UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2005
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period           to

Commission File Number 001-31617

Offshore Logistics, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	72-0679819 (IRS Employer Identification Number)
2000 W. Sam Houston Parkway South, Suite 1700 Houston, Texas (Address of principal executive offices)	77042 (Zip Code)

Registrant’s telephone number, including area code:

(713) 267-7600

N/A

(Former name, former address and former fiscal year, if changed since last report)

     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 for 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 o          No þ

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes þ          No o

      Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes o          No þ

      Indicate the number shares outstanding of each of the issuer’s classes of Common Stock, as of December 15, 2005.

23,344,508 shares of Common Stock, $.01 par value

OFFSHORE LOGISTICS, INC.

INDEX — FORM 10-Q

		Page
PART I
Item 1.	Financial Statements		2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		45
Item 4.	Controls and Procedures		45
PART II
Item 1.	Legal Proceedings		47
Item 1A.	Risk Factors		48
Item 3.	Defaults Upon Senior Securities		48
Item 4.	Submission of Matters to a Vote of Security Holders		48
Item 6.	Exhibits		48
Signatures			50
Delaware Certificate of Incorporation
Certificate of Amendment of Certificate of Incorporation
Certificate of Amendment of Certificate of Incorporation
Amended and Restated By-laws
Certificate of Designation of Series A Junior Participating Preferred Stock
New Helicopter Sales Agreement
Amendment #1 to Sikorsky Agreement
Amendment #2 to Sikorsky Agreement
Amendment #3 to Sikorsky Agreement
Amendment #4 to Sikorsky Agreement
Amendment #5 to Sikorsky Agreement
Amendment #6 to Sikorsky Agreement
Amendment #7 to Sikorsky Agreement
Amendment #8 to Sikorsky Agreement
Amendment #9 to Sikorsky Agreement
Letter from KPMG LLP
Rule 13a-14(a) Certification of CEO, President and CFO
Section 1350 Certification of CEO, President and CFO

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

			Three Months Ended
			June 30,
			2005			2004
						(Restated)
			(Unaudited)
			(In thousands, except per
			share amounts)
Operating revenues			$	180,937		$	160,401
Operating expenses:
	Direct costs			141,214			121,877
	Depreciation and amortization			10,307			10,450
	General and administrative			14,963			11,321
	Gain on disposal of assets			(592	)		(2,598	)
				165,892			141,050
		Operating income		15,045			19,351
Earnings from unconsolidated affiliates, net of losses				46			1,520
Interest income				1,032			436
Interest expense				(3,708	)		(3,929	)
Other income, net				2,783			88
		Income before provision for income taxes and minority interest		15,198			17,466
Provision for income taxes				3,176			5,790
Minority interest				(50	)		(89	)
		Net income	$	11,972		$	11,587
Net income per common share:
		Basic	$	0.51		$	0.51
		Diluted	$	0.51		$	0.51

The accompanying notes are an integral part of these financial statements.

2

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

				June 30,			March 31,
				2005			2005
				(Unaudited)
				(In thousands)
ASSETS
Current assets:
	Cash and cash equivalents			$	106,222		$	146,440
	Accounts receivable				155,239			133,839
	Inventories				144,651			140,706
	Prepaid expenses and other				9,983			11,459
		Total current assets			416,095			432,444
Investments in unconsolidated affiliates					35,982			37,176
Property and equipment — at cost:
	Land and buildings				33,948			32,543
	Aircraft and equipment				834,410			827,031
					868,358			859,574
	Less: accumulated depreciation and amortization				(253,392	)		(250,512	)
					614,966			609,062
Goodwill					26,797			26,809
Other assets					42,629			44,085
				$	1,136,469		$	1,149,576
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
	Accounts payable			$	38,364		$	35,640
	Accrued liabilities				98,012			101,904
	Deferred taxes				16,145			17,740
	Current maturities of long-term debt				6,476			6,413
			Total current liabilities		158,997			161,697
Long-term debt, less current maturities					255,008			255,667
Other liabilities and deferred credits					156,767			164,728
Deferred taxes					69,639			69,977
Minority interest					4,281			4,514
Commitments and contingencies (Note E)
Stockholders’ investment:
	Common Stock, $.01 par value, authorized 35,000,000 shares; outstanding 23,341,508 shares and 23,314,708 shares at June 30 and March 31, respectively (exclusive of 1,281,050 treasury shares)				233			233
	Additional paid-in capital				157,744			157,100
	Retained earnings				401,687			389,715
	Accumulated other comprehensive loss				(67,887	)		(54,055	)
					491,777			492,993
				$	1,136,469		$	1,149,576

The accompanying notes are an integral part of these financial statements.

3

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

		Three Months Ended
		June 30,
		2005			2004
					(Restated)
		(Unaudited)
		(In thousands)
Cash flows from operating activities:
	Net income	$	11,972		$	11,587
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
	Depreciation and amortization		10,307			10,450
	Increase (decrease) in deferred taxes		(737	)		2,358
	Gain on asset dispositions		(592	)		(2,598	)
	Equity in earnings from unconsolidated affiliates (over) under dividends received		(46	)		10,907
	Minority interest in earnings		50			89
Increase (decrease) in cash resulting from changes in:
	Accounts receivable		(27,430	)		(4,261	)
	Inventories		(7,144	)		(2,388	)
	Prepaid expenses and other		736			(2,339	)
	Accounts payable		3,522			7,118
	Accrued liabilities		(567	)		(6,587	)
	Other liabilities and deferred credits		154			501
Net cash provided by (used in) operating activities			(9,775	)		24,837
Cash flows from investing activities:
	Capital expenditures		(30,130	)		(14,978	)
	Proceeds from asset dispositions		2,394			12,757
Net cash used in investing activities			(27,736	)		(2,221	)
Cash flows from financing activities:
	Repayment of debt		(798	)		(249	)
	Repurchase of shares from minority interests		—			(7,389	)
	Partial prepayment of put/call obligation		(34	)		—
	Issuance of common stock		530			3,285
Net cash used in financing activities			(302	)		(4,353	)
Effect of exchange rate changes on cash and cash equivalents			(2,405	)		(325	)
Net increase (decrease) in cash and cash equivalents			(40,218	)		17,938
Cash and cash equivalents at beginning of period			146,440			85,679
Cash and cash equivalents at end of period		$	106,222		$	103,617
Supplemental disclosure of cash flow information:
Cash paid during the period for:
	Interest, net of interest capitalized	$	6,943		$	7,184
	Income taxes	$	1,711		$	9,807
Supplemental disclosure of non-cash investing activities:
	Nonmonetary exchange of assets	$	—		$	5,876

The accompanying notes are an integral part of these financial statements.

4

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements

NOTE A — BASIS OF PRESENTATION AND CONSOLIDATION

      The information contained in the following condensed notes to consolidated financial statements is condensed from that which would appear in the annual consolidated financial statements; accordingly, the consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and related notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2005 (“Annual Report”). Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the entire fiscal year.

      The condensed consolidated financial statements included herein are unaudited; however, they include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair presentation of the consolidated financial position of the Company at June 30, 2005, the consolidated results of operations for the three months ended June 30, 2005 and 2004, and the consolidated condensed cash flows for the three months ended June 30, 2005 and 2004.

