Pemco Aviation Announces New Bluebird B737-400 Cargo Conversion Program.

BIRMINGHAM, Ala. -- Pemco Aviation Group, Inc. (NASDAQ: PAGI) announced today that its Dothan, Alabama subsidiary, Pemco World Air Services, Inc., has entered into a new contract with Bluebird Cargo (Blafugl ehf), a company with its primary offices located in Iceland, to convert two B737-400 aircraft to freighter configuration. The work will take place at the STAECO facility in Jinan, China pursuant to Pemco's 2005 partnership agreement with Taikoo (Xiamen) Aircraft Engineering Company (TAECO) and Taikoo (Shandong) Aircraft Engineering Company (STAECO).

"Bluebird was our first customer under our new 737-300 STC in 2001 and they continue their commitment to innovative excellence in their choice of Pemco for conversion of their 737-400 aircraft," states Ron Aramini, President and Chief Executive Officer of Pemco Aviation Group. "We have enjoyed our long-standing relationship with Bluebird and look forward to delivering our next generation of B737 freighter conversions to them."

"We see the B737-400 freighter as a natural next development in our fleet, which currently includes five B737-300 freighter aircraft. We have found Pemco to be a reliable conversion partner, and are excited about their -400 program," states Thor Kjartansson, Chief Executive Officer of Bluebird Cargo.

Kevin Casey, Vice President, Commercial Business Development said, "The B737-400 has become the aircraft of choice for operators looking for proven reliability and operational excellence. Pemco has brought the first conversion of this aircraft model to market with the delivery of Alaska Airline's new B737-400 freighter in July of this year and we are seeing a definite rise of interest in this aircraft on an international basis. We are excited about the Bluebird program and grateful that the top cargo operators like Bluebird are responding favorably to Pemco's many investments aimed at providing world class products and service one might expect of a market leader in cargo conversions."

Pemco Aviation Group, Inc., with executive offices in Birmingham, Alabama, and facilities in Alabama and California, performs maintenance and modification of aircraft for the U.S. Government and foreign and domestic commercial customers. The company also provides aircraft parts, support and engineering services and develops and manufactures aircraft cargo systems, rocket vehicles and control systems, and precision components.

Bluebird Cargo is a specialized air cargo capacity provider, operating B737 freighter aircraft for integrators, airlines, and postal services within Europe. Bluebird Cargo was founded in the year 2000, and is owned by Icelandair Group.

This press release contains forward-looking statements made in reliance on the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be identified by their use of words, such as "believe," "expect," "intend" and other words and terms of similar meaning, in connection with any discussion of the Company's prospects, financial statements, business, financial condition, revenues, results of operations or liquidity. Factors that could affect the Company's forward-looking statements include, among other things: changes in global or domestic economic conditions; the loss of one or more of the Company's major customers; the Company's ability to obtain additional contracts and perform under existing contracts; the outcome of pending and future litigation and the costs of defending such litigation; financial difficulties experienced by the Company's customers; potential environmental and other liabilities; the inability of the Company to obtain additional financing; material weaknesses in the Company's internal control over financial reporting; regulatory changes that adversely affect the Company's business; loss of key personnel; and other risks detailed from time to time in the Company's SEC reports, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2005. The Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. The Company does not undertake any obligation to update or revise any forward-looking statements and is not responsible for changes made to this release by wire services or Internet services.