credit line as
of March 31, 2004 as long-term to reflect the terms included
under the amendment signed on August 31, 2003.

Amounts advanced under the credit facility bear interest at
the 30-day "LIBOR" rate plus 137 basis points. The LIBOR rate at
March 31, 2004 was 1.10%.

The following table of material contractual commitments at
March 31, 2004 summarizes the effect these obligations are
expected to have on the Company's cash flow in the future
periods, which includes the Company's obligation to purchase
shares of its Common Stock from its former executive officer, as
discussed above.

Contractual Obligations

Less than 1 More than
Total Year 1-3 Years 3-5 Years 5 Years

Long-term bank debt $ 132,000 $ - $ 132,000 $ - $ -
Operating leases 2,280,000 705,000 1,314,000 261,000 -
Capital leases 97,000 38,000 52,000 7,000 -
Purchase obligations 359,000 359,000 - - -
Deferred retirement
obligation 225,000 75,000 150,000 - -
Total $3,093,000 $1,177,000 $1,648,000 $ 268,000 $ -

The respective years ended March 31, 2004, 2003 and 2002
resulted in the following changes in cash flow: operating
activities provided $2,205,000, $2,366,000 and $2,946,000
respectively in fiscal 2004, 2003 and 2002. Investing activities
provided $652,000 in fiscal 2004 and used $327,000 and $713,000,
respectively, in fiscal 2003 and 2002 and financing activities
used $2,477,000, $1,991,000 and $2,300,000 respectively, in
fiscal 2004, 2003 and 2002. Net cash increased $380,000, $48,000
in fiscal 2004 and 2003, respectively, and decreased $66,000 in
fiscal 2002.

Cash provided by operating activities was $160,000 more for
the year ended March 31, 2004, compared to fiscal 2003
principally due to increased inventory associated with equipment
production and decreased accounts payable associated with,
increased cash flow, partially offset by fiscal 2004 increases in
earnings from continuing operations of $2,962,000 and decreased
accounts receivable associated with increased collections
efforts. Cash used in investing activities for the year ended
March 31, 2004 was approximately $979,000 less than fiscal 2003,
principally due to proceeds from sale of assets associated with
discontinued operations of $1,550,000, offset by increased
capital expenditures relating to the $1,000,000 purchase of an
airplane. Cash used in financing activities was $486,000 more in
fiscal 2004 compared to fiscal 2003 principally due to increased
repayment of borrowings under the line of credit, and no payment
of dividends in the current year.

During the fiscal year ended March 31, 2004 the Company
repurchased 39,493 of its common stock for $179,427, as described
above.

There are currently no commitments for significant capital
expenditures. The Company's Board of Directors, on August 7,
1997, adopted the policy to pay an annual cash dividend in the
first quarter of each fiscal year, in an amount to be determined
by the board. On May 27, 2003, the Company declared that, due to
losses sustained in fiscal 2003, no common share dividend would
be paid in fiscal 2004. On May 4, 2004, the Company declared a
$0.20 per share cash dividend, to be paid on June 25, 2004 to
shareholders of record June 11, 2004.

Derivative Financial Instruments

As required by SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", the Company recognizes all
derivatives as either assets or liabilities in the statement of
financial position and measures those instruments at fair value.

The Company is exposed to market risk, such as changes in
interest rates. To manage the volatility relating to interest
rate risk, the Company may enter into interest rate hedging
arrangements from time to time. The Company does not utilize
derivative financial instruments for trading or speculative
purposes.

In May 2001, the Company entered into two interest rate
swaps with notional amounts of $2.4 million, and $2 million
respectively. These agreements were originally entered into at
respective interest rates of 6.97% and 6.5%. On July 31, 2002
the Company elected to unwind its $2,000,000 (6.5%) revolving
credit line swap in consideration for $58,750, the fair-market-
value termination fee as of that date. On October 30, 2003, the
Company terminated its remaining credit line swap for $97,500,
the fair-market-value termination fee as of that date, the
$75,000 balance included in accumulated other comprehensive
income (loss) as of March 31, 2004 will be ratably amortized into
interest expense over the remaining term of the Company's credit
line.

The Company does not hold or issue derivative financial
instruments for trading purposes. As of March 31, 2004 the
Company had no derivative financial instruments outstanding. The
Company is exposed to changes in interest rates on certain
portions of its line of credit, which bears interest based on the
30-day LIBOR rate plus 137 basis points. If the LIBOR interest
rate had been increased by one percentage point, based on the
balance of the line of credit at March 31, 2004, annual interest
expense would have increased by approximately $1,300.

Deferred Retirement Obligation

Contractual death benefits for the Company's former Chairman and
Chief Executive Officer who passed away on April 18, 1997 are
payable by the Company in the amount of $75,000 per year for 10
years. As of March 31, 2004 $74,000 has been reflected as
current liability and $152,000 has been reflected as long-term
liability associated with this death benefit.

Off-Balance Sheet Arrangements

The Company defines an off-balance sheet arrangement as any
transaction, agreement or other contractual arrangement involving
an unconsolidated entity under which a company has (1) made
guarantees, (2) a retained or a contingent interest in
transferred assets, (3) an obligation under derivative
instruments classified as equity, or (4) any obligation arising
out of a material variable interest in an unconsolidated entity
that provides financing, liquidity, market risk or credit risk
support to the Company, or that engages in leasing, hedging, or
research and development arrangements with the company.

The Company is not currently engaged in the use of any of
the arrangements defined above.

Impact of Inflation

The Company believes that, due to the currently low levels
of inflation, the impact of inflation and changing prices on its
revenues and net earnings will not have a material effect on its
manufacturing operations, because increased costs can be passed
on to its customers, or on its air cargo business since the major
cost components of its operations, consisting principally of
fuel, crew and other direct operating costs, and certain
maintenance costs are reimbursed, without markup, under current
contract terms. Significant increases in inflation rates could,
however, have a material impact on future revenue and operating
income.

Forward Looking Statements

Certain statements in this Report, including those contained
in "Outlook," are "forward-looking" statements within the meaning
of the Private Securities Litigation Reform Act of 1995 with
respect to the Company's financial condition, results of
operations, plans, objectives, future performance and business.
Forward-looking statements include those preceded by, followed by
or that include the words "believes", "pending", "future",
"expects," "anticipates," "estimates," "depends" or similar
expressions. These forward-looking statements involve risks and
uncertainties. Actual results may differ materially from those
contemplated by such forward-looking statements, because of,
among other things, potential risks and uncertainties, such as:

Economic conditions in the Company's markets;
The continuing impact of the events of September 11, 2001,
or any subsequent terrorist activities on United States soil or
abroad;
The Company's ability to manage its cost structure for
operating expenses, or unanticipated capital requirements, and
match them to shifting customer service requirements and
production volume levels;
Market acceptance of the Company's new commercial and
military equipment and services;
Competition from other providers of similar equipment and
services;
Changes in government regulation and technology;
Mild winter weather conditions reducing the demand for
deicing equipment.

A forward-looking statement is neither a prediction nor a
guarantee of future events or circumstances, and those future
events or circumstances may not occur. We are under no
obligation, and we expressly disclaim any obligation, to update
or alter any forward-looking statements, whether as a result of
new information, future events or otherwise.

Recent Accounting Pronouncements

The FASB has issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" and SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-lived Assets". SFAS No. 143
addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. It requires that the fair
value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount
of the long-lived asset. SFAS No. 143 was adopted by the Company
in fiscal 2004 and did not have a material effect on the
Company's financial position and results of operations. SFAS No.
144 supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of"
and amends Accounting Principles Bulletin (APB) No. 30 "Reporting
the Results of Operations-Discontinued Events and Extraordinary
Items". Along with establishing a single accounting model, based
on the framework established in SFAS No. 121, for long-lived
assets to be disposed of by sale, this standard retains the basic
provisions of APB No. 30 for the presentation of discontinued
operations in the income statement but broadens that presentation
to include a component of an entity. SFAS No. 144 is effective
for fiscal 2003. The effect of the adoption of SFAS No. 144 on
management's plan to discontinue the operations of MAS is
reflected in the Company's consolidated statements of financial
position and results of operations and is detailed in Note 10
Discontinued Operations.

In November 2002, the FASB issued FASB Interpretation No.
45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others". This Interpretation elaborates on the disclosures to be
made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it
has issued. It also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the
guarantee. The disclosure requirements of this Interpretation
are currently effective and did not affect the Company's
financial position and results of operations. The initial
recognition and initial measurement provisions of this
Interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002. The
Company has evaluated all of its guarantees under the provisions
of FIN 45 and does not believe the effect of its adoption on its
financial position and results of operations will be material.

The Company warranties its ground equipment products for up
to a two-year period from date of sale. Product warranty
reserves are recorded at time of sale based on the historical
average warranty cost and are adjusted as actual warranty cost
becomes known. As of March 31, 2004 the Company's warranty
reserve amounted to $147,000.

Product warranty reserve activity during fiscal 2004 and
fiscal 2003 is as follows:

Balance at 3/31/02 $119,000
Additions to reserve 199,000
Use of reserve (202,000)
Balance at 3/31/03 116,000
Additions to reserve 217,000
Use of reserve (186,000)
Balance at 3/31/04 $147,000

In December 2002, the FASB issued SFAS No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure". This
Statement amends FASB Statement No. 123, "Accounting for Stock-
Based Compensation", to provide alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition,
this Statement amends the disclosure requirements of Statement
123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-
based employee compensation and the effect of the method used on
reported results. Because the Company has elected to continue to
account for its stock-based compensation under the provisions of
Accounting Principles bulletin No. 25, SFAS No. 148 has no impact
on the Company's consolidated statement of operations for 2004.
However, the disclosure provisions of SFAS No. 148 are reflected
in the accompanying notes to the Company's consolidated financial
statements.
In January 2003, the FASB issued FIN 46 "Consolidation of
Variable Interest Entities" which requires the primary
beneficiary of a variable interest entity's activities to
consolidate the variable interest entity. In December 2003, the
FASB issued FIN 46 (Revised December 2003) (FIN 46R),
"Consolidation of Variable Interest Entities - An Interpretation
of ARB No. 51," which supercedes and amends certain provisions of
FIN 46. While FIN 46R retains many of the concepts and provisions
of FIN 46, it also provides additional guidance related to the
application of FIN 46 and certain additional scope exceptions,
and incorporates several FASB Staff Positions issued related to
the application of FIN 46. The provisions of FIN 46 are
immediately applicable to variable interest entities created, or
interests in variable interest entities obtained, after January
31, 2003 and the provisions of FIN 46R are required to be applied
to such entities, except for special purpose entities, by the end
of the first reporting period ending after March 15, 2004 (March
31, 2004 for the Company). For variable interest entities
created, or interests in variable interest entities obtained, on
or before January 31, 2003, FIN 46 or FIN 46R was required to be
applied to special-purpose entities by the end of the first
reporting period ending after December 15, 2003 (December 31,
2003 for the Company), and was required to be applied to all
other non-special purpose entities by the end of the first
reporting period ending after March 15, 2004 (March 31, 2004 for
the Company). Adoption of FIN 46 did not have an impact on the
Company's consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity". SFAS No. 150 is effective for the
Company July 1, 2003, although the FASB has recently proposed
that implementation of certain provisions of SFAS No. 150 be
postponed indefinitely. The Company has determined that the
adoption of SFAS No. 150 did not have an impact on the
financial position or results of operations.

Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.

Quantitative and Qualitative Disclosures About Market Risk is
included in Item 7.

Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Air T, Inc.
Maiden, North Carolina

We have audited the accompanying consolidated balance sheets of
Air T, Inc. and subsidiaries (the "Company") as of March 31, 2004
and 2003, and the related consolidated statements of operations,
stockholders' equity and comprehensive income (loss), and cash
flows for each of the three years in the period ended March 31,
2004. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as of March 31, 2004 and 2003, and the results of its
operations and its cash flows for each of the three years in the
period ended March 31, 2004, in conformity with accounting
principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
Charlotte, North Carolina
June 21, 2004

AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

AIR T, INC. AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(CONTINUED)

AIR T, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

AIR T, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND
OTHER COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

See notes to consolidated financial statements.

AIR T, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2004, 2003, AND 2002

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principal Business Activities - Air T, Inc. (the Company),
through its operating subsidiaries, is an air cargo carrier
specializing in the overnight delivery of small package air
freight and a manufacturer of aircraft ground service
equipment. In the fourth quarter of fiscal 2003, management
committed to a plan to discontinue the operations of the
aviation services sector of its business. The Company
finalized the sale of certain assets of this business and
discontinued its aviation services operations in fiscal
2004. See Note 10 "Discontinued Operations".

Principles of Consolidation - The consolidated financial
statements include the accounts of the Company and its
wholly-owned subsidiaries, Mountain Air Cargo, Inc., CSA
Air, Inc., MAC Aviation Services, LLC (MACAS), formerly
known as Mountain Aircraft Services, LLC (MAS) and Global
Ground Support, LLC (Global). All significant intercompany
transactions and balances have been eliminated.

Concentration of Credit Risk - The Company's potential
exposure to concentrations of credit risk consists of trade
accounts and notes receivable. Accounts receivable are
normally due within 30 days and the Company performs
periodic credit evaluations of its customers' financial
condition. Notes receivable payments are normally due
monthly.

Substantially all of the Company's customers are
concentrated in the aviation industry and revenue can be
materially affected by current economic conditions and the
price of certain supplies such as fuel, the cost of which is
passed through to the customer. The Company has customer
concentrations in two areas of operations, air cargo which
provides service to one major customer and ground support
equipment which provides equipment and services to
approximately 90 customers, one of which is considered a
major customer. The loss of a major customer would have a
material impact on the Company's results of operations. See
Note 11. "Revenues From Major Customer".

Cash Equivalents - Cash equivalents consist of liquid
investments with maturities of three months or less when
purchased.

Marketable Securities - Marketable securities consists
primarily of investments in mutual funds and preferred
stocks. The Company has classified marketable securities as
available-for-sale and they are carried at fair value in the
accompanying consolidated balance sheets. Unrealized gains
and losses on such securities are excluded from earnings and
reported as a separate component of accumulated other
comprehensive income (loss) until realized. Realized gains
and losses on marketable securities are determined by
calculating the difference between the basis of each
specifically identified marketable security sold and its
sales price.

Inventories - Inventories related to the Company's
manufacturing operations are carried at the lower of cost
(first in, first out) or market. Aviation parts and
supplies inventories are carried at the lower of average
cost or market. Consistent with industry practice, the
Company includes aircraft parts and supplies in current
assets, although a certain portion of these inventories may
not be used or sold within one year.

Property and Equipment - Property and equipment is stated at
cost or, in the case of equipment under capital leases, the
present value of future lease payments. Rotables inventory
represents aircraft parts, which are repairable, capitalized
and depreciated over their estimated useful lives.
Depreciation and amortization are provided on a straight-
line basis over the shorter of the asset's service life or
related lease term, as follows:

Flight equipment and intellectual property 7 years
Other equipment and furniture 3 to 7 years

Revenue Recognition - Cargo revenue is recognized upon
completion of contract terms and maintenance revenue is
recognized when the service has been performed. Revenue
from product sales is recognized when contract terms are
completed and title has passed to customers. Revenues from
overhaul contracts on customer owned parts and long term
fixed price construction projects are recognized on the
percentage-of-completion method, in accordance with AICPA
Statement of Position No. 81-1, "Accounting for Performance
of Construction Type and Certain Production Type Contracts".
Revenues for contracts under percentage of completion are
measured by the percentage of cost incurred to date to
estimated total cost for each contract or workorder.
Contract costs include all direct material and labor costs
and overhead costs related to contract performance.
Unanticipated changes in job performance, job conditions and
estimated profitability may result in revisions to costs and
income, and are recognized in the period in which the
revisions are determined. Such contracts generally have a
customer retainage provision. Except for a construction
contract at Global, which is billed on a progress billing
basis, the Company generally bills its customer at the time
of completion of the contract or workorder.

Operating Expenses Reimbursed by Customer - The Company,
under the terms of its air cargo dry-lease service
contracts, passes through to its major customer certain cost
components of its operations without markup. The cost of
flight crews, fuel, landing fees, outside maintenance and
certain other direct operating costs are included in
operating expenses and billed to the customer, at cost, and
included in overnight air cargo revenue on the accompanying
statements of operations.

Stock Based Compensation - The Company measures employee
stock compensation plans using the intrinsic value method
with pro-forma disclosure of net earnings and earnings per
share determined as if the fair value based method had been
applied in measuring compensation cost.

As the Company uses the intrinsic value method, and all
stock-based compensation has an exercise price equal to the
market price at the date of grant, no compensation cost has
been included in the accompanying financial statements. The
following table sets forth compensation costs net of taxes,
and proforma net income (loss) if compensation cost for the
Company's stock-based compensation awards had been recorded
at the grant dates based on the fair market value method
described in FASB Statement No. 123, "Accounting for Stock-
Based Compensation":

Stock based compensation 2004 2003 2002
Net income as reported $ 1,738,000 (1,224,000) 1,278,000
Compensation costs, net of taxes $ - - 46,000
Proforma net income $ 1,738,000 (1,224,000) 1,232,000
Proforma net income per diluted share $ 0.64 (0.45) 0.44

Financial Instruments - The carrying amounts reported in the
consolidated balance sheets for cash and cash equivalents,
accounts receivable, notes receivable, accrued expenses, and
long-term debt approximate their fair value at March 31,
2004 and 2003 because of their relatively short maturity or
their variable interest nature.

Income Taxes - Deferred income taxes are provided for
temporary differences between the tax and financial
accounting bases of assets and liabilities using the asset
and liability method. Deferred income taxes are recognized
for the tax consequence of such temporary differences at the
enacted tax rate expected to be in effect when the
differences reverse.

Accounting Estimates - The preparation of consolidated
financial statements in conformity with accounting
principles generally accepted in the United States requires
management to make estimates and assumptions that affect the
amounts reported and disclosed. Actual results could differ
from those estimates. Significant estimates include the
allowance for doubtful accounts, inventory reserves,
intangible pension asset, deferred retirement obligations,
revenue recognized under the percentage of completion method
and valuation of long-lived assets.

Derivative Financial Instruments -As required by SFAS No.
133, "Accounting for Derivative Instruments and Hedging
Activities", the Company recognizes all derivatives as
either assets or liabilities in the consolidated balance
sheets and measures those instruments at fair value.

The Company is exposed to market risk, such as changes in
interest rates. To manage the volatility relating to
interest rate risk, the Company may enter into interest rate
hedging arrangements from time to time. The Company does
not utilize derivative financial instruments for trading or
speculative purposes.

Recent Accounting Pronouncements - The FASB has issued SFAS
No. 143, "Accounting for Asset Retirement Obligations" and
SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-lived Assets". SFAS No. 143 addresses financial
accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated
asset retirement costs. It requires that the fair value of
a liability for an asset retirement obligation be recognized
in the period in which it is incurred if a reasonable
estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying
amount of the long-lived asset. SFAS No. 143 was adopted by
the Company in fiscal 2004 and did not have a material
effect on the Company's financial position and results of
operations.

SFAS No. 144 supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" and amends Accounting Principles Bulletin
(APB) No. 30 "Reporting the Results of Operations-
Discontinued Events and Extraordinary Items". Along with
establishing a single accounting model, based on the
framework established in SFAS No. 121, for long-lived assets
to be disposed of by sale, this standard retains the basic
provisions of APB No. 30 for the presentation of
discontinued operations in the income statement but broadens
that presentation to include a component of an entity. SFAS
No. 144 is effective for fiscal 2003. The effect of the
adoption of SFAS No. 144 on management's plan to discontinue
the operations of MAS is reflected in the Company's
consolidated statements of financial position and results of
operations and is detailed in Note 10 Discontinued
Operations.

In November 2002, the FASB issued FASB Interpretation No.
45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others". This Interpretation elaborates on the disclosures
to be made by a guarantor in its interim and annual
financial statements about its obligations under certain
guarantees that it has issued. It also clarifies that a
guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The disclosure
requirements of this Interpretation are currently effective
and did not affect the Company's financial position and
results of operations. The initial recognition and initial
measurement provisions of this Interpretation are applicable
on a prospective basis to guarantees issued or modified
after December 31, 2002. The Company has evaluated all of
its guarantees under the provisions of FIN 45 and does not
believe the effect of its adoption on its financial position
and results of operations was not material.

The Company warranties its ground equipment products for up
to a two-year period from date of sale. Product warranty
reserves are recorded at time of sale based on the
historical average warranty cost and are adjusted as actual
warranty cost becomes known. As of March 31, 2004 the
Company's warranty reserve amounted to $147,000.