Restatement of Previously Reported Amounts

      As a result of the Internal Review findings discussed further in Note E, the Company restated its historical financial statements to accrue for payroll taxes, penalties and interest attributable to underreported employee payroll. For further information regarding the Internal Review and related matters, including the Company’s restatement of its historical financial statements, refer to the Annual Report. The restated condensed consolidated statements of income included in this Quarterly Report on Form 10-Q for the fiscal period ended June 30, 2005 (“Quarterly Report”) reflect reductions in operating income of $0.9 million for the three months ended June 30, 2004 in connection with this matter. As of June 30, 2005, accrued liabilities includes $16.7 million related to this matter. At this time, the Company cannot estimate what additional payments, fines and/or penalties may be required in connection with the matters identified as a result of the Internal Review or the related Securities and Exchange Commission (“SEC”) investigation; however, such payments, fines and/or penalties could have a material adverse effect on the Company’s business, financial condition and results of operations.

      The Company’s management has separately determined that the Company was not reporting reimbursements received from its customers for costs incurred on their behalf in accordance with United States generally accepted accounting principles (“GAAP”). The Company’s customers reimburse it for certain costs incurred on their behalf, which have historically been recorded by offsetting such amounts against the related expenses. In addition, the Company’s management has determined that the Company did not properly record expenses related to severance benefits for certain employees of a foreign subsidiary and the Company did not properly record expenses related to payroll taxes incurred by one of the Company’s foreign subsidiaries. In accordance with GAAP, the Company has restated its historical financial statements for the three months ended June 30, 2004 to reflect such reimbursement as an increase in revenue and a corresponding increase in expense, and the Company increased direct costs to reflect the severance obligation and payroll taxes in the applicable periods. With respect to customer reimbursements, operating revenues and direct costs were increased $13.0 million for the three months ended June 30, 2004, from previously reported amounts, with no impact on income from operations or net income. With respect to the severance benefits and payroll taxes, direct costs were increased by $0.2 million for the three months ended June 30, 2004.

5

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

      The impact of these adjustments on the condensed consolidated statements of income and cash flows is reflected in the tables below (in thousands, except per share amounts):

	Three Months Ended
	June 30, 2004
	(Unaudited)
	As
	Previously
	Reported			Restated
Statements of Income
Operating revenues	$	147,382		$	160,401
Direct costs		107,668			121,877
Total operating expenses		126,841			141,050
Operating income		20,541			19,351
Income before provision for taxes and minority interests		18,656			17,466
Provision for income taxes		5,597			5,790
Net income		12,970			11,587
Basic EPS		0.57			0.51
Diluted EPS		0.57			0.51
Statements of Cash Flows
Net income	$	12,970		$	11,587
Deferred taxes		2,043			2,358
Decrease in accrued liabilities		(7,655	)		(6,587	)
Net cash provided by operating activities		24,837			24,837

      In addition, certain information in Notes B, G, H and J has been restated to reflect the effect of these adjustments. Certain amounts in the above presentation for 2004 have been reclassified to conform to the current year presentation. Specifically, gains and losses on asset disposals were previously included in revenues but are now included in operating expenses.

Recent Accounting Pronouncements

      In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 153, “Exchange of Nonmonetary Assets” (“SFAS No. 153”), effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. SFAS No. 153 amends Accounting Principles Board (“APB”) Opinion No. 29, “Accounting for Nonmonetary Transactions”, to eliminate the similar productive assets concept and replace it with the concept of commercial substance. Commercial substance occurs when the future cash flows of an entity are changed significantly due to the nonmonetary exchange. The adoption of SFAS No. 153 did not have a significant impact on the Company’s financial statements.

      In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment” (“SFAS No. 123R”), which is a revision of SFAS No. 123, “Accounting for Stock Based Compensation” (“SFAS No. 123”) and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB Opinion No. 25”). SFAS No. 123R becomes effective for the Company’s fiscal year beginning April 1, 2006 and will require companies to expense stock options and other share based payments. The Company does not currently know whether implementation of SFAS No. 123R would result in financial results materially different from pro forma results presented in Note B.

      In December 2004, the FASB issued FASB Staff Position No. 109-1, “Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004” (“FSP 109-1”) which provides accounting guidance to companies

6

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

that will be eligible for the tax deduction resulting from “qualified production activities income” as defined in the American Jobs Creation Act of 2004 (the “Act”). FSP No. 109-1 provides that this deduction will be treated as a “special deduction” as described in SFAS 109 rather than a reduction in the statutory tax rate applied to deferred tax items. As such, FSP 109-1 does not result in a revaluation of the Company’s U.S. deferred tax assets. The impact of this deduction has not had and is not expected to have a material effect on the Company’s results for fiscal year 2006, the first tax year in which this tax deduction is available.

      In December 2004, the FASB issued Staff Position No. 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (“FSP No. 109-2”) to address the treatment of a special one time incentive provided in the Act for companies to repatriate foreign earnings. Signed into law on October 22, 2004, the Act provides for a special one-time tax deduction equal to 85% of dividends received out of qualifying foreign earnings that are paid in either a company’s last tax year that began before the enactment date, or the first tax year that begins during the one-year period beginning on the enactment date. The special deduction is subject to a number of limitations and requirements, one of which is to adopt a Domestic Reinvestment Plan (“DRIP”) to document planned reinvestments of amounts equal to the foreign earnings repatriated under the Act. FSP 109-2 provides entities additional time to assess the effect of repatriating foreign earnings under the Act for purposes of applying SFAS No. 109, which otherwise requires the effect of a new tax law to be recorded in the period of enactment. In September 2005, senior management approved a DRIP that provides for the repatriation of up to $75 million of previously unremitted foreign earnings under the Act. If the Company does repatriate the maximum amount called for in the DRIP, the related U.S. incremental tax liability associated with the total repatriated earnings would be approximately $5.3 million. Technical corrections, regulations and additional guidance from the U.S. Treasury related to the statute could impact the Company’s estimate of the tax liability associated with the potential range of repatriation. The favorable U.S. tax rate on such repatriations under the Act applies to qualifying distributions received by the Company through March 31, 2006. As of November 2005, the Company had received $30.9 million of repatriated funds intended to qualify under the Act, and the Company has reflected the tax in its overall effective tax rate for the three months ended June 30, 2005.

      In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (“Interpretation No. 47”), an interpretation of SFAS No. 143, “Accounting for Asset Retirement Obligations” (“SFAS No. 143”). The interpretation is effective for the Company’s fiscal year ending March 31, 2006. Interpretation No. 47 provides clarification on conditional asset retirement obligation and the fair value of such obligation as referred to in SFAS No. 143. The adoption of Interpretation No. 47 did not have a significant impact on these condensed consolidated financial statements.

      In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS No. 154”), which is a replacement of APB Opinion No. 20, “Accounting Changes”, and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements”. SFAS No. 154 becomes effective for the Company’s fiscal year beginning April 1, 2006 and provides guidance on the accounting for, and reporting of, accounting changes and error corrections. SFAS No. 154 establishes the method of retrospective application as the required method of reporting a change in accounting principle, unless impracticable or the new accounting principle explicitly states transition requirements, and the Company expects that in the future there will be more instances of retrospective application of new accounting principles to prior periods whereas previously such applications were typically required to be reported as a cumulative adjustment in the period in which the accounting principle was adopted. With respect to reporting the correction of an error in previously issued financial statements, SFAS No. 154 carries forward without change the guidance contained in APB Opinion No. 20 which requires the correction to be reflected as a prior period adjustment, and therefore the adoption of this standard would not have affected the restatements reflected in these financial statements.

