Aviation Group Inc. Reports 3rd Quarter Fiscal 1999 Results.

DALLAS--(BUSINESS WIRE)--May 14, 1999--

Aviation Group Inc. (Nasdaq:AVGP) today announced record revenues of $5,544,000 for the third quarter ended March 31, 1999, versus $4,928,000 for the same quarter ended March 31, 1998. For the current quarter, the company reported losses of $754,000, including non-recurring operating costs and eliminations of $346,000. For the quarter ended March 31, 1998, the company reported income of $2,000.

For the nine months ended March 31, 1999 the Company reported record revenues of $17,613,000 versus $14,150,000 for the same nine-month period ended March 31, 1998. For the current nine months, the company reported a net loss of $674,000, which amount included non-recurring operating costs and eliminations of 361,000. For the nine months ended March 31, 1998, the company reported net losses of $557,000. Earnings before interest and depreciation ("EBITDA") rose $210,000 to $164,000 for the nine months ended March 31, 1999, versus ($46,000) for the same period in 1998.

"The economic prospects of the aviation sector are as promising as ever," reported Lee Sanders, CEO. "The airlines and other industry participants are experiencing record growth, and consolidation in the highly fragmented outsourcing service segment continues. However, our company's low stock price has slowed down the pace of our acquisition activity. Nevertheless, we are presently working on a couple of interesting acquisitions that if completed, could have a significant effect on growth and profitability," said Sanders.

Last month, the company announced its engagement of Josephthal & Co., a New York investment banking firm, to assist it in its acquisition and financing activities. In addition to pursuing acquisitions that meet its strict purchase and funding criteria, management is also considering a plan to pursue strategic alliances and combinations with other larger aviation outsourcing and service companies in an effort to achieve positive near-term results.

"Maximizing share value in the near term is a top priority. During the third fiscal quarter ended March 31, 1999, management and the board initiated strategies intended to balance our twin goals of growth and near-term performance. Acquisitions and/or alliances are still very much a part of our future, and moving aggressively to cut overhead improves the near term. Balancing these two important goals is the objective of our third quarter actions," said Sanders.

The company has successfully obtained paint contracts from United Parcel Service, Piedmont Airlines, and others, and continues to negotiate additional work with other large air carriers that if obtained will allow it to generate significant profit margins. Growth in the company's battery business is particularly strong as well. "During the quarter, we incurred start-up costs at our new Greenville, Miss., paint facility, and invested in equipment and inventory to support the surge in our battery business. We anticipate that these efforts and costs will generate significant revenue and cashflow during the next year. Meanwhile, we have moved to cut marginal products and services in our other divisions, and eliminate business that is not strategic to our long-term growth. Significant cuts in corporate overhead expenses have been made and we will continue to seek further reductions in costs."

Aviation Group is a publicly traded holding company based in Dallas. Aviation Group operates world-class painting facilities through its Aviation Exteriors, Inc. ("AvEx") subsidiaries in New Iberia, La., and Portland, Ore. Through its Tri-Star Airline Services division, Aviation Group provides airline ground services to a variety of passenger and freight airlines at Dallas-Fort Worth International Airport. Its Fixed Base Operations and Airport Management division, through Casper Air Service, provides fuel, parts, and light maintenance services to general, corporate, and freight aircraft customers. The Company's Component Overhaul and Service Division manufactures replacement batteries, precision aviation scales and other component parts for general and commercial airplanes. Additional information can be obtained from the Company's Web site at www.aviationgroup.com. -0-

                 AVIATION GROUP INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                              (UNAUDITED)


                    Three Months Ended            Nine Months Ended
                         March 31,                    March 31,
                         ---------                    ---------
                    1999           1998          1999          1998
                    ----           ----          ----          ----

Revenue          $ 5,544,000  $ 4,928,000    $17,613,000  $14,150,000

Cost of Revenue    3,991,000    3,542,000     12,733,000   10,785,000
                 ------------ ------------   ------------ ------------

  Gross Profit     1,553,000    1,386,000      4,880,000    3,365,000
                 ------------ ------------   ------------ ------------

General and
 Administrative
 Expenses          1,379,000      826,000      3,080,000    2,375,000
Corporate
 Overhead
 Expenses            442,000      280,000      1,275,000      820,000
Nonrecurring
 Operating
 Costs Incurred      346,000       30,000        361,000      146,000
Depreciation and
 Amortization        234,000      201,000        712,000      531,000
                 ------------ ------------   ------------ ------------
                   2,401,000    1,337,000      5,428,000    3,942,000
                 ------------ ------------   ------------ ------------

  Income (Loss)
   From
   Operations       (848,000)      49,000       (548,000)    (577,000)
                 ------------ ------------   ------------ ------------

Other Income
 (Expenses)
  Other Income
   (Expense)              --        4,000          2,000       19,000
  Interest
   Expense, net     (101,000)     (37,000)      (298,000)    (227,000)
                 ------------ ------------   ------------ ------------
                    (101,000)     (33,000)      (296,000)    (208,000)
                 ------------ ------------   ------------ ------------

Income (Loss)
 Before
 Provision for
 Income Taxes       (949,000)      16,000       (844,000)    (785,000)

Provision
 (Benefit) for
 Income Taxes       (195,000)      14,000       (170,000)    (228,000)
                 ------------ ------------   ------------ ------------

Net Income
 (Loss)          $  (754,000) $     2,000    $  (674,000) $  (557,000)
                 ------------ ------------   ------------ ------------
                 ------------ ------------   ------------ ------------

Earnings (loss)
 per common
 share

  Basic and
   diluted       $      (.21) $      0.00    $      (.20) $    (0.18)
                 ------------ ------------   ------------ ------------
                 ------------ ------------   ------------ ------------

Weighted average
 shares
 outstanding
 (Note C)

  Basic            3,524,062    3,191,265      3,409,469    3,014,757
                 ------------ ------------   ------------ ------------
                 ------------ ------------   ------------ ------------

  Diluted          3,524,062    3,191,265      3,409,469    3,058,261
                 ------------ ------------   ------------ ------------
                 ------------ ------------   ------------ ------------

Except for the historical information contained herein, this press release contains statements that constitute forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that may cause or contribute to such differences include, among other things, the Company's dependence on certain customers, changes in the airline travel industry, seasonality of the Company's painting business, risk of future losses from operations, the ability to make additional business acquisitions, uninsured casualty losses, environmental regulation of airline stripping and painting operations and increased competition in the airline services industry. Other risks and uncertainties include changes in business conditions and the economy in general, changes in governmental regulations, unforeseen litigation and other risk factors identified in the Company's SEC filings under "Risk Factors." The Company undertakes no obligation to update these forward-looking statements for revisions or changes after the date of this press release.