Product warranty reserve activity during fiscal 2004 and
fiscal 2003 is as follows:

Balance at 3/31/02 $119,000
Additions to reserve 199,000
Use of reserve (202,000)
Balance at 3/31/03 116,000
Additions to reserve 217,000
Use of reserve (186,000)
Balance at 3/31/04 $147,000

In December 2002, the FASB issued SFAS No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure".
This Statement amends FASB Statement No. 123, "Accounting
for Stock-Based Compensation", to provide alternative
methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee
compensation. In addition, this Statement amends the
disclosure requirements of Statement 123 to require
prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based
employee compensation and the effect of the method used on
reported results. Because the Company has elected to
continue to account for its stock-based compensation under
the provisions of Accounting Principles bulletin No. 25,
SFAS No. 148 has no impact on the Company's consolidated
statement of operations for 2004. However, the disclosure
provisions of SFAS No. 148 are reflected in the accompanying
notes to the Company's consolidated financial statements.

In January 2003, the FASB issued FIN 46 "Consolidation of
Variable Interest Entities" which requires the primary
beneficiary of a variable interest entity's activities to
consolidate the variable interest entity. In December 2003,
the FASB issued FIN 46 (Revised December 2003) (FIN 46R),
"Consolidation of Variable Interest Entities - An
Interpretation of ARB No. 51," which supercedes and amends
certain provisions of FIN 46. While FIN 46R retains many of
the concepts and provisions of FIN 46, it also provides
additional guidance related to the application of FIN 46 and
certain additional scope exceptions, and incorporates
several FASB Staff Positions issued related to the
application of FIN 46. The provisions of FIN 46 are
immediately applicable to variable interest entities
created, or interests in variable interest entities
obtained, after January 31, 2003 and the provisions of FIN
46R are required to be applied to such entities, except for
special purpose entities, by the end of the first reporting
period ending after March 15, 2004 (March 31, 2004 for the
Company). For variable interest entities created, or
interests in variable interest entities obtained, on or
before January 31, 2003, FIN 46 or FIN 46R was required to
be applied to special-purpose entities by the end of the
first reporting period ending after December 15, 2003
(December 31, 2003 for the Company), and was required to be
applied to all other non-special purpose entities by the end
of the first reporting period ending after March 15, 2004
(March 31, 2004 for the Company). Adoption of FIN 46 did not
have an impact on the Company's consolidated financial
statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity". SFAS No. 150 is effective for the
Company July 1, 2003, although the FASB has recently
proposed that implementation of certain provisions of SFAS
No. 150 be postponed indefinitely. The Company has
determined that the adoption of SFAS No. 150 will not have
an impact on the financial position or results of
operations.

Reclassifications - Certain reclassifications have been made
to fiscal 2003 and 2002 amounts to conform to the current
year presentation.

2. MARKETABLE SECURITIES

Marketable securities consist of the following investment
types:
Fair value at
March 31,

2004 2003

Preferred Stocks $ $ 313,600
Mutual Funds 849,018 743,442

Total $ 849,018 $ 1,057,042

The Company did not realize any gains or losses on sales of
marketable securities in fiscal 2004, 2003 or 2002.
Unrealized gains reflected in other comprehensive income
totaled $159,000, $74,000 and $120,000 in fiscal 2004, 2003
and 2002. As of March 31, 2004 $119,000 in unrealized gains
and an unrealized loss of $40,000 for 2003 are included in
accumulated other comprehensive income (loss).

An other-than-temporary impairment charge of $161,000 was
recorded in the consolidated statement of operations in the
year ended March, 31, 2003.

3. INVENTORIES

Inventories consist of the following:
March 31,

2004 2003

Aircraft parts and supplies $ 1,892,916 $ 2,088,315
Aircraft equipment manufacturing:
Raw materials 3,508,363 2,595,448
Work in process 1,563,259 745,409
Finished goods 920,149 1,940,077

Total Inventory 7,884,687 7,369,249
Reserves (1,424,615) (1,093,961)

Total, net of reserves $ 6,460,072 $ 6,275,288

4. UNCOMPLETED CONTRACTS

Construction and overhaul contracts in process accounted for
under the percentage of completion method are summarized as
follows:
March 31,

2004 2003

Costs incurred and estimated earnings
on uncompleted contracts $ 2,860,483 $ 803,605
Less billings to date 2,940,612 1,564,584

Billings in excess of costs
and estimated earnings $ (80,129) $ (760,979)

5. ACCRUED EXPENSES

Accrued expenses consist of the following:
March 31,

2004 2003

Salaries, wages and
related items $ 1,040,224 $ 819,848
Profit Sharing 486,879 81,000
Health Insurance 266,905 305,834
Professional fees 204,236 223,922
Warranty reserves 147,287 116,000
54,678 144,737

Total $ 2,200,209 $ 1,691,341

6. FINANCING ARRANGEMENTS

On August 31, 2003 the Company amended its $7,000,000
secured bank financing line to extend its expiration date to
August 31, 2005.

The credit facility contains customary events of default, a
subjective clause and restrictive covenants that, among
other matters, require the Company to maintain certain
financial ratios. There is no requirement for the Company to
maintain a lock-box arrangement under this agreement. Under
the provisions of the revolving credit line, the sale of
certain assets of its aviation services business as
described in Note 10. would be considered an event of
default. The Company has obtained a waiver for this
covenant. As of March 31, 2004, the Company was in
compliance with all of the restrictive covenants.

The amount of credit available to the Company under the
agreement at any given time is determined by an availability
calculation, based on the eligible borrowing base, as
defined in the credit agreement, which includes the
Company's outstanding receivables, inventories and
equipment, with certain exclusions. The credit facility is
secured by substantially all of the Company's assets.

Amounts advanced under the credit facility bear interest at
the 30-day "LIBOR" rate plus 137 basis points. The LIBOR
rate at March 31, 2004 was 1.11%. At March 31, 2004 and
2003, the amounts outstanding against the line were $132,000
and $2,217,000, respectively. At March 31, 2004, an
additional $3,175,000 was available under the terms of the
credit facility.

The Company has classified the $132,000 outstanding balance
on its credit line as of March 31, 2004 as long-term to
reflect the terms included under the amendment signed on
August 31, 2003.

7. LEASE COMMITMENTS

The Company has operating lease commitments for office
equipment and its office and maintenance facilities, as well
as capital leases for certain office and other equipment.
The Company leases its corporate offices from a company
controlled by certain Company officers for $11,255 per month
under two five-year leases which expire in May 2006.

In August 1996, the Company relocated certain portions of
its maintenance operations to a new maintenance facility
located at the Global TransPark in Kinston, N. C. Under the
terms of the long-term facility lease, after an 18 month
grace period (from date of occupancy), rent will escalate
from $2.25 per square foot to $5.90 per square foot, per
year, over the 21.5 year life of the lease. However, based
on the occurrence of certain events related to the
composition of aircraft fleet, the lease may be canceled by
the Company. The Company currently considers the lease to
be non-cancelable for eight and one-half years and has
calculated rent expense on a straight-line basis over this
portion of the lease term.

In August 1997 Global, located in Olathe, Kansas, leased
approximately 57,000 square feet of manufacturing space for
$17,030 per month, under a two-year operating lease. In
September 1998, the lease was expanded to 112,500 square
feet of manufacturing and office space for $35,903 per month
and the term extended to August 2001. In April 2001 the
lease was renewed through August 2006; monthly rental will
increase over the life of the lease, based on increases in
the Consumer Price Index.

At March 31, 2004, future minimum annual lease payments
under capital and non-cancellable operating leases with
initial or remaining terms of more than one year are as
follows:

Capital Operating
Leases Leases

2005 $ 37,547 $ 705,476
2006 26,318 710,632
2007 13,203 386,399
2008 13,203 216,699
2009 6,602 261,147

Total minimum lease payments 96,873 $ 2,280,353
Less amount representing interest 13,728

Present value of lease payments 83,145
Less current maturities 30,486

Long-term maturities $ 52,659

Rent expense for operating leases totaled approximately
$704,000, $713,000, and $759,000 for fiscal 2004, 2003 and
2002, respectively, and includes amounts to related parties
of $132,260 in fiscal 2004 and $109,860 in fiscal 2003 and
2002.

8. DERIVATIVE FINANCIAL INSTRUMENTS

In May 2001, the Company entered into two interest-rate
swaps with notional amounts of $2.4 million, and $2 million
respectively. These agreements were originally entered into
at respective interest rates of 6.97% and 6.5%. On July 31,
2002 the Company elected to unwind its $2,000,000 (6.5%)
revolving credit line swap in consideration for $58,750, the
fair-market-value termination fee as of that date. On
October 30, 2003, the Company terminated its remaining
credit line swap for $97,500, the fair-market-value
termination fee as of that date. The $75,000 balance
included in accumulated other comprehensive income (loss) at
March 31, 2004 will be ratably amortized into interest
expense over the remaining term of the Company's credit
line.

9. STOCKHOLDERS' EQUITY

The Company may issue up to 50,000 shares of preferred
stock, in one or more series, on such terms and with such
rights, preferences and limitations as determined by the
Board of Directors. No preferred shares have been issued as
of March 31, 2004.

The Company has granted options to purchase up to a total of
64,000 shares of common stock to certain Company employees
and outside directors at prices of $3.19 and $6.38 per
share. As of March 31, 2004, 301,000 shares remain
available for issuance under future option grants. All
options were granted at exercise prices which approximated
the fair market value of the common stock on the date of
grant. Options granted in fiscal 1998 and 2000 are fully
vested and must be exercised within one to five years of the
vesting date.

The following table summarizes information about stock
options at March 31, 2004:
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Option Remaining Average Average
Grant Exercise Options Contractual Exercise Options Exercise
Date Price Outstanding Life(years) Price Exercisabe Price

1/28/00 $3.19 59,000 .8 $ 3.19 59,000 $3.19

8/13/98 6.38 5,000 4.4 6.38 5,000 6.38

64,000 1.1 $ 3.44 64,000 $ 3.44

Option activity is summarized as follows:

Weighted Average
Exercise Price
Shares Per Share
Outstanding March 31, 2001 259,200 $2.93
Exercised (32,667) 2.75
Outstanding March 31, 2002 226,533 3.00
Exercised (2,000) 2.75
Expired (160,533) 2.83
Outstanding March 31, 2003 64,000 3.44
Exercised - -
Outstanding March 31, 2004 64,000 $3.44

The fair value of options granted in fiscal 2000 and 1998,
was estimated on the date of grant using the Black-Scholes
option-pricing model with the assumptions listed below. No
options were granted since fiscal 2000.

2000 1998

Weighted average fair value per option $1.62 $ 1.15
Assumptions used:
Weighted average expected volatility 65.1% 61.0%
Weighted average expected dividend yield 2.4% 2.2%
Weighted average risk-free interest rate 6.59% 5.70%
Weighted average expected life, in years 4.6 3.0

During fiscal 2004 the Company suspended its stock
repurchase program. Except for 39,493 shares repurchased in
conjunction with the retirement of an executive officer (see
Note 13), no common shares were repurchased in fiscal 2004.
Through March 31, 2004 the Company had repurchased and
retired a total of 829,273 shares at a total cost of
$3,437,045.