7

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

NOTE B — EARNINGS PER SHARE

      Basic earnings per common share was computed by dividing net income by the weighted average number of shares of Common Stock outstanding during the period. Diluted earnings per common share for the three months ended June 30, 2005 excluded options to purchase 89,000 shares at a weighted average exercise price of $33.69, which were outstanding during the period but were anti-dilutive. Diluted earnings per share for the three months ended June 30, 2004 excluded options to purchase 7,418 shares at a weighted average exercise price of $27.21, which were outstanding during the period but were anti-dilutive. The following table sets forth the computation of basic and diluted net income per share:

			Three Months Ended
			June 30,
			2005		2004
					(Restated)
Net income (in thousands):
	Income available to common stockholders		$	11,972	$	11,587
Shares:
	Weighted average number of common shares outstanding			23,319,677		22,654,114
	Options and restricted stock units			262,734		250,671
		Weighted average number of common shares outstanding, including assumed conversions		23,582,411		22,904,785
Basic earnings per share			$	0.51	$	0.51
Diluted earnings per share			$	0.51	$	0.51

      The Company accounts for its stock-based employee compensation under the principles prescribed by APB Opinion No. 25. SFAS No. 123 permits the continued use of the intrinsic-value based method prescribed by APB Opinion No. 25 but requires additional disclosures, including pro forma calculations of earnings and net earnings per share as if the fair value method of accounting prescribed by SFAS No. 123 had been applied. As required by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” which amended SFAS No. 123, the following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-

8

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

based employee compensation. The pro forma data presented below may not be representative of the effects on reported amounts for future years.

		Three Months Ended
		June 30,
		2005			2004
					(Restated)
		(In thousands, except
		per share amounts)
Net income, as reported:		$	11,972		$	11,587
	Stock-based employee compensation expense included in reported net income, net of tax		30			—
	Stock-based employee compensation expense, net of tax		(546	)		(463	)
	Pro forma net income	$	11,456		$	11,124
Basic earnings per share:
	Earnings per share, as reported	$	0.51		$	0.51
	Stock-based employee compensation expense, net of tax		(0.02	)		(0.02	)
	Pro forma basic earnings per share	$	0.49		$	0.49
Diluted earnings per share:
	Earnings per share, as reported	$	0.51		$	0.51
	Stock-based employee compensation expense, net of tax		(0.02	)		(0.02	)
	Pro forma diluted earnings per share	$	0.49		$	0.49

NOTE C — INVESTMENTS IN UNCONSOLIDATED AFFILIATES

      During the first quarter of fiscal 2006, the Company’s unconsolidated Norwegian affiliate, Norsk Helikopter AS (“Norsk”), completed the acquisition of Lufttransport A/ S, a Norwegian company, and its sister company Lufttransport AB, in Sweden, collectively operating 28 aircraft and engaged in providing air ambulance services in Scandinavia. In addition, in the first quarter of fiscal year 2006, Norsk committed to purchase three large aircraft. The purchase of these three aircraft, supported by a multi-year contract to provide helicopter services offshore in Norway, will be funded through additional borrowings by Norsk and additional funding by both of its shareholders.

NOTE D — LONG-TERM DEBT

      Long-term debt at June 30, 2005 and March 31, 2005 consisted of the following (in thousands):

		June 30,		March 31,
		2005		2005
61/8% Senior Notes due 2013		$	230,000	$	230,000
Limited recourse term loans			20,849		21,116
Short-term advance from customer			3,400		3,400
Note to Sakhalin Aviation Services Ltd.			629		641
Sakhalin debt			6,606		6,923
	Total debt		261,484		262,080
	Less current maturities		6,476		6,413
	Total long-term debt	$	255,008	$	255,667

9

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

      At June 30, 2005, the Company had a $30 million unsecured line of credit with a U.S. bank that expires on August 31, 2006. Borrowings bear interest at a rate equal to one month LIBOR plus a spread ranging from 1.25% to 2.0%. The Company had $0.7 million of outstanding letters of credit and no borrowings under this facility as of June 30, 2005.

      At June 30, 2005, Bristow Aviation Holdings, Ltd. (“Bristow”) had a £6.0 million ($10.8 million) facility for letters of credit, of which £3.6 million ($6.4 million) was outstanding, and a £1 million ($1.8 million) net overdraft facility, of which no borrowings were outstanding. Both facilities are with a U.K. bank. The letter of credit facility is provided on an uncommitted basis, and outstanding letters of credit bear a rate of 0.7% per annum. Borrowings under the net overdraft facility are payable upon demand and bear interest at the bank’s base rate plus a spread that can vary between 1% and 3% per annum depending on the net overdraft amount. The net overdraft facility was scheduled to expire August 31, 2005, but has been extended to August 31, 2006.

      Defaults Under Certain Long-Term Debt Agreements — The $230.0 million 6¹/8% Senior Notes due 2013 (“Senior Notes”) were issued on June 20, 2003. On June 16, 2005, the Company received notice from the trustee of the indenture underlying the Senior Notes that it was in breach of the financial reporting covenants contained in the indenture, and stating that, unless the deficiency was remedied within 60 days, an event of default would occur under the indenture. On July 26, 2005, the Company solicited consents from all holders of the Senior Notes to extend until November 15, 2005 (or, at the election of the Company and upon the payment of additional fees, until December 15, 2005 or January 16, 2006, as applicable) the period in which the Company must file and deliver its financial reports and related documents, and to waive certain past defaults under the indenture relating to the Company’s failure to timely file and deliver its required financial reporting information.

      The Company amended the terms of its solicitation of consents on August 9, 2005 and August 11, 2005 and on August 16, 2005 completed the consent solicitation. The terms of the consent solicitation were as follows:

•  A consent fee to holders of Senior Notes as of 5:00 p.m. (EST) on July 25, 2005 that delivered (and not revoked) valid consents on or prior to August 15, 2005 (the “Expiration Date”) were paid $6.25 per $1,000 principal amount of Senior Notes, or $1.4 million, on August 17, 2005.

•  In the event that the Company did not comply with the financial reporting covenants and related compliance certificate and auditors’ statement covenants on or before November 15, 2005 and elected to pay on or before the third business day following such date an additional fee to consenting holders in an amount equal to $2.50 per $1,000 principal amount of Senior Notes, or $0.6 million, in respect of which consents had been delivered (and not revoked), the Company would have until December 15, 2005 to comply with the financial reporting covenants and the compliance certificate and auditors’ statement covenants in the indenture. In addition, if the Company did not comply with the financial reporting covenants and related compliance certificate and auditors’ statement covenants on or before December 15, 2005 and elected to pay on or before the third business day following such date a further additional fee to consenting holders in an amount equal to $2.50 per $1,000 principal amount of Senior Notes, or $0.6 million, in respect of which consents have been delivered (and not revoked), the Company would have until January 16, 2006 to comply with the financial reporting covenants and the compliance certificate and auditors’ statement covenants in the indenture. In the event that the Company did not comply with the financial reporting covenants and related compliance certificate and auditors’ statement covenants on or before November 15, 2005 (or, at the election of the Company and upon the payment of an additional fee described above, until December 15, 2005 or January 16, 2006, as applicable), the trustee or the holders of at least 25% in principal amount of the outstanding Senior Notes could have declared all of the Senior Notes due and payable immediately.

