BAS Submits Chairman's Report To BSX

"One single event can often change the fortunes of a company and September 5, 2003 was just such a day in our last fiscal year. Revenues in Bermuda Aviation Services Ltd. (BAS) dove as the immediate effects of hurricane Fabian were felt. In the ensuing weeks revenues were further impacted as flights were cancelled and the hours of operation of Bermuda's airport were curtailed, largely a result of the damage to the Causeway. However, facing the worst that nature could throw at us also provided an opportunity to witness the best. The employees of BAS showed an unprecedented display of unity and energy to get us back into operation. Their personal commitment has always been the key to our success and we thank them.

Our management never lost focus despite the challenges of the past year and continued their quest to maintain shareholder value, delivering a 7.5% return on income. Whilst satisfied with this result we continue to work diligently to improve on these results and strengthen our balance sheet in the coming year.

BAS had net earnings of $1.2 million or $1.17 per share for the year, down 29% or $0.5 million on fiscal 2003. Revenues of $16.4 million were off 2% or $0.4 million. Operating earnings of $1.1 million, although 35% below 2003, were in line with revised expectations. In addition to the loss of revenue, there were many other items that impacted earnings such as repair and maintenance that resulted from the hurricane. Not all were recoverable from our various insurances and contributed to our increases in operating expenses that rose 1.5% or a mere $0.2 million. Our share price held steady during the period, trading as high as $13.00 but finally settling at $9.00 at the end of the year.

With the continuing decline in catering revenues, the Company is contemplating exiting the catering business and is close to making a final decision in this respect. The division is experiencing losses with little hope of returning to the profitability required. Should we close the facility, it is our intent to work with the Department of Airport Operations to develop a plan for utilization of the building.

In June of this year, we returned the shares of the business of D. E. Mortimer & Co. Ltd. to the original owners in a transaction that gave 100% ownership of the real estate of that company to BAS. BAS continues to provide administrative and accounting services to D. E. Mortimer & Co. Ltd.

Whilst there were many challenges and disappointments, there were also many items of success. The Company successfully negotiated an extension to its lease to be the exclusive provider of services for private aircraft. This lease now runs until 2014. In return the Company invested more than $800,000 in the resurfacing of the apron of that facility and in upgrading the lighting for night operations that enhances safety and security.

In March of this year further investment was made in equipment for Aircraft Services Bermuda Ltd. (ASB). This equipment is required to provide services to the various airlines. The purchase of new air stairs, baggage carts, a lavatory service truck and a container loader will replace similar pieces at the end of their cycle. ASB had an excellent year of operation with revenue increasing 3% and operating profits also ahead 3%.

Crow Lane Bakery Ltd. also improved its performance during this year with sales in the subsidiary increasing 3%. Operating profits were up 30% with expenses being increased less than 2%. We are extremely pleased with the performance and look forward to another successful year under the leadership of that group's management.

BAS-Serco's contribution to the group was also ahead of fiscal 2003. The scope of works remains consistent as the reviews by our primary contractors continue to be very positive. We congratulate our colleagues in BAS-Serco on receiving the "people" recognition award from chairman Brad King of Serco North America. BAS-Serco was recognized for the extraordinary work and response during hurricane Fabian. Their efforts were critical in getting the Bermuda International Airport back open in a timely manner which helped in getting needed supplies to the island. It is unlikely the team could have performed so well under such demanding conditions had they not been fully committed and had the support of their company. The Serco foundation has awarded BAS-Serco £15,000 which will go to the charity of our choice in Bermuda.

Weir Enterprises Ltd. saw an 8% increase in revenue as it continued to perform to forecast. The board would like to extend its thanks to the staff of Weir who have gained a reputation as the most courteous and efficient in the industry. Under the direction of George Hammond and Jeff Cook we can be assured of continued success.

Again this year, BAS, through careful cash management, was able to accelerate its long term debt reduction. As it is still our intention to acquire new companies that will strengthen BAS, we feel it is prudent to strengthen our balance sheet and position ourselves for such opportunities when they arise.

In April of this year, a selection committee of the board identified Raymond Packwood to succeed our present CEO who is expected to retire in 2006. He is intimately familiar with the Company having served many years as our chief financial officer and actively participated in the administration of BAS.

During the past year Neville Conyers decided to step down from the post of board chairman. We are delighted to say that he has agreed to remain on the board. On behalf of the board, the staff and the shareholders I wish to record our thanks to Neville for his stewardship over so many years.

In addition to our staff, I wish to thank our board of directors for their support during very challenging times and to our shareholders for their continuing belief in our vision. I also believe we have a company that is positioned for continued growth and success. My heartfelt thanks also go out to our management team who leave no doubt that they feel personally accountable for the delivery of outstanding results and promoting our exceptional culture."

Signed by:

Michael L. Darling

Co-Chairman