10. DISCONTINUED OPERATIONS

During the fourth quarter of fiscal 2003, Company management
agreed to a plan to sell the assets of MAS and to
discontinue the operations of the Company's aviation service
sector business. The Company entered into a letter of
intent on June 19, 2003 to sell certain assets and the
business operations of MAS to an investor group, which
included former management of MAS, for consideration of
$1,950,000. On August 14, 2003, the Company closed on the
transaction for consideration totaling $1,885,000, comprised
of $1,550,000 in cash and a $335,000 promissory note. The
sale resulted in the recognition of losses totaling
$1,121,000. In conjunction with the sale, the Company
agreed to indemnify the buyer and its affiliates with
respect to certain matters related to contractual
representations and warranties and the operation of the
business prior to closing. Although no assurances can be
made, the Company does not believe the indemnities provided
will have a material effect on its financial condition or
results of operations.

Under the terms of the sale agreement, the Company also
entered into a three-year consignment agreement granting the
buyer an exclusive right to sell remaining MAS inventory not
included in the sale transaction. Upon termination of the
consignment agreement, all unsold inventory will be returned
to the Company. Inventory on consignment under this
agreement amounted to $704,000 as of March 31, 2004. The
accompanying consolidated financial statements reflect the
sale of certain MAS assets and reclassify the net operations
of MAS as discontinued operations, net of tax, for all
periods presented.

A summary of the assets held for sale at March 31, 2004 and
2003 is as follows:

2004 2003
Inventory $ - $ 1,900,000
Property, plant and equipment - 50,000

Assets held for sale $ - $ 1,950,000

A summary of the operating results of the discontinued
operations is as follows:

2004 2003 2002

Revenue $ 2,575,259 $ 5,977,697 $ 11,355,128
Operating loss $ (500,901) $ (942,110) (90,491)

Loss before income taxes $ (698,902) $ (2,598,005) (1,190,337)
Income tax benefit 272,932 1,007,428 452,328

Net loss $ (425,970) $ (1,590,577) $ (738,009)

The loss before income taxes on discontinued operations for
the year ended March 31, 2003, was comprised of a $942,110
loss from operations and $1,655,895 impairment charge
recorded to write down certain assets held for sale to their
estimated fair value.

11. REVENUES FROM MAJOR CUSTOMER

Approximately 64.5%, 69.5% and 41.2% of the Company's
revenues were derived from services performed for Federal
Express in fiscal 2004, 2003 and 2002, respectively. In
addition, approximately 16.4%, 19.9% and 22.9% of the
Company's revenues for fiscal 2004, 2003 and 2002
respectively, were generated from Global's US Air Force
contract.

12. INCOME TAXES

The provision (benefit) for income taxes consists of:
Year Ended March 31, 2004

Continuing Discontinued
Operations Operations Total

Current:

Federal $ 1,082,000 $ (665,000) $ 417,000
State 228,000 (147,000) 81,000

Total current 1,310,000 (812,000) 498,000

Deferred:
Federal 43,000 441,000 484,000
State 9,000 98,000 107,000

Total deferred 52,000 539,000 591,000

Total $ 1,362,000 $ (273,000) $ 1,089,000

Year Ended March 31, 2003

Continuing Discontinued
Operations Operations Total

Current:

Federal $ 278,000 $ (226,000) $ 52,000
State 56,000 - 56,000

Total current 334,000 (226,000) 108,000

Deferred:
Federal (102,000) (582,000) (684,000)
State 45,000 (199,000) (154,000)

Total deferred (57,000) (781,000) (838,000)

Total $ 277,000 $(1,007,000) $ (730,000)

Year Ended March 31, 2002

Continuing Discontinued
Operations Operations Total

Current:

Federal $ 1,209,000 $ (293,000) $ 916,000
State 264,000 (65,000) 199,000

Total current 1,473,000 (358,000) 1,115,000

Deferred:
Federal (137,000) (77,000) (214,000)
State (53,000) (17,000) (70,000)

Total deferred (190,000) (94,000) (284,000)

Total $ 1,283,000 $ (452,000) $ 831,000

The income tax provision for continuing operations was
different from the amount computed using the statutory
Federal income tax rate for the following reasons:

2004 2003 2002
$ % $ % $ %
Income tax provision at
U.S. Statutory rate $1,199,000 34.0% $ 219,000 34.0% $1,122,000 34.0%
State income taxes, net
of Federal benefit 163,000 4.6 31,000 4.8 154,000 4.7
Meal and entertainment
disallowance 19,000 .5 15,000 2.4 23,000 .7
Other, net (19,000) (.5) (71,000)(11.0) (16,000) (.5)
Change in valuation
allowance - 83,000 12.9 -

Income tax provision $ 1,362,000 38.6% $ 277,000 43.1% $1,283,000 38.9%

Deferred tax asset is comprised of the following
components

2004 2003
Net deferred tax asset
Warranty reserve $ 56,853 $ 46,864
Accounts receivable
reserve 142,924 174,523
Inventory reserve 690,214 543,578
Accrued insurance 104,552 74,784
Accrued vacation 174,971 94,290
Deferred Compensation 698,269 658,559
Other 94,904 97,132
Fixed assets (405,467) (88,124)
MAS discontinued operations - 545,705
State loss carryforward 70,000 70,000
Valuation allowance (83,430) (83,430)

Total $ 1,543,790 $2,133,881

The deferred tax items are reported on a net current and non-
current basis in the accompanying fiscal 2004 and 2003
consolidated balance sheets according to the classification
of the related asset and liability. The Company has state
net operating loss carryforwards as of March 31, 2004 with a
tax effected amount of approximately $70,000. The state
loss carryforwards will expire in varying periods through
March 2023. At March 31, 2004 the Company had deferred tax
assets of $21,853 for capital loss carryforwards and $61,577
for unrealized capital losses. The Company recorded a full
valuation allowance of $83,430 on the deferred tax assets
relating to these capital losses at March 31, 2004 based on
management's belief that realization is unlikely.

13. EMPLOYEE BENEFITS

The Company has a 401K defined contribution plan (AirT
401(K) Retirement Plan). All employees of the Company are
eligible to participate in the plan. The Company's
contribution to the 401(K) plan for the years ended March
31, 2004, 2003 and 2002 was $231,000, $232,000, and
$228,000, respectively and was recorded in general and
administrative expenses in the consolidated statements of
operations.

The Company, in each of the past three years, has paid a
discretionary profit sharing bonus in which all employees
have participated. Profit sharing expense in fiscal 2004,
2003, and 2002 was $487,000, $81,000 and $562,000,
respectively, and was recorded in general and administrative
expenses in the consolidated statements of operations.

Effective January 1, 1996 the Company entered into
supplemental retirement agreements with certain key
executives of the Company, to provide for a monthly benefit
upon retirement. The Company has purchased life insurance
policies for which the Company is the sole beneficiary to
facilitate the funding of benefits under these supplemental
retirement agreements. The cost of funding these benefits
is recorded in general and administrative expense on the
consolidated statements of operations and is offset by
increases in the cash surrender value of the life insurance
policies..

Effective December 31, 2003, an executive officer and
director of the company resigned his employment with AirT.
In consideration of approximately $300,000 the executive
agreed to forgo certain retirement and other contractual
benefits for which the Company had previously accrued
aggregate liabilities of $715,000. See Item 2. Resignation
of Executive Officer.

The above-mentioned cancellation of contractual retirement
benefits reduced recorded liabilities by $715,000. The
difference between the recorded liability and ultimate cash
payment of $300,000 resulted in a $305,000 reduction in
actuarial losses, recorded in Other Comprehensive Loss, a
$90,000 reduction in intangible assets and a net $20,000
reduction in executive compensation charges included in the
statement of operations.

The Company also agreed to purchase from the former
executive officer 118,480 shares of AirT common stock held
by him (representing approximately 4.3% of the outstanding
shares of common stock at December 31, 2003) for $4.54 per
share (80% of the January 5, 2004 closing price). The stock
repurchase will take place in three installments over a one-
year period, starting January 12, 2004, and will total
approximately $538,000. The repurchase of the former
executive's stock will be recorded in the period that the
repurchase occurs as treasury stock transactions and all
such stock will be subsequently retired. All installment
payments required to be made on January 12, 2004, have been
made.

The following tables set forth the funded status of the
Company's supplemental retirement plan at March 31, 2004 and
2003 and the change in the projected benefit obligation
during fiscal 2004 and 2003:

March 31,
2004 2003

Vested benefit obligation and accumulated
benefit obligation $ 1,462,384 $ 1,918,826
Projected benefit obligation 1,462,384 1,918,826
Plan assets at fair value - -

Projected benefit obligation greater than plan assets 1,462,384 1,918,826

Unrecognized prior service cost (149,324) (219,862)
Unrecognized actuarial gain (loss) 69,629 (283,363)
Adjustment required to recognize minimum liability 79,695 503,225

Accrued pension cost recognized in the consolidated
balance sheets $ 1,462,384 $ 1,918,826

2004 2003

Projected benefit obligation March 31, 2003 $ 1,918,826 $1,555,827
Service cost 72,789 70,244
Interest cost 113,510 112,194
Actuarial loss due to change in assumption 72,315 180,561
Non-cash reduction due to partial settlement (415,056) -
Benefits paid (300,000)
Projected benefit obligation end of year $ 1,462,384 $1,918,826

In accordance with the provisions of Statement of Financial
Accounting Standards No. 87, "Employers' Accounting for
Pensions," the Company has recorded an additional minimum
liability of $79,695 at March 31, 2004 and $503,225 at March
31, 2003, representing the excess of the accumulated benefit
obligation over the fair value of plan assets and accrued
pension liability for its pension plan. The additional
liability has been offset by an intangible asset to the
extent of unrecognized prior service cost. The portion of
the additional minimum liability in excess of unrecognized
prior service cost decreased by $283,000 in fiscal 2004 and
is reported as a component of other comprehensive loss for
the year ended March 31, 2004 due to the above-mentioned
settlement.

The projected benefit obligation was determined using an
assumed discount rate of 5.75% at March 31, 2004 and 6.5% at
March 31, 2003. The liability relating to these benefits
has been included in deferred retirement obligation in the
accompanying financial statements.