10

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

      On November 15, 2005, the Company elected to extend the waiver to December 15, 2005 upon payment of the additional fee described above, and on December 15, 2005 the Company elected to exercise its option to further extend this waiver through January 16, 2006 upon payment of the second additional fee described above. The consent and waiver fees have been deferred and are being amortized over the remaining term of the Senior Notes.

      As of June 30, 2005, the Company was in default of the various financial information reporting covenants in its revolving credit facility and a five-year $31.8 million term loan (the “RLR Note”) under which an unconsolidated affiliate, Rotorwing Leasing Resources, L.L.C. (“RLR”), is a borrower and the Company is a guarantor. The defaults were as a result of not providing financial information for fiscal 2005 when due, and also for not providing similar information to other creditors. This situation resulted from activities identified in connection with the Internal Review discussed in Note E which prevented the Company from filing the financial report for fiscal year 2005 on time. The bank initially provided waivers through August 14, 2005, and subsequently provided additional waivers through November 15, 2005. Further, the waivers were extended at the Company’s election through December 15, 2005 upon payment of $26,000, and were further extended through January 16, 2006 upon payment of an additional fee of $26,000.

NOTE E — COMMITMENTS AND CONTINGENCIES

      Aircraft Purchase Contracts — In fiscal 2003, the Company initiated a fleet renewal program. In December 2002, the Company entered into a contract with Sikorsky Aircraft Corporation, a major helicopter manufacturer, to acquire 15 new medium-sized helicopters, which are the Company’s most versatile aircraft. Six of the aircraft were delivered in fiscal year 2004, four of the aircraft were delivered in fiscal year 2005, two of the aircraft were delivered in the first half of fiscal year 2006, and one is expected to be delivered in the fourth quarter of fiscal year 2006. The remaining two aircraft are expected to be delivered in early fiscal year 2007. In June 2005, the Company amended the initial contract to acquire 32 additional medium-sized helicopters as part of its ongoing fleet renewal program. The first additional helicopter under the amended contract is due to be delivered early in fiscal year 2007, and a total of 17 additional aircraft are to be delivered in fiscal years 2007 and 2008. The remaining helicopters are slated for delivery between fiscal years 2009 and 2013. The agreement allows the Company to trade in one previously purchased Sikorsky aircraft on each new aircraft purchased. The agreement also gives the Company the option to purchase up to 24 additional aircraft with deliveries through fiscal year 2013, provided the Company exercises the options by an annual deadline. Thereafter, the option aircraft are subject to availability. As of September 30, 2005, the options with respect to six of the aircraft are now subject to availability.

      In connection with the Company’s fleet renewal program, in March 2003, the Company also entered into a contract with Bell Helicopter Textron Canada Ltd., or Bell Helicopter, a major helicopter manufacturer, to acquire 14 new small helicopters. Two of these aircraft were delivered in fiscal year 2004, seven were delivered in fiscal year 2005, four were delivered in the first half of fiscal year 2006, and the final aircraft under this agreement was delivered in the third quarter of fiscal year 2006.

      In January 2004, the Company entered into a purchase agreement with Eurocopter for two new large aircraft to be delivered in calendar year 2005. In connection with this purchase agreement, Eurocopter has found a purchaser for five of the Company’s used large aircraft. The proceeds from the sale of the five used aircraft and some surplus spares will principally fund the purchase of the two new aircraft. The Company took delivery of both of these aircraft during the second quarter of fiscal year 2006.

      In fiscal year 2006, the Company entered into agreements with Eurocopter for the purchase of four large aircraft, all of which are expected to be delivered in the third quarter of fiscal year 2007, and for the purchase of four medium aircraft, three of which are expected to be delivered in the second half of fiscal year 2007 and one of which is expected to be delivered in the first quarter of fiscal year 2008. In addition, the Company entered into an agreement with Bell Helicopter for the purchase of six medium aircraft to be delivered in fiscal

11

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

year 2006, all of which were delivered subsequent to June 2005. The Company also purchased five small used aircraft that were delivered in the first and second quarters of fiscal year 2006.

      In June 2005, the Company entered into an agreement regarding the purchase of three large aircraft to be utilized and owned by Norsk. The Company agreed to fund the purchase of one aircraft, and Norsk and the other equity owner in Norsk each agreed to fund the purchase of one of the two other aircraft. One was delivered in the third quarter of fiscal year 2006 and the remaining two are expected to be delivered in fiscal year 2007.

      As of June 30, 2005, the Company had $359.6 million remaining to be paid in connection with its aircraft purchase commitments.

      Internal Review — In February 2005, the Company voluntarily advised the SEC that the Audit Committee of its Board of Directors had engaged special outside counsel to undertake a review of certain payments made by two of the Company’s affiliated entities in a foreign country. The review of these payments, which initially focused on Foreign Corrupt Practices Act matters, was subsequently expanded to cover operations in other countries and other issues (the “Internal Review”). In connection with this review, special outside counsel to the Audit Committee retained forensic accountants.

      The SEC then notified the Company that it had initiated an informal inquiry and requested that the Company provide certain documents on a voluntary basis. Subsequently, the SEC advised the Company that the inquiry had become an investigation. The Company has responded to the SEC’s requests for documents and is continuing to do so.

      The Internal Review is complete and the accompanying financial statements reflect all known required restatements. As a follow-up to matters identified during the course of the Internal Review, Special Counsel to the Audit Committee is completing certain work, and may be called upon to undertake additional work in the future to assist in responding to inquiries from the SEC, from other governmental authorities or customers, or as follow-up to the steps being performed by Special Counsel.

      In October 2005, the Audit Committee reached certain conclusions with respect to findings to date from the Internal Review. The Audit Committee concluded that, over a considerable period of time, (a) improper payments were made by, and on behalf of, certain foreign affiliated entities directly or indirectly to employees of the Nigerian government, (b) improper payments were made by certain foreign affiliated entities to Nigerian employees of certain customers with whom the Company has contracts, (c) inadequate employee payroll declarations and, in certain instances, tax payments were made by the Company or its affiliated entities in certain jurisdictions, (d) inadequate valuations for customs purposes may have been declared in certain jurisdictions resulting in the underpayment of import duties, and (e) an affiliated entity in a South American country, with the assistance of Company personnel and two of its other affiliated entities, engaged in transactions which appear to have assisted the South American entity in the circumvention of currency transfer restrictions and other regulations. In addition, as a result of the Internal Review, the Audit Committee and management determined that there were deficiencies in the Company’s books and records and internal controls with respect to the foregoing and certain other activities.

      Based on the Audit Committee’s findings and recommendations, the Board of Directors has taken disciplinary action with respect to the Company’s personnel who it determined bore responsibility for these matters. The disciplinary actions included termination or resignation of employment (including of certain members of senior management), changes of job responsibility, reductions in incentive compensation payments and reprimands. One of the Company’s affiliates has also obtained the resignation of certain of its personnel.

