BAS Submits Chairman's Report To BSX

"THIS PAST YEAR WAS TRULY A REMARKABLE YEAR FOR BERMUDA AVIATION SERVICES LTD. (BAS), AND A REWARDING ONE FOR OUR SHAREHOLDERS AS EARNINGS PER SHARE REACHED $1.91 NO BETTER RESULT HAS BEEN RECORDED EXCEPT THAT OF 2000 WHEN EARNINGS OF $1.99 WERE ACHIEVED. SHAREHOLDER EQUITY FOR THIS FISCAL YEAR IMPROVED 11.3% TO $13.7 MILLION.

OPERATING INCOME FROM CONTINUING OPERATIONS FOR THE YEAR WAS UP 143% OR $1.8 TO $3.0 MILLION, WHILST EXPENSES WERE INCREASED 46% OR $5.9 MILLION. NET EARNINGS FROM CONTINUING OPERATIONS FOR THE YEAR IMPROVED 64% TO $2.0 MILLION ON CONTINUING REVENUES THAT GREW 54% TO 21.7 MILLION.

IN 2004 FOUR EVENTS TOOK PLACE WHICH HAD A SIGNIFICANT IMPACT ON OUR PERFORMANCE. THE CLOSING DOWN OF OUR CATERING BUSINESS AND SUBSEQUENTLY THE AIRPORT BAR HAD A NEGATIVE IMPACT ON INCOME OF MORE THAN A SIX HUNDRED THOUSAND DOLLARS. HOWEVER AS A RESULT WE INTEGRATED GO FORWARD WITH A STRONGER AND MORE STABLE OPERATION. IN NOVEMBER WE INTEGRATED INTERNATIONAL BONDED COURIERS BERMUDA LTD. INTO THE GROUP. THE ADDITION OF THIS SUCCESSFUL AND WELL RUN COMPANY TO OUR PORTFOLIO WILL HELP US ACHIEVE DIVERSITY AND FITS WELL WITH OUR OTHER OPERATIONS. ALSO, IN DECEMBER WE ACQUIRED ADDITIONAL SHARES FROM SERCO MANAGEMENT SERVICES INC. AS A RESULT WE NOW HOLD 82.5% OF THIS COMPANY.

BY TAKING THESE STEPS TO INCREASE OUR OVERALL SIZE AND AT THE SAME TIME DISPOSE OF UNPROFITABLE OPERATIONS WE HAVE POSITIONED THE COMPANY TO GO FORWARD WITH INCREASED PROFIT POTENTIAL AND GREATER DIVERSITY. THESE ACTIONS BY MANAGEMENT HAVE THE FULL SUPPORT OF THE DIRECTORS.

THE OUTLOOK FOR THE NEXT TWELVE MONTHS IS EXTREMELY BRIGHT. WE BELIEVE WE HAVE PUT TOGETHER A GROUP OF GREAT COMPANIES THAT CAN WORK TOGETHER. THE ADDITIONAL INCOME WILL ENABLE US TO GO FORWARD WITH THE

EXPECTATION OF IMPROVED EARNINGS ESPECIALLY AS WE HAVE DISPOSED OF THOSE DIVISIONS THAT WERE NO LONGER ABLE OPERATE PROFITABLY. 

I WOULD LIKE TO TAKE THIS OPPORTUNITY TO THANK ALL OF OUR MANAGEMENT AND STAFF, THEY HAVE DONE A MAGNIFICENT JOB. I AM PROUD OF THE MORE THAN 250 MEMBERS OF STAFF WHO HAVE WORKED WITH ENERGY AND COMMITMENT. I AM CONFIDENT OF OUR SUCCESS WHICH IS DUE IN NO SMALL PART TO OUR PRESIDENT AND HIS LOYAL TEAM. THIS YEAR WE WILL BE ADDING A REPORT FROM MANAGEMENT WHICH WILL COVER DETAILS OF THE VARIOUS COMPANIES. 

FINALLY IT IS WITH GRATITUDE THAT WE BID FAREWELL TO TWO OF OUR DIRECTORS; MR. C.N.A. BUTTERFIELD AND MR. MARK MORABITO. THE FORMER WAS ONE OF THE LONGER SERVING MEMBERS OF THE BOARD REPRESENTING ONE OF THE FOUNDING FAMILIES OF THE COMPANY AND WE ARE GRATEFUL TO HIM FOR SO MANY YEARS OF SERVICE. THE LATTER STEPPED IN TO FILL THE VACANCY THAT OCCURRED WHEN MR. WILLIAM FRITH STEPPED DOWN IN 1996."

Signed by:

Michael L. Darling

Co-Chairman