Net periodic pension expense for fiscal 2004, 2003 and 2002
consisted of the following:

2004 2003 2002

Service cost $ 72,789 $ 70,244 $ 62,944
Interest cost 113,510 112,194 97,665
Amortization of unrecognized
prior service cost and actuarial
losses 99,714 93,845 93,000
Gain on partial settlemetn (19,211) - -

Net periodic pension cost $ 266,802 $ 276,283 $ 253,609

The Company's former Chairman and CEO passed away on April
18, 1997. Under the terms of his supplemental retirement
agreement, approximately $498,000 in present value of death
benefits is required to be paid to fulfill death benefit
payments over 10 years after his death. As of March 31,
2004 and 2003 accruals related to the unpaid present value
of the benefit amounted to approximately $226,000 and
$293,000, respectively (of which approximately $152,000 and
$220,000, respectively is included under defined retirement
obligations in the accompanying consolidated balance
sheets). Net periodic pension costs are included in general
and administrative expenses in the accompanying consolidated
statements of operations.

14. NET EARNINGS (LOSS) PER COMMON SHARE

Basic earnings (loss) per share has been calculated by
dividing net earnings (loss) by the weighted average number
of common shares outstanding during each period. For
purposes of calculating diluted earnings (loss) per share,
shares issuable under employee stock options were considered
potential common shares and were included in the weighted
average common shares unless they were anti-dilutive. As of
March 31, 2004 5,000 shares of outstanding stock options
were anti-dilutive.

The computation of basic and diluted weighted average common
shares outstanding is as follows:

Year Ended March 31,
2004 2003 2002

Basic 2,716,447 2,726,320 2,716,823
Incremental Shares From
Stock Options 11,472 - 71,877
Diluted 2,727,919 2,726,320 2,788,700

15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(in thousands except per share data)

During the fourth quarter of fiscal 2003, management agreed
to a plan to discontinue the operations of MAS and dispose
of its assets. The Company closed on the transaction to
sell certain MAS assets and operations on August 14, 2003.
As a result, the Company has retroactively reflected the
discontinued operations of MAS in the accompanying
consolidated statements of financial position and results of
operations.

FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER

2004
Operating Revenues $11,056 $13,623 $12,980 $18,338

Operating Income $ 675 $ 939 $ 370 $ 1,418

Earnings Before Income Taxes $ 444 $ 612 $ 493 $ 1,977

Net Earnings $ 349 $ 358 $ 230 $ 801

Basic and Diluted Net Earnings per
share $ 0.13 $ 0.13 $ 0.08 $ 0.30

2003
Operating Revenues $10,198 $ 9,176 $11,233 $12,265

Operating Income (Loss) $ 41 $ (390) $ 160 $ 818

(Loss) Earnings Before Income
Taxes $ (70) $ (351) $ 177 $ 888

Net (Loss) Earnings $ (161) $ (363) $ 37 $ (737)

Basic and Diluted Net (Loss)
Earnings per share $ (0.06) $ (0.13) $ 0.01 $ (0.27)

16. SEGMENT INFORMATION

The Company operates three subsidiaries in two continuing
business segments. Each business segment has separate
management teams and infrastructures that offer different
products and services. During the fourth quarter of fiscal
2003, Company management agreed to a plan to sell the assets
of MAS and to discontinue the operations of the Company's
aviation service sector business (MAS). The Company
completed an agreement to sell certain assets and operation
on August 14, 2003. The operations of MAS are, therefore,
not presented in the segment information below. The
subsidiaries with continuing operations have been combined
into the following two reportable segments: overnight air
cargo and ground equipment. The overnight air cargo
segment encompasses services provided primarily to one
customer, Federal Express, and the ground equipment segment
encompasses the operations of Global.

The accounting policies for all reportable segments are the
same as those described in Note 1 to the Consolidated
Financial Statements. The Company evaluates the performance
of its operating segments based on operating income from
continuing operations.

Segment data is summarized as follows:

2004 2003 2002

Operating Revenues
Overnight Air Cargo $ 36,168,096 $29,898,840 $29,258,086
Ground Equipment 19,828,749 12,972,887 30,344,889

Total $ 55,996,845 $42,871,727 $59,602,975

Operating Income from
Continuing operations
Overnight Air Cargo $ 3,988,995 $ 2,621,003 $ 2,215,901
Ground Equipment 2,039,691 204,642 3,335,477
Corporate (1) (2,626,654) (2,197,125) (2,106,708)

Total $ 3,402,032 $ 658,520 $ 3,444,670

Identifiable Assets
Overnight Air Cargo $ 5,727,470 $ 4,130,676 $ 3,852,042
Ground Equipment 9,646,490 8,615,032 10,051,691
Corporate 3,093,449 4,684,070 2,856,792

Total $ 18,467,409 $ 17,429,778 $16,760,525

Capital Expenditures, net
Overnight Air Cargo $ 1,101,355 $ 131,626 $ 107,264
Ground Equipment 75,775 155,528 216,032
Corporate 83,689 175,670 303,184

Total $ 1,260,819 $ 462,824 $ 626,480

Depreciation and Amortization
Overnight Air Cargo $ 200,128 $ 243,635 $ 228,051
Ground Equipment 187,284 239,699 253,377
Corporate 170,139 143,248 91,193

Total $ 557,551 $ 626,582 $ 572,621

(1) Includes income from inter-segment transactions,
eliminated in consolidation.

17. COMMITMENTS AND CONTINGENCIES

Global and one of its employees are defendants in a lawsuit
filed in March 2002 in the United States District Court for
the District of Columbia, Catalyst & Chemical Services et
al v. Terex, et al. In this action, the plaintiffs allege
that they provided to Global and the employee certain trade
secrets regarding aircraft de/anti-icing systems that were
then disclosed by Global and the employee to third parties.
The plaintiffs allege misappropriation of trade secrets,
breach of contract and violation of the federal Racketeer
Influenced and Corrupt Organizations Act and seek monetary
damages. The Company and its employee have filed an answer
in this action denying all liability. Upon Global's motion,
the court has dismissed the plaintiff's claims under the
Racketeer Influenced and Corrupt Organizations Act. The
Company does not believe that the action has any merit and
intends to defend the lawsuit vigorously. In November 2002,
Global and the Company filed suit in North Carolina state
court against affiliates of the plaintiffs in the Catalyst &
Chemical Services et al v. Terex, et al action alleging
defamation. This action has been moved to, and is pending
before, the United States District Court for the Western
District of North Carolina.

The Company is currently involved in certain intellectual
property, personal injury and environmental matters, which
involve pending or threatened lawsuits. Management believes
the results of these pending or threatened lawsuits will not
have a material adverse effect on the Company's results of
operations or financial position.

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.

The Company had no disagreements on accounting or financial
disclosure matters with its independent certified public
accountants to report under this Item 9.

Item 9A. Controls and Procedures.

As of the end of the period covered by this report,
management, including the Company's Chief Executive Officer and
our Chief Financial Officer, evaluated the effectiveness of the
design and operation of our disclosure controls and procedures
with respect to the information generated for use in this report.
Based upon, and as of the date of that evaluation, the Chief
Executive Officer and the Chief Financial Officer concluded that
the disclosure controls and procedures were effective to provide
reasonable assurance that information required to be disclosed in
the reports we file or submit under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within
the time periods specified in the Commission's rules and forms.

Except as described below, there was no change in our
internal control over financial reporting during or subsequent to
the fourth fiscal quarter for the fiscal year ended March 31,
2004, that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

It should be noted that while the Company's management,
including the Chief Executive Officer and the Chief Financial
Officer, believe that the Company's disclosure controls and
procedures provide a reasonable level of assurance, they do not
expect that the disclosure controls and procedures or internal
controls will prevent all error and all fraud. A control system,
no matter how well conceived or operated, can provide only
reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system
must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within
the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or
mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more
people, or by management override of the controls. The design of
any system of controls is based in part upon certain assumptions
about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated
goals under all potential future conditions; over time, controls
may become inadequate because of changes in conditions, or the
degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-
effective control system, misstatements due to error or fraud may
occur and not be detected.

PART III

Item 10. Directors and Executive Officers of the Registrant.

Walter Clark, age 46, has served as Chairman of the Board of
Directors of the Company and Chief Executive Officer since April
1997. Mr. Clark also serves as a director of MAC and CSA and as
the Chief Executive Officer of MAC. Mr. Clark was elected a
director of the Company in April 1996. Mr. Clark was self-
employed in the real estate development business from 1985 until
April 1997.

John J. Gioffre, age 60, has served as Vice President-
Finance and Chief Financial Officer of the Company since
April 1984 and as Secretary/Treasurer of the Company since
June 1983. He has served as a director of the Company since
March 1987. Mr. Gioffre also serves as Vice-President,
Secretary/Treasurer and a director of MAC and CSA, Chief
Financial Officer of MAC and as Vice President-Finance, Treasurer
and Secretary of MACAS.

J. Leonard Martin, age 67, was elected a director in August
1994 and joined the Company as a Vice President in April 1997.
He served as Chief Executive Officer of Global from August 1997
to January 2001. From June 1995 until April 1997, Mr. Martin was
an independent aviation consultant. From April 1994 to June
1995, Mr. Martin served as Chief Operating Officer of Musgrave
Machine & Tool, Inc., a machining company. From January 1989 to
April 1994, Mr. Martin served as a consultant to the North
Carolina Air Cargo Authority in connection with the establishment
of the Global TransPark air cargo facility in Kinston, North
Carolina. From 1955 through 1988 Mr. Martin was employed by
Piedmont Airlines, a commercial passenger airline, in various
capacities, ultimately serving as Senior Vice President-Passenger
Services.

William H. Simpson, age 56, has served as Executive Vice
President of the Company since June 1990, as Vice President from
June 1983 to June 1990, and as a director of the Company since
June 20, 1985. Mr. Simpson is also the President and a director
of MAC, the Chief Executive Officer and a director of CSA and
Executive Vice President of MACAS.

Claude S. Abernethy, Jr., age 77, was elected as director of
the Company in June 1990. For the past five years, Mr. Abernethy
has served as a Senior Vice President of IJL Wachovia Securities,
a securities brokerage and investment banking firm, and its
predecessor. Mr. Abernethy is also a director of Carolina Mills,
Inc. and Wellco Enterprises, Inc.

Sam Chesnutt, age 67, was elected a director of the Company
in August 1994. Mr. Chesnutt serves as President of Sam Chesnutt
and Associates, an agribusiness consulting firm. From November
1988 to December 1994, Mr. Chesnutt served as Executive Vice
President of AgriGeneral Company, L.P., an agribusiness firm.

Allison T. Clark, age 48, has served as a director of the
Company since May 1997. Mr. Clark has been self-employed in the
real estate development business since 1987.

Herman A. Moore, age 74, was elected a director of the
Company on June 22, 1998. Mr. Moore is the president of Herman
A. Moore & Assoc., Inc., a real estate development company.