      The Company has initiated remedial action, including initiating action to correct underreporting of payroll tax, disclose to certain customers inappropriate payments made to customer personnel and terminate

12

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

certain agency, business and joint venture relationships. The Company also has taken steps to reinforce its commitment to conduct its business with integrity by creating an internal corporate compliance function, instituting a new code of business conduct (the Company’s new code of business conduct entitled “Code of Business Integrity” is available on its website, http://www.olog.com), and developing and implementing a training program for all employees. In addition to the disciplinary actions referred to above, the Company has also taken steps to strengthen its control environment by hiring new personnel and realigning reporting lines within the accounting function so that field accounting reports directly to the corporate accounting function instead of operations management.

      Following the Audit Committee’s conclusions, the Company initiated the process of voluntarily advising governmental authorities in certain countries of the Audit Committee’s findings. The Company has not yet advised such foreign governmental authorities of the Audit Committee findings, but intends to do so. Such disclosure may result in legal and administrative proceedings, the institution of administrative, civil injunctive or criminal proceedings involving the Company and/or current or former employees, officers and/or directors who are within the jurisdictions of such authorities, the imposition of fines and other penalties, remedies and/or sanctions, including precluding the Company from participating in business operations in their countries. To the extent that violations of the law may have occurred in several countries in which the Company operates, the Company does not yet know whether such violations can be cured merely by the payment of fines or whether other actions may be taken against the Company, including requiring the Company to curtail its business operations in one or more such countries for a period of time. In the event that the Company curtails its business operations in any such country, the Company may face difficulties exporting its aircraft. As of November 30, 2005, the book values of its aircraft in Nigeria and the South American country where certain improper activities took place were approximately $101.7 million and $2.9 million, respectively.

      The Company cannot predict the ultimate outcome of the SEC investigation, nor can the Company predict whether other applicable U.S. and foreign governmental authorities will initiate separate investigations. The outcome of the SEC investigation and any related legal and administrative proceedings could include the institution of administrative, civil injunctive or criminal proceedings involving the Company and/or current or former employees, officers and/or directors, the imposition of fines and other penalties, remedies and/or sanctions, modifications to business practices and compliance programs and/or referral to other governmental agencies for other appropriate actions. It is not possible to accurately predict at this time when matters relating to the SEC investigation will be completed, the final outcome of the SEC investigation, what if any actions may be taken by the SEC or by other governmental agencies in the U.S. or in foreign jurisdictions, or the effect that such actions may have on the Company’s consolidated financial statements. In addition, in view of the findings of the Internal Review, the Company expects to encounter difficulties in the future conducting business in Nigeria and a South American country, and with certain customers. It is also possible that certain of the Company’s existing contracts may be cancelled and that the Company may become subject to claims by third parties, possibly resulting in litigation. The matters identified in the Internal Review and their effects could have a material adverse effect on the Company’s business, financial condition and results of operations.

      In connection with its conclusions regarding payroll declarations and tax payments, the Audit Committee determined on November 23, 2005, following the recommendation of the Company’s senior management, that there was a need to restate the Company’s historical consolidated financial statements, including those for the quarterly periods in fiscal year 2005. As of June 30, 2005, the Company has accrued $16.7 million for the taxes, penalties and interest attributable to underreported employee payroll. Operating income for the three months ended June 30, 2005 and 2004 includes $0.9 million and $0.9 million, respectively, attributable to this accrual. At this time, the Company cannot estimate what additional payments, fines, penalties and/or litigation and related expenses may be required in connection with the matters identified as a result of the Internal Review, the SEC investigation, any other regulatory investigation that may be instituted or third-

13

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

party litigation; however, such payments, fines, penalties and/or expenses could have a material adverse effect on the Company’s business, financial condition and results of operations.

      As the Company continues to respond to the SEC investigation and other governmental authorities and take other actions relating to improper activities that have been identified in connection with the Internal Review, there can be no assurance that additional restatements will not be required or that these historical financial statements will not change or require amendment. In addition, new issues may be identified that may impact the financial statements and the scope of the restatements described in this Quarterly Report and the Annual Report and lead the Company to take other remedial actions or that may otherwise adversely impact the Company.

      Through November 30, 2005, the Company has incurred approximately $11.2 million, including $3.2 million in the three months ended June 30, 2005, in legal and other professional costs in connection with the Internal Review. The Company expects to incur additional costs associated with the Internal Review, which will be expensed as incurred and which could be significant in the fiscal quarters in which they are recorded.

      As a result of the disclosure and remediation of a number of activities identified in the Internal Review, the Company expects to encounter difficulties conducting business in certain foreign countries and retaining and attracting additional business with certain customers. The Company cannot predict the extent of these difficulties; however, its ability to continue conducting business in these countries and with these customers may be significantly impacted.

      The Company has commenced actions to disclose activities in Nigeria identified in the Internal Review to affected customers, and one or more of these customers may seek to cancel their contracts with the Company. One such customer already has commenced its own investigation. Among other things, the Company has been advised that such customer intends to exercise its rights to audit a specific contract, as well as to review its other relations with the Company. Although the Company has no indication as to what the final outcome of the audit and review will be, it is possible that such customer may seek to cancel one or more existing contracts if it believes that they were improperly obtained or that the Company breached any of their terms. Since its customers in Nigeria are affiliates of major international petroleum companies with whom the Company does business throughout the world, any actions which are taken by certain customers could have a material adverse effect on its business, financial position and results of operations, and these customers may preclude the Company from bidding on future business with them either locally or on a worldwide basis. In addition, applicable governmental authorities may preclude the Company from bidding on contracts to provide services in the countries where improper activities took place.

      In connection with the Internal Review, the Company also has terminated its business relationship with certain agents and has taken actions to terminate business relationships with other agents. As described further below, in November 2005, one of the terminated agents and his affiliated entity have commenced litigation against two of the Company’s foreign affiliated entities claiming damages of $16.3 million for breach of contract. The Company may be required to indemnify certain of its agents to the extent that regulatory authorities seek to hold them responsible in connection with activities identified in the Internal Review.

      In a South American country where certain improper activities took place, the Company is negotiating to terminate its ownership interest in the joint venture that provides the Company with the local ownership content necessary to meet local regulatory requirements for operating in that country. During fiscal year 2005, the Company derived approximately $9.9 million of leasing and other revenues, of which $3.2 million was paid by the Company to a third party for the use of the aircraft, and received approximately $0.3 million of dividend income from this joint venture. During the three months ended June 30, 2005, the Company derived approximately $2.0 million of leasing and other revenues, of which $1.3 million was paid by the Company to a third party for the use of the aircraft, and received no dividend income from this joint venture. Without a joint

14

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

venture partner, the Company will be unable to maintain an operating license and its future activities in that country may be limited to leasing its aircraft to unrelated operating companies. The Company’s joint venture partners and agents are typically influential members of the local business community and instrumental in aiding the Company in obtaining contracts and managing its affairs in the local country. As a result of terminating these relationships, the Company’s ability to continue conducting business in these countries where the improper activities took place may be negatively affected. The Company may not be successful in its negotiations to terminate its ownership interest in the joint venture, and the outcome of such negotiations may negatively affect the Company’s ability to continue leasing its aircraft to the joint venture or unrelated operating companies or conducting other business in that country, to export its aircraft or to recover its investment in the joint venture.