George C. Prill, age 81, has served as a director of the
Company since June 1982, as Chief Executive Officer and Chairman
of the Board of Directors from August 1982 until June 1983, and
as President from August 1982 until spring 1984. Mr. Prill has
served as an Editorial Director for General Publications, Inc., a
publisher of magazines devoted to the air transportation
industry, from November 1992 until 2001 and was retired from 1990
until that time. From 1979 to 1990, Mr. Prill served as
President of George C. Prill & Associates, Inc., of
Charlottesville, Virginia, which performed consulting services
for the aerospace and airline industry. Mr. Prill has served as
President of Lockheed International Company, as Assistant
Administrator of the FAA, as a Senior Vice President of the
National Aeronautic Association and Chairman of the Aerospace
Industry Trade Advisory Committee.

The officers of the Company and its subsidiaries each serve
at the pleasure of the Board of Directors. Allison Clark and
Walter Clark are brothers.

During the fiscal year ended March 31, 2004, each director
received a director's fee of $500 per month and an attendance fee
of $500 is paid to outside directors for each meeting of the
board of directors or a committee thereof. Commencing with the
current fiscal year, each director receives a director's fee of
$1,000 per month and an attendance fee of $500 is paid to non-
employee directors for each meeting at the Board of Directors or
a committee thereof. Pursuant to the Company's 1998 Omnibus
Securities Award Plan (the "Plan") each director who is not an
employee of the Company received an option to purchase 1,000
shares of Common Stock at an exercise price of $6.375 per share
(the closing bid price per share on the date of stockholder
approval of the Plan.) The Plan provides for a similar option
award to any director first elected to the board after the date
the stockholders approved the Plan. Such options expire ten
years after the date they were granted.

The Board of Directors maintains a standing Audit Committee
for the purpose of overseeing the accounting and financial
reporting processes, and audits of financial statements, of the
Company. The Audit Committee consists of Messrs. Abernethy,
Chesnutt and Moore each of whom is not an employee of the Company
and otherwise is considered to be an independent director under
NASDAQ rules. The Board of Directors has determined that the
Audit Committee does not include an "audit committee financial
expert," as that term is defined by the recently adopted
regulations of the Securities and Exchange Commission pursuant to
the Sarbanes-Oxley Act of 2002, and further that no other
independent director qualifies as an "audit committee financial
expert." Under the SEC's rules, an "audit committee financial
expert" is required to have not only an understanding of
generally accepted accounting principles and the function of the
Audit Committee, along with experience in preparing or analyzing
financial statements, but also the ability to assess the
application of general accounting principles in connection with
the accounting for estimates, accruals and reserves. The Board
of Directors relys upon independent auditors to assist the Audit
Committee and the Board in making judgments under generally
accepted accounting principles. Given the significant
requirements of the SEC's definition of an "audit committee
financial expert" and the demands and responsibilities placed on
directors of a small public company by applicable securities,
corporate and other laws, the Board of Directors believes it is
difficult to identify and attract an independent director to
serve on the Board of Directors who qualifies as an "audit
committee financial expert."

To the Company's knowledge, based solely on review of the
copies of reports under Section 16(a) of the Securities Exchange
Act of 1934 that have been furnished to the Company and written
representations that no other reports were required, during the
fiscal year ended March 31, 2004 all executive officers,
directors and greater than ten-percent beneficial owners have
complied with all applicable Section 16(a) filing requirements.

Code of Ethics.

The Company has adopted a code of ethics applicable to its
executive officers and other employees. A copy of the code of
ethics is available on the Company's internet website at
http://www.airt.net. The Company intends to post waivers and
wording of its code of ethics applicable to its principal
executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar
functions on its Internet website.

Item 11. Executive Compensation.

The following table sets forth a summary of the compensation
paid during each of the three most recent fiscal years to the
Company's Chief Executive Officer and to the four other executive
officers on March 31, 2004 with total compensation of $100,000 or
more.
SUMMARY COMPENSATION TABLE

Annual
Name and Principal Compensation
Position Year
Salary ($)(1)
Bonus ($)
Walter Clark 2004 106,319 66,420
Chief Executive 2003 105,001 -
Officer
2002 111,522 52,140

J. Hugh Bingham (2) 2004 262,009 37,760
President 2003 197,335 -
2002 193,004 52,140

John J. Gioffre 2004 127,027 49,815
Vice President 2003 126,767 -
2002 122,058 39,880

William H. Simpson 2004 199,761 66,420
Executive Vice 2003 199,705 -
President
2002 195,364 52,140

__________________________________________
(1) Includes perquisites in aggregate amount no greater than 10%
of the officer's base salary plus bonus.
(2) Mr. Bingham terminated his employment with the Company
effective December 31, 2003. In consideration of approximately
$300,000, payable in three installments over a one-year period
starting January 12, 2004, Mr. Bingham agreed to forego certain
retirement and other contractual benefits. Fiscal 2004's salary
includes the first $100,000, installment payment under this
agreement.

The following table sets forth, the number of shares of
Common Stock underlying unexercised options at March 31, 2004
held by each of the executive officers listed in the Summary
Compensation Table. The table also includes the value of such
options at March 31, 2004 based upon the closing bid price of the
Company's Common Stock in the over-the-counter market on that
date ($5.30 per share) and the exercise price of the options.
None of the executive officers listed in this table exercised any
options in fiscal 2004.

AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND
FISCAL
YEAR-END OPTION VALUES

Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options
Options at FY-End at FY-End ($)
(#)
Name Exercis Unexerci Exercis Unexerci
able sable able sable
Walter Clark
50,000 - - -
J. Hugh
Bingham - - - -
John J.
Gioffre - - - -
William H.
Simpson 9,000 - - -

EMPLOYMENT AGREEMENTS

Effective January 1, 1996, the Company and each of its
subsidiaries entered into employment agreements with J. Hugh
Bingham (See Resignation of Executive Officer, discussed below
regarding termination of employment agreement), John J. Gioffre
and William H. Simpson, each of substantially similar form. Each
of such employment agreements provides for an annual base salary
($130,000, $103,443 and $165,537 for Messrs. Bingham, Gioffre and
Simpson, respectively) which may be increased upon annual review
by the Compensation Committee of the Company's Board of
Directors. In addition, each such agreement provides for the
payment of annual incentive bonus compensation equal to a
percentage (2.0%, 1.5% and 2.0% for Messrs. Bingham, Gioffre and
Simpson, respectively) of the Company's consolidated earnings
before income taxes and extraordinary items as reported by the
Company in its Annual Report on Form 10-K. Payment of such bonus
is to be made within 15 days after the Company files its Annual
Report on Form 10-K with the Securities and Exchange Commission.

The initial term of each such employment agreement expired
on March 31, 1999, and the term is automatically extended for
additional one-year terms unless either such executive officer or
the Company's Board of Directors gives notice to terminate
automatic extensions, which must be given by December 1 of each
year (commencing with December 1, 1996).

The two remaining agreements provide that upon the executive
officer's retirement, he shall be entitled to receive an annual
benefit equal to $75,000, for Mr. Simpson, and $60,000, for Mr.
Gioffre, reduced by three percent for each full year that the
termination of their employment precedes the date he reaches age
65. The retirement benefits under such agreements may be paid at
the executive officer's election in the form of a single life
annuity or a joint and survivor annuity or a life annuity with a
ten-year period certain. In addition, such executive officer may
elect to receive the entire retirement benefit in a lump sum
payment equal to the present value of the benefit based on
standard insurance annuity mortality tables and an interest rate
equal to the 90-day average of the yield on ten-year U.S.
Treasury Notes.

Retirement benefits shall be paid commencing on such
executive officer's 65th birthday, provided that such executive
officer may elect to receive benefits on the later of his 62nd
birthday, in which case benefits will be reduced as described
above, or the date on which his employment terminates, provided
that notice of his termination of employment is given at least
one year prior to the termination of employment. Any retirement
benefits due under the employment agreement shall be offset by
any other retirement benefits that such executive officer
receives under any plan maintained by the Company. In the event
such executive officer becomes totally disabled prior to
retirement, he will be entitled to receive retirement benefits
calculated as described above.

In the event of such executive officer's death before
retirement, the agreement provides that the Company shall be
required to pay an annual death benefit to such officer's estate
equal to the single life annuity benefit such executive officer
would have received if he had terminated employment on the later
of his 65th birthday or the date of his death, payable over ten
years; provided that such amount would be reduced by five percent
for each year such executive officer's death occurs prior to age
65, but in no event more than 50 percent.

Each of the employment agreements provides that if the
Company terminates such executive officer's employment other than
for "cause" (as defined in the agreement), such executive officer
be entitled to receive a lump sum cash payment equal to the
amount of base salary payable for the remaining term of the
agreement (at the then current rate) plus one-half of the maximum
incentive bonus compensation that would be payable if such
executive officer continued employment through the date of the
expiration of the agreement (assuming for such purposes that the
amount of incentive bonus compensation would be the same in each
of the years remaining under the agreement as was paid for the
most recent year prior to termination of employment). Each of
the agreements further provides that if any payment on
termination of employment would not be deductible by the Company
under Section 280G(b)(2) of the Internal Revenue Code, the amount
of such payment would be reduced to the largest amount that would
be fully deductible by the Company.

Resignation of Executive Officer

Effective December 31, 2003, J. Hugh Bingham, an executive
officer and director of the Company, resigned his employment with
AirT.

In consideration of approximately $300,000, payable in three
installments over a one-year period starting January 12, 2004,
Mr. Bingham agreed to forgo certain retirement and other
contractual benefits for which the company had previously accrued
aggregate liabilities of $715,000.

The above-mentioned cancellation of contractual retirement
benefits reduced recorded liabilities by $715,000. The
difference between the recorded liability and ultimate cash
payment of $300,000 required the recording of a $305,000
reduction in actuarial losses, recorded in Other Comprehensive
(Loss), a $90,000 reduction in intangible assets and a net
$20,000 reduction in executive compensation charges included in
the statement of operations. After accounting for the effect of
income taxes, these transactions increased the company's reported
net earnings from continuing operations by $12,000.

The Company also agreed to purchase from Mr. Bingham 118,480
shares of AirT common stock held by him (representing
approximately 4.3% of the outstanding shares of common stock at
December 31, 2003) for $4.54 per share (80% of the January 5,
2004 closing price). The stock repurchase will take place in
three installments over a one-year period, starting January 12,
2004, and will total approximately $538,000. The repurchase of
Mr. Bingham's stock will be recorded in the period that the
repurchase occurs as treasury stock transactions. All
installment payments required to be made on January 12, 2004,
have been made.

Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.

CERTAIN BENEFICIAL OWNERS

The following table sets forth information regarding the
beneficial ownership of shares of Common Stock (determined in
accordance with Rule 13d-3 of the Securities and Exchange
Commission) of the Company as of June 1, 2004 by each person that
beneficially owns five percent or more of the shares of Common
Stock. Each person named in the table has sole voting and
investment power with respect to all shares of Common Stock shown
as beneficially owned, except as otherwise set forth in the notes
to the table.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Amount of
Title of Beneficial Percen
Class Name and Address of Ownership t
Beneficial Owner as of June 1, Of
2004 Class
Common Walter Clark and Caroline 1,342,416(1) 48.9%
Stock, par Clark, Executors(1)
value $.25 P.O. Box 488
per share Denver, North Carolina 28650

William H. Simpson 270,580(2) 9.9%
P.O. Box 488
Denver, North Carolina 28650

_____________________________

(1) Includes 1,279,272 shares controlled by such individuals as
the executors of the estate of David Clark, 10,922 shares
owned by Walter Clark, 50,000 shares purchasable by Walter
Clark under options awarded by the Company and 2,222 shares
owned by Caroline Clark.

(2) Includes 1,200 shares held jointly with J. Hugh Bingham and
9,000 shares under options granted by the Company.

The following table sets forth information regarding the
beneficial ownership of shares of Common Stock of the Company by
each director of the Company and by all directors and executive
officers of the Company as a group as of June 1, 2004. Each
person named in the table has sole voting and investment power
with respect to all shares of Common Stock shown as beneficially
owned, except as otherwise set forth in the notes to the table.

SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Shares and Percent of
Common Stock Beneficially
Owned as of June 1, 2004
Name Position with No. of Shares Percent
Company
Walter Clark Chairman of the 1,340,194(2) 48.8%
Board of Directors
and Chief Executive
Officer

John J. Gioffre Vice President- 57,580 2.1%
Finance, Chief
Financial Officer,
Secretary and
Treasurer, Director

J. Leonard Vice President, 100(3) *
Martin Director

William H. Executive Vice 271,180(1)(4) 9.9%
Simpson President, Director

Claude S. Director 44,011(5)(6) 1.6%
Abernethy, Jr.

Sam Chesnutt Director 12,100(5) *

Allison T. Director 3,222(5) *
Clark

Herman A. Moore Director 1,000(5) *

George C. Prill Director 46,966(5) 1.7%

All directors N/A 1,776,353(7) 64.6%
and executive
officers as a
group (10
persons)
__________________________________________

* Less than one percent.
(1) Includes 1,200 shares jointly held by Messrs. Simpson and
Bingham.
(2) Includes 1,279,272 shares held by the estate of David Clark,
of which Mr. Walter Clark is a co-executor and 50,000 shares
under options granted by the Company to Mr. Walter Clark.
(3) Such 100 shares are held by Mr. Martin's spouse of which
shares Mr. Martin disclaims beneficial ownership.
(4) Includes 9,000 shares under options granted by the Company
to Mr. Simpson.
(5) Includes 1,000 shares under options granted by the Company.
(6) Includes 20,400 shares held by the Estate of Raenelle B.
Abernethy, of which Mr. Abernethy is the executor.
(7) Includes an aggregate of 64,000 shares of Common Stock
members of such group have the right to acquire within 60
days.

This table summarizes share and exercise price information about
equity compensation plans as of March 31, 2004.

EQUITY COMPENSATION PLAN INFORMATION
Number of
securities
Number of Weighted- remaining
securities to average available for
be issued upon exercise price future issuance
Plan Category exercise of outstanding under equity
of outstanding options, compensation
options, warrants and plans
warrants and rights (excluding
rights securities
listed in first
column)
Equity
compensation 64,000 $3.44 301,000
plans approved by
security holders
Equity None N/A N/A
compensation
plans not
approved by
security holders

Item 13. Certain Relationships and Related Transactions.

Contractual death benefits for the Company's former Chairman
and Chief Executive Officer, David Clark, who passed away on
April 18, 1997 are payable by the company to his estate in the
amount of $75,000 per year for 10 years. Walter Clark and
Allison Clark are beneficiaries of the estate of David Clark, and
Walter Clark is also a co-executor of the estate.

The Company leases its corporate and operating facilities at
the Little Mountain, North Carolina airport from Little Mountain
Airport Associates, Inc. ("Airport Associates"), a corporation
whose stock is owned by J. Hugh Bingham, William H. Simpson, John
J. Gioffre, the estate of David Clark and three unaffiliated
third parties. On May 31, 2001, the Company renewed its lease
for this facility, scheduled to expire on that date, for an
additional five-year term, and adjusted the rent to account for
increases in the consumer price index. Upon the renewal, the
monthly rental payment was increased from $8,073 to $9,155. The
Company paid aggregate rental payments of $132,960 to Airport
Associates pursuant to such lease during the fiscal year ended
March 31, 2004. In May 2003 the Company leased additional office
space from Airport Associates under terms similar to the above
lease at a monthly rental payment of $2,100. The Company
believes that the terms of such leases are no less favorable to
the Company than would be available from an independent third
party.

Item 14. Principal Accountants and Accounting Fees

Fees billed to the Company by Deloitte & Touche, LLP.

Audit Fees. Fees for audit service totaled $176,000 in 2004 and
$126,176 in 2003. Audit fees for 2004 and 2003 included fees
associated with annual year-end audit and reviews of the
Company's quarterly reports on Form 10-Q.

Audit-Related Fees. Fees for audit-related services totaled
$35,903 in 2004 and $32,487 in 2003. Audit-related fees in 2004
included fees associated with the audit of the Company's employee
benefit plan and accounting consultations regarding various
compliance requirements, including the Sarbanes-Oxley Act of
2002. Audit-related fees for 2003 were primarily associated with
the audit of the Company's employee benefit plan and a compliance
related matter.

Tax Fees. Fees for tax compliance totaled $43,225 in 2004 and
$37,360 in 2003, and were primarily related to preparation of
year-end tax return and associated matters. In addition, fees
for tax consulting and advisory services totaled $8,910 in 2004
and $7,575 in 2003, and were related to tax consultation services
associated with various state and international tax matters.

All Other Fees. The Company was not billed by Deloitte for any
other services during 2004 or 2003.

Consistent with SEC policies regarding auditor independence, our
Audit Committee has responsibility for appointing, setting
compensation and overseeing the work of the independent auditor.
In recognition of this responsibility, Air T's Audit Committee
has established a policy requiring its pre-approval of all audit
and permissible non-audit services provided by the independent
auditor.

The policy is a part of the Audit Committee's Charter. The
independent auditor, management and the Audit Committee must meet
on at least an annual basis to review the plans and scope of the
audit and the proposed fees of the independent auditor.

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K

The following documents are filed as part of this report:

1. Financial Statements

a. The following are incorporated herein by reference in Item 8
of Part II of this report:

(i) Independent Auditors' Report.
(ii) Consolidated Balance Sheets as of March 31, 2004 and 2003.
(iii) Consolidated Statements of Operations for each of the
three years in the period ended March 31, 2004.
(iv) Consolidated Statements of Stockholders' Equity for each of
the three years in the period ended March 31, 2004.
(v) Consolidated Statements of Cash Flows for each of the three
years in the period ended March 31, 2004.
(vi) Notes to Consolidated Financial Statements.

2. Financial Statement Schedules

No schedules are required to be submitted.

3. Exhibits

No. Description

3.1 Restated Certificate of Incorporation, incorporated by
reference to Exhibit 3.1 of the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 2001

3.2 By-laws of the Company, as amended, incorporated by
reference to Exhibit 3.2 of the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1996

4.1 Specimen Common Stock Certificate, incorporated by reference
to Exhibit 4.1 of the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1994

10.1 Aircraft Dry Lease and Service Agreement dated February 2,
1994 between Mountain Air Cargo, Inc. and Federal Express
Corporation, incorporated by reference to Exhibit 10.13 to
Amendment No. 1 on Form 10-Q/A to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended December 31, 1993

10.2 Loan Agreement among Bank of America, N.A. the Company and
its subsidiaries, dated May 23, 2001, incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 2001.

10.3 Aircraft Wet Lease Agreement dated April 1, 1994 between
Mountain Air Cargo, Inc. and Federal Express Corporation,
incorporated by reference to Exhibit 10.4 of Amendment No. 1 on
Form 10-Q/Q to the Company's Quarterly Report on Form 10-Q for
the period ended September 30, 1994

10.4 Adoption Agreement regarding the Company's Master 401(k)
Plan and Trust, incorporated by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1993*

10.5 Amendment No. 1 to Omnibus Securities Award Plan
incorporated by reference to Exhibit 10.14 of the Company's
Annual Report on Form 10-K for the year ended March 31, 2000*.

10.6 Premises and Facilities Lease dated November 16, 1995
between Global TransPark Foundation, Inc. and Mountain Air Cargo,
Inc., incorporated by reference to Exhibit 10.5 to Amendment No.
1 on Form 10-Q/A to the Company's Quarterly Report on Form 10-Q
for the period ended December 31, 1995

10.7 Employment Agreement dated January 1, 1996 between the
Company, Mountain Air Cargo Inc. and Mountain Aircraft
Services, LLC and William H. Simpson, incorporated by
reference to Exhibit 10.8 to the Company's Annual
Report Form 10-K for the fiscal year ended March 31,
1996*

10.8 Employment Agreement dated January 1, 1996 between the
Company, Mountain Air Cargo Inc. and Mountain Aircraft
Services, LLC and John J. Gioffre, incorporated by
reference to Exhibit 10.9 to the Company's Annual
Report Form 10-K for the fiscal year ended March 31,
1996*

10.9 Omnibus Securities Award Plan, incorporated by reference to
Exhibit 10.11 to the Company's Quarterly Report Form 10-Q for the
quarter ended June 30, 1998.*

10.10 Commercial and Industrial Lease Agreement dated August
25, 1998 between William F. Bieber and Global Ground
Support, LLC, incorporated by reference to Exhibit 10.12 of the
Company's Quarterly Report on 10Q for the period ended September
30, 1998.

10.11 Amendment, dated February 1, 1999, to Aircraft Dry
Lease and Service Agreement dated February 2, 1994 between
Mountain Air Cargo, Inc. and Federal Express Corporation,
incorporated by reference to Exhibit 10.13 of the Company's
Quarterly Report on 10Q for the period ended December 31, 1998.