      Many of the improper actions identified in the Internal Review resulted in decreasing the costs incurred by the Company in performing its services. The remedial actions the Company is taking will result in an increase in these costs and, if the Company cannot raise its prices simultaneously and to the same extent of its increased costs, its operating income will decrease.

      In November 2005, two of the Company’s consolidated foreign affiliates were named in a lawsuit filed in the High Court of Lagos State, Nigeria by Mr. Benneth Osita Onwubalili and Kensit Nigeria Limited, which allegedly acted as agents of the affiliates in Nigeria. The claimants allege that an agreement between the parties was terminated without justification by the defendants and seek damages of $16.3 million. The Company is continuing to investigate this matter.

      Collective Bargaining Agreement — The Company employs approximately 300 pilots in its North American Operations who are represented by the Office and Professional Employees International Union (“OPEIU”) under a collective bargaining agreement. The Company and the pilots represented by the OPEIU ratified an amended collective bargaining agreement on April 4, 2005. The terms under the amended agreement are fixed until October 3, 2008 and include a wage increase for the pilot group and improvements to several benefit plans. The Company does not believe that these increases will place it at a competitive, financial or operational disadvantage.

      Document Subpoena from U.S. Department of Justice — On June 15, 2005, the Company issued a press release stating that one of the Company’s subsidiaries had received a document subpoena from the Antitrust Division of the U.S. Department of Justice (“DOJ”). The subpoena relates to a grand jury investigation of potential antitrust violations among providers of helicopter transportation services in the U.S. Gulf of Mexico. The Company is continuing to investigate this matter and intends to comply with requests for information from the DOJ in connection with this investigation. The outcome of the DOJ investigation and any related legal and administrative proceedings could include civil injunctive or criminal proceedings, the imposition of fines and other penalties, remedies and/or sanctions, referral to other governmental agencies and/or the payment of damages in civil litigation. It is not possible to predict accurately at this time when the government investigation described above will be completed. Based on current information, the Company cannot predict the outcome of such investigation or what, if any, actions may be taken by the DOJ or other U.S. agencies or authorities or the effect that they may have on the Company.

      Environmental Contingencies — The United States Environmental Protection Agency, also referred to as the EPA, has in the past notified the Company that it is a potential responsible party, or PRP, at four former waste disposal facilities that are on the National Priorities List of contaminated sites. Under the federal Comprehensive Environmental Response, Compensation and Liability Act, also known as the Superfund law, persons who are identified as PRPs may be subject to strict, joint and several liability for the costs of cleaning up environmental contamination resulting from releases of hazardous substances at National Priorities List sites. The Company was identified by the EPA as a PRP at the Western Sand and Gravel Superfund site in Rhode Island in 1984, at the Sheridan Disposal Services Superfund site in Waller County, Texas in 1989, at the Gulf Coast Vacuum Services Superfund site near Abbeville, Louisiana in 1989, and at Operating

15

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

Industries, Inc. Superfund site in Monterey Park, California in 2003. The Company has not received any correspondence from the EPA with respect to the Western Sand and Gravel Superfund site since February 1991, nor with respect to the Sheridan Disposal Services Superfund site since 1989. Remedial activities at the Gulf Coast Vacuum Services Superfund site were completed in September 1999 and the site was removed from the National Priorities List in July 2001. The EPA has offered to submit a settlement offer to the Company in return for which the Company would be recognized as a de minimis party in regard to the Operating Industries Superfund site, but the Company has not received this settlement proposal. Although the Company has not obtained a formal release of liability from the EPA with respect to any of these sites, the Company believes that its potential liability in connection with these sites is not likely to have a material adverse effect on its business, financial condition or results of operations.

      Other Matters — See Note I for discussion of additional commitments and contingencies. The Company is a defendant in certain claims and litigation arising out of operations in the normal course of business. In the opinion of management, uninsured losses, if any, will not be material to the Company’s financial position, results of operations or cash flows.

NOTE F — EMPLOYEE BENEFIT PLANS

      The following table provides a detail of the components of net periodic pension cost:

	Three Months Ended
	June 30,
	2005			2004
	(In thousands)
Service cost for benefits earned during the period	$	57		$	72
Interest cost on pension benefit obligation		4,367			5,072
Expected return on assets		(3,973	)		(4,710	)
Prior service costs		—			—
Amortization of unrecognized experience losses		747			833
Net periodic pension cost	$	1,198		$	1,267

      The current estimate of cash contributions to the pension plans by the Company for the year ending March 31, 2006 is $9.9 million, $0.8 million of which was paid during the three months ended June 30, 2005.

NOTE G — COMPREHENSIVE INCOME

      Comprehensive income is as follows:

		Three Months Ended
		June 30,
		2005			2004
					(Restated)
		(In thousands)
Net income		$	11,972		$	11,587
Other comprehensive income:
	Currency translation adjustments		(13,832	)		(3,673	)
Comprehensive income (loss)		$	(1,860	)	$	7,914

NOTE H — SEGMENT INFORMATION

      The Company operates principally in two business segments: Helicopter Services and Production Management Services. Beginning in fiscal year 2006, the Company conducts the operations of its Helicopter

16

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

Services segment through six business units: North America, South and Central America, Europe, West Africa, Southeast Asia and Other International. Previously, the Company conducted these operations through four business units: North America, North Sea, International and Technical Services. The Company provides Production Management Services, contract personnel and medical support services in the U.S. Gulf of Mexico to the domestic oil and gas industry under the Grasso Production Management name. The change in business units reflects changes made in fiscal year 2006 by the Company’s president and chief executive officer (its chief decision maker) and other senior management to the way they manage and evaluate the Company’s results of operations. Accordingly, the Company has modified its segment disclosure to reflect the change in business units. The following shows reportable segment information for the three months ended June 30, 2005 and 2004, reconciled to consolidated totals, and prepared on the same basis as the Company’s consolidated financial statements:

			Three Months Ended
			June 30,
			2005		2004
					(Restated)
			(In thousands)
Segment operating revenues from external customers:
	Helicopter Services:
		North America	$	46,686	$	39,345
		South and Central America		9,456		13,660
		Europe		60,123		55,739
		West Africa		27,618		22,010
		Southeast Asia		13,808		12,056
		Other International		5,648		2,504
	Total Helicopter Services			163,339		145,314
	Production Management Services			16,950		13,676
		Total segment operating revenues	$	180,289	$	158,990
Intersegment and intrasegment operating revenues:
	Helicopter Services:
		North America	$	5,763	$	5,846
		South and Central America		450		400
		Europe		4,170		3,843
		West Africa		—		3
		Southeast Asia		—		—
		Other International		365		70
	Total Helicopter Services			10,748		10,162
	Production Management Services			19		16
		Total intersegment and intrasegment operating revenues	$	10,767	$	10,178

17

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

			Three Months Ended
			June 30,
			2005			2004
						(Restated)
			(In thousands)
Consolidated operating revenues reconciliation:
	Helicopter Services:
		North America	$	52,449		$	45,191
		South and Central America		9,906			14,060
		Europe		64,293			59,582
		West Africa		27,618			22,013
		Southeast Asia		13,808			12,056
		Other International		6,013			2,574
		Intrasegment eliminations		(8,759	)		(8,148	)
	Total Helicopter Services			165,328			147,328
	Production Management Services			16,969			13,692
	Corporate			2,799			3,795
	Intersegment eliminations			(4,159	)		(4,414	)
		Total consolidated operating revenues	$	180,937		$	160,401
Consolidated operating income (loss) reconciliation:
	Helicopter Services:
		North America	$	9,783		$	7,873
		South and Central America		435			3,242
		Europe		5,499			3,229
		West Africa		2,369			2,357
		Southeast Asia		707			1,103
		Other International		906			(586	)
	Total Helicopter Services			19,699			17,218
	Production Management Services			1,320			765
	Gain on disposal of assets			592			2,598
	Corporate			(6,566	)		(1,230	)
		Total consolidated operating income	$	15,045		$	19,351

NOTE I — SUBSEQUENT EVENTS

      Flight Accident — On August 18, 2005, one of the Company’s helicopters operating in the U.S. Gulf of Mexico was involved in an accident that resulted in two fatalities. The cause of the accident is still under investigation by the Company and the National Transportation Safety Board. The Company’s liability in connection with this accident is not likely to have a material adverse effect on its business or financial condition.

      Mexican Joint Venture — Since the conclusion of the contract with Petroleós Mexicanos in February 2005, the Company’s 49% owned unconsolidated affiliates, Hemisco Helicopters International, Inc. (“Hemisco”) and Heliservicio Campeche, S.A. de C.V. (“Heliservicio” and together “HC”) have experienced difficulties in meeting their obligations to make lease rental payments to the Company and RLR. During the three months ended June 30, 2005, the Company and RLR made a determination that because of the uncertainties as to collectibility, lease revenues from HC would be recognized as they were collected. As of June 30, 2005, $2.2 million of revenues billed but not collected from HC have not been recognized in the

18

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

Company’s results and the Company’s 49% share of the equity in earnings of RLR has been reduced by $1.4 million for revenues billed but not collected from HC.

      In order to improve the financial condition of Heliservicio, the Company and its joint venture partner, Compania Controladora de Servicios Aeronauticos, S.A. de C.V. (“CCSA”) completed a recapitalization of Heliservicio on August 19, 2005. As a result of this recapitalization, Heliservicio’s two shareholders, the Company and CCSA, have notes payable to Hemisco of $4.4 million and $4.6 million, respectively, and obligations of Heliservicio in the same amounts were cancelled thereby increasing its capital. The $4.4 million note owed by the Company to Hemisco bears interest at 3% and is due on July 31, 2015.

      The Company is continuing to evaluate certain actions to return HC’s operations to profitability, including reducing the number of aircraft to a lower level based on current utilization, and the Company is actively seeking other markets in which to redeploy the aircraft in Mexico that are currently operating on an ad hoc basis. Although not anticipated or known at this time, such actions could result in future losses.

      Income Taxes on Distributions of Foreign Earnings — In September 2005, in response to the tax-favored provisions on repatriation of foreign earnings into the U.S. provided for in the American Jobs Creation Act of 2004 (the “Act”), the Company’s senior management approved a Domestic Reinvestment Plan (“DRIP”), as required by the Act, documenting the Company’s plan to repatriate up to a maximum of $75 million from its foreign subsidiaries. The Company’s Board of Directors subsequently approved the plan in November 2005. The favorable U.S. tax rate on such repatriations under the Act applies to qualifying distributions received by the Company through March 31, 2006. Through November 2005, the Company has received distributions intended to qualify under the Act totaling $30.9 million from one of its foreign subsidiaries. The Company is currently exploring its options with respect to sources of additional repatriations from its foreign subsidiaries but cannot at this time estimate the total amount, out of the $75 million approved in the DRIP, that will ultimately be received by March 31, 2006.

      Hurricanes Katrina and Rita — As a result of Hurricanes Katrina and Rita, several of the Company’s shorebase facilities located along the U.S. Gulf Coast sustained significant hurricane damage. In particular, Hurricane Katrina caused a total loss of the Company’s Venice, Louisiana shorebase facility, and Hurricane Rita severely damaged the Creole, Louisiana base and flooded the Intracoastal City, Louisiana base. The Company recorded a $0.3 million net gain ($2.9 million in anticipated insurance recoveries offset by $2.6 million of involuntary conversion losses) during the three months ended September 30, 2005 related to property damage to these facilities. The Company reopened its Intracoastal City, Louisiana base in December 2005 and expects to reopen its Venice and Creole, Louisiana bases in the fourth quarter of fiscal year 2006.

      Sale and Leaseback Financing — On December 30, 2005, the Company sold nine aircraft for $68.6 million in aggregate to a subsidiary of General Electric Capital Corporation, and then leased back each of the nine aircraft under separate operating leases with terms of ten years expiring in January 2016. Each “net” lease agreement requires the Company to be responsible for all operating costs and has an effective interest rate of approximately 5%. Rent payments under each lease are payable monthly and total $6.3 million and $7.6 million annually during the first 60 months and second 60 months, respectively, for all nine leases. Each lease has an end of lease purchase option at ten years, an early purchase option at 60 months (January 2011), and an early termination option at 24 months (January 2008). The early purchase option price for the nine aircraft at 60 months is approximately $52 million in aggregate. There was a deferred gain on the sale of the aircraft in the amount of approximately $10.8 million in aggregate. The deferred gain will be amortized as a reduction in lease expense over the 10 year lease term in proportion to the rent payments. Additional collateral in the amount of at least $11.8 million is to be provided until the conclusion of the SEC investigation related to the Internal Review. A portion of the proceeds ($10.3 million) has been retained by the lessor pending the provision of such collateral.

      Stock Option and Restricted Stock Unit Grant — On December 29, 2005, the Company granted options to purchase 105,915 shares at an exercise price of $29.17 per share and granted 143,600 shares of restricted

19

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

stock units pursuant to the 2004 Stock Incentive Plan. The options vest ratably over three years on each anniversary from the date of grant and expire ten years from the date of grant. The restricted stock units fully vest on the fifth anniversary from the date of grant if the “Cumulative Annual Shareholder Return” (as defined in the restricted stock unit agreements) exceeds an annual average of 3% for the five year period. Partial vesting occurs on the third or fourth anniversary after the date of grant if the Cumulative Annual Shareholder Return equals or exceeds 10% with full vesting if such amount equals or exceeds 15%.

NOTE J — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

      In connection with the sale of the Senior Notes, certain of the Company’s subsidiaries (the “Guarantor Subsidiaries”) jointly, severally and unconditionally guaranteed the payment obligations under these notes. The following supplemental financial information sets forth, on a consolidating basis, the balance sheet, statement of income and cash flow information for Offshore Logistics, Inc. (“Parent Company Only”), for the Guarantor Subsidiaries and for Offshore Logistics, Inc.’s other subsidiaries (the “Non-Guarantor Subsidiaries”). The Company has not presented separate financial statements and other disclosures concerning the Guarantor Subsidiaries because management has determined that such information is not material to investors.