10.12 ISDA Schedule to Master Agreement between Bank of
America, N.A. and the Company dated May 23, 2001, incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the period ended June 30, 2001

10.13 Amendment No 1. to Loan Agreement among Bank of
America, N.A., the Company and its subsidiaries, dated August 31,
2002, incorporated by reference to Exhibit 10.15 to the Company's
Quarterly Report on Form 10-Q for the period ended September 30,
2002

10.14 Lease Agreement between Little Mountain Airport
Associates, Inc. and Mountain Air Cargo, Inc., dated June 1,
1991, most recently amended May 28, 2001, incorporated by
reference to Exhibit 10.15 to the Company's Annual Report on Form
10-K for the year ended March 31, 2003.

10.15 Agreement dated January 12, 2004 between the Company
and J. Hugh Bingham*.

10.16 Amendment No 2. to Loan Agreement among Bank of
America, N.A., the Company and its subsidiaries, dated August 31,
2003, incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the period ended September 30,
2003.

21.1 List of subsidiaries of the Company

23.1 Consent of Deloitte & Touche LLP

31.1 Certification of Walter Clark

31.2 Certification of John J. Gioffre

32.1 Section 1350 Certification
__________________

* Management compensatory plan or arrangement required to
be filed as an exhibit to this report.

b. Reports on Form 8-K.

The Company filed the following Current reports on Form 8-K
in the last quarter of the fiscal year ended March 31, 2004:

Current Report on form 8-K dated January 12, 2004 announcing
the resignation of J. Hugh Bingham.
Current Report on form 8-K dated February 13, 2004
announcing unaudited financial results for the period ended
December 31, 2003.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

AIR T, INC.

By: /s/ Walter Clark
Walter Clark, Chief Executive Officer
(Principal Executive Officer)

Date: June 15, 2004

By: /s/ John J. Gioffre
John J. Gioffre, Chief Financial Officer
(Principal Financial and Accounting Officer)

Date: June 15, 2004

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

By: /s/ Claude S. Abernethy
Claude S. Abernethy, Jr., Director

Date: June 15, 2004

By: /s/ Allison T. Clark
Allison T. Clark, Director

Date: June 15, 2004

By: /s/ Walter Clark
Walter Clark, Director

Date: June 15, 2004

By: /s/ Sam Chesnutt
Sam Chesnutt, Director

Date: June 15, 2004

By: /s/ John J. Gioffre
John J. Gioffre, Director

Date: June 15, 2004

By: /s/ J. Leonard Martin
J. Leonard Martin, Director

Date: June 15, 2004

By: /s/ Herman A. Moore
Herman A. Moore, Director

Date: June 15, 2004

By: /s/ George C. Prill
George C. Prill, Director

Date: June 15, 2004

By: /s/ William Simpson
William Simpson, Director

Date: June 15, 2004

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

AIR T, INC.

By:
Walter Clark, Chief Executive Officer
(Principal Executive Officer)

Date: June 15, 2004

By:
John J. Gioffre, Chief Financial Officer
(Principal Financial and Accounting Officer)

Date: June 15, 2004

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

By:
Claude S. Abernethy, Jr., Director

Date: June 15, 2004

By:
Allison T. Clark, Director

Date: June 15, 2004

By:
Walter Clark, Director

Date: June 15, 2004

By:
Sam Chesnutt, Director

Date: June 15, 2004

By:
John J. Gioffre, Director

Date: June 15, 2004

By:
J. Leonard Martin, Director

Date: June 15, 2004

By:
Herman A. Moore, Director

Date: June 15, 2004

By:
George C. Prill, Director

Date: June 15, 2004

By:
William Simpson, Director

Date: June 15, 2004

AIR T, INC.
EXHIBIT INDEX

Exhibit Number Document

10.15 Agreement dated January 12, 2004 between the Company
and J. Hugh Bingham
21.1 List of Subsidiaries
23.1 Consent of Deloitte & Touche LLP
31.1 Certification of Walter Clark
31.2 Certification of John Gioffre
32.1 Section 1350 certification

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration
Statement No. 333-37224 on Form S-8 of Air T, Inc. and
subsidiaries of our report dated June 21, 2004 which report
expresses an unqualified opinion, appearing in this Annual Report
on Form 10-K of Air T, Inc. for the year ended March 31, 2004.

Charlotte, North Carolina
June 21, 2004

CERTIFICATION

I, Walter Clark, Chief Executive Officer, certify that:

1. I have reviewed this Annual Report on Form 10-K of Air
T, Inc.;

2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements
were made, not misleading with respect to the period
covered by this report;

3. Based on my knowledge, the financial statements, and
other financial information included in this report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in
this report;

4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:

(a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures
to be designed under our supervision, to ensure
that material information relating to the
registrant, including its consolidated
subsidiaries, is made known to us by others within
those entities, particularly during the period in
which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented
in this report our conclusions about the
effectiveness of the disclosure controls and
procedures, as of the end of the period covered by
this report based on such evaluation; and

(c) Disclosed in this report any change in the
registrant's internal control over financial
reporting that occurred during the registrant's
fourth fiscal quarter that has materially
affected, or is reasonably likely to materially
affect, the registrant's internal control over
financial reporting; and

5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation of
internal control over financial reporting, to the
registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing
the equivalent functions):

(a) All significant deficiencies and material
weaknesses in the design or operation of internal
control over financial reporting which are
reasonably likely to adversely affect the
registrant's ability to record, process, summarize
and report financial information; and

(b) Any fraud, whether or not material, that involves
management or other employees who have a
significant role in the registrant's internal
control over financial reporting.

Date: June 15, 2004

___________________________________
_______
Walter Clark
Chief Executive Officer

CERTIFICATION

I, Walter Clark, Chief Executive Officer, certify that:

1. I have reviewed this Annual Report on Form 10-K of Air
T, Inc.;

2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements
were made, not misleading with respect to the period
covered by this report;

3. Based on my knowledge, the financial statements, and
other financial information included in this report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in
this report;

4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:

(a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures
to be designed under our supervision, to ensure
that material information relating to the
registrant, including its consolidated
subsidiaries, is made known to us by others within
those entities, particularly during the period in
which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented
in this report our conclusions about the
effectiveness of the disclosure controls and
procedures, as of the end of the period covered by
this report based on such evaluation; and

(c) Disclosed in this report any change in the
registrant's internal control over financial
reporting that occurred during the registrant's
fourth fiscal quarter that has materially
affected, or is reasonably likely to materially
affect, the registrant's internal control over
financial reporting; and

5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation of
internal control over financial reporting, to the
registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing
the equivalent functions):

(a) All significant deficiencies and material
weaknesses in the design or operation of internal
control over financial reporting which are
reasonably likely to adversely affect the
registrant's ability to record, process, summarize
and report financial information; and

(b) Any fraud, whether or not material, that involves
management or other employees who have a
significant role in the registrant's internal
control over financial reporting.

Date: June 15, 2004

/s/ Walter Clark
Walter Clark
Chief Executive Officer

CERTIFICATION

I, John Gioffre, Chief Financial Officer, certify that:

1. I have reviewed this Annual Report on Form 10-K of Air
T, Inc.;

2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements
were made, not misleading with respect to the period
covered by this report;

3. Based on my knowledge, the financial statements, and
other financial information included in this report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in
this report;

4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:

(a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures
to be designed under our supervision, to ensure
that material information relating to the
registrant, including its consolidated
subsidiaries, is made known to us by others within
those entities, particularly during the period in
which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented
in this report our conclusions about the
effectiveness of the disclosure controls and
procedures, as of the end of the period covered by
this report based on such evaluation; and

(c) Disclosed in this report any change in the
registrant's internal control over financial
reporting that occurred during the registrant's
fourth fiscal quarter that has materially
affected, or is reasonably likely to materially
affect, the registrant's internal control over
financial reporting; and

5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation of
internal control over financial reporting, to the
registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing
the equivalent functions):

(a) All significant deficiencies and material
weaknesses in the design or operation of internal
control over financial reporting which are
reasonably likely to adversely affect the
registrant's ability to record, process, summarize
and report financial information; and

(b) Any fraud, whether or not material, that involves
management or other employees who have a
significant role in the registrant's internal
control over financial reporting.

Date: June 15, 2004

___________________________________
_______
John J. Gioffre
Chief Financial Officer

53
CERTIFICATION

I, John Gioffre, Chief Financial Officer, certify that:

1. I have reviewed this Annual Report on Form 10-K of Air
T, Inc.;

2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in
light of the circumstances under which such statements
were made, not misleading with respect to the period
covered by this report;

3. Based on my knowledge, the financial statements, and
other financial information included in this report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in
this report;

4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the registrant and
have:

(a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures
to be designed under our supervision, to ensure
that material information relating to the
registrant, including its consolidated
subsidiaries, is made known to us by others within
those entities, particularly during the period in
which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented
in this report our conclusions about the
effectiveness of the disclosure controls and
procedures, as of the end of the period covered by
this report based on such evaluation; and

(c) Disclosed in this report any change in the
registrant's internal control over financial
reporting that occurred during the registrant's
fourth fiscal quarter that has materially
affected, or is reasonably likely to materially
affect, the registrant's internal control over
financial reporting; and

5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation of
internal control over financial reporting, to the
registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing
the equivalent functions):

(a) All significant deficiencies and material
weaknesses in the design or operation of internal
control over financial reporting which are
reasonably likely to adversely affect the
registrant's ability to record, process, summarize
and report financial information; and

(b) Any fraud, whether or not material, that involves
management or other employees who have a
significant role in the registrant's internal
control over financial reporting.

Date: June 15, 2004

/s/ John J. Gioffre
John J. Gioffre
Chief Financial Officer

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CERTIFICATION

The undersigned hereby certifies in his capacity as an officer of
Air T, Inc. (the "Company") that, to the best of his knowledge,
the Annual Report of the Company on Form 10-K for the fiscal year
ended March 31, 2004 fully complies with the requirements of
Section 13(a) of the Securities Exchange Act of 1934 and that the
information contained in such report fairly presents, in all
material respects, the financial condition of the Company at the
end of such period and the results of operations of the Company
for such period.

Date: June 15, 2004 /s/ Walter Clark
Walter Clark, Chief Executive
Officer

Date: June 15, 2004 /s/ John J. Gioffre
John J. Gioffre, Chief Financial Officer

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CERTIFICATION

The undersigned hereby certifies in his capacity as an officer of
Air T, Inc. (the "Company") that, to the best of his knowledge,
the Annual Report of the Company on Form 10-K for the fiscal year
ended March 31, 2004 fully complies with the requirements of
Section 13(a) of the Securities Exchange Act of 1934 and that the
information contained in such report fairly presents, in all
material respects, the financial condition of the Company at the
end of such period and the results of operations of the Company
for such period.

Date: June 15, 2004
Walter Clark, Chief Executive
Officer

Date: June 15, 2004
John J. Gioffre, Chief
Financial Officer

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