      The supplemental condensed consolidating financial information has been prepared pursuant to the rules and regulations for condensed financial information and does not include all disclosures included in annual financial statements, although the Company believes that the disclosures made are adequate to make the information presented not misleading. Certain reclassifications were made to conform all of the financial information to the financial presentation on a consolidated basis. The principal eliminating entries eliminate investments in subsidiaries, intercompany balances and intercompany revenues and expenses.

      The allocation of the consolidated income tax provision was made using the with and without allocation method.

20

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

Supplemental Condensed Consolidating Statement of Income

Three Months Ended June 30, 2005

(In thousands)

			Parent						Non-
			Company			Guarantor			Guarantor
			Only			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Operating revenues			$	16		$	71,575		$	109,346		$	—		$	180,937
Intercompany revenues				—			1,590			1,121			(2,711	)		—
				16			73,165			110,467			(2,711	)		180,937
Operating expenses:
	Direct costs			8			53,057			88,149			—			141,214
	Intercompany expenses			—			1,122			1,479			(2,601	)		—
	Depreciation and amortization			17			4,207			6,083			—			10,307
	General and administrative			6,692			2,978			5,403			(110	)		14,963
	Loss (gain) on disposal of assets			6			(9	)		(589	)		—			(592	)
				6,723			61,355			100,525			(2,711	)		165,892
		Operating income (loss)		(6,707	)		11,810			9,942			—			15,045
Earnings (losses) from unconsolidated affiliates, net of losses				6,831			(810	)		909			(6,884	)		46
Interest income				13,534			44			1,127			(13,673	)		1,032
Interest expense				(3,668	)		(1	)		(13,712	)		13,673			(3,708	)
Other income (expense), net				(347	)		(8	)		3,138			—			2,783
		Income before provision for income taxes and minority interest		9,643			11,035			1,404			(6,884	)		15,198
Allocation of consolidated income taxes				(2,370	)		1,241			4,305			—			3,176
Minority interest				(41	)		—			(9	)		—			(50	)
		Net income (loss)	$	11,972		$	9,794		$	(2,910	)	$	(6,884	)	$	11,972

21

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

Supplemental Condensed Consolidating Statement of Income

Three Months Ended June 30, 2004

(Restated)

(In thousands)

			Parent						Non-
			Company			Guarantor			Guarantor
			Only			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Operating revenues			$	229		$	62,186		$	97,986		$	—		$	160,401
Intercompany revenues				—			928			541			(1,469	)		—
				229			63,114			98,527			(1,469	)		160,401
Operating expenses:
	Direct costs			13			45,171			76,693			—			121,877
	Intercompany expenses			—			541			688			(1,229	)		—
	Depreciation and amortization			30			3,627			6,793			—			10,450
	General and administrative			2,518			2,889			6,154			(240	)		11,321
	Gain on disposal of assets			—			(1,293	)		(1,305	)		—			(2,598	)
				2,561			50,935			89,023			(1,469	)		141,050
		Operating income (loss)		(2,332	)		12,179			9,504			—			19,351
Earnings from unconsolidated affiliates, net of losses				6,266			535			1,038			(6,319	)		1,520
Interest income				11,813			9			727			(12,113	)		436
Interest expense				(3,803	)		(83	)		(12,156	)		12,113			(3,929	)
Other income (expense), net				(9	)		10			87			—			88
		Income (loss) before provision for income taxes and minority interest		11,935			12,650			(800	)		(6,319	)		17,466
Allocation of consolidated income taxes				259			1,828			3,703			—			5,790
Minority interest				(89	)		—			—			—			(89	)
		Net income (loss)	$	11,587		$	10,822		$	(4,503	)	$	(6,319	)	$	11,587

22

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

Supplemental Condensed Consolidating Balance Sheet

As of June 30, 2005

(In thousands)

			Parent						Non-
			Company			Guarantor			Guarantor
			Only			Subsidiaries			Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
	Cash and cash equivalents		$	11,471		$	4,495		$	90,256		$	—		$	106,222
	Accounts receivable			18,353			49,079			111,589			(23,782	)		155,239
	Inventories			—			76,745			67,906			—			144,651
	Prepaid expenses and other			385			1,892			7,706			—			9,983
		Total current assets		30,209			132,211			277,457			(23,782	)		416,095
Intercompany investment				301,095			1,046			—			(302,141	)		—
Investments in unconsolidated affiliates				632			3,309			32,041			—			35,982
Intercompany notes receivable				553,202			—			11,256			(564,458	)		—
Property and equipment — at cost:
	Land and buildings			136			24,778			9,034			—			33,948
	Aircraft and equipment			1,260			347,398			485,752			—			834,410
				1,396			372,176			494,786			—			868,358
Less: accumulated depreciation and amortization				(1,318	)		(104,247	)		(147,827	)		—			(253,392	)
				78			267,929			346,959			—			614,966
Goodwill				—			18,593			8,093			111			26,797
Other assets				6,501			535			35,593			—			42,629
			$	891,717		$	423,623		$	711,399		$	(890,270	)	$	1,136,469
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
	Accounts payable		$	1,849		$	13,205		$	28,828		$	(5,518	)	$	38,364
	Accrued liabilities			7,321			21,554			87,401			(18,264	)		98,012
	Deferred taxes			5,027			(452	)		11,570			—			16,145
	Current maturities of long-term debt			—			—			6,476			—			6,476
		Total current liabilities		14,197			34,307			134,275			(23,782	)		158,997
Long-term debt, less current maturities				230,000			—			25,008			—			255,008
Intercompany notes payable				10,456			104,217			449,785			(564,458	)		—
Other liabilities and deferred credits				3,129			430			153,208			—			156,767
Deferred taxes				37,201			1,427			31,011			—			69,639
Minority interest				1,861			—			2,420			—			4,281
Stockholders’ investment:
	Common stock			233			4,062			13,964			(18,026	)		233
	Additional paid-in capital			157,744			51,169			13,477			(64,646	)		157,744
	Retained earnings			401,687			228,011			(8,653	)		(219,358	)		401,687
	Accumulated other comprehensive income (loss)			35,209			—			(103,096	)		—			(67,887	)
				594,873			283,242			(84,308	)		(302,030	)		491,777
			$	891,717		$	423,623		$	711,399		$	(890,270	)	$	1,136,469

23

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

Supplemental Condensed Consolidating Balance Sheet

As of March 31, 2005

(In thousands)

			Parent						Non-
			Company			Guarantor			Guarantor
			Only			Subsidiaries			Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
	Cash and cash equivalents		$	23,947		$	7,907		$	114,586		$	—		$	146,440
	Accounts receivable			19,108			41,253			97,484			(24,006	)		133,839
	Inventories			—			72,892			67,814			—			140,706
	Prepaid expenses and other			470			2,529			8,460			—			11,459
		Total current assets		43,525			124,581			288,344			(24,006	)		432,444
Intercompany investment				297,709			1,046			—			(298,755	)		—
Investments in unconsolidated affiliates				683			4,121			32,372			—			37,176
Intercompany notes receivable				554,655			—			10,727			(565,382	)		—
Property and equipment — at cost:
	Land and buildings			135			23,466			8,942			—			32,543
	Aircraft and equipment			1,426			327,214			498,391			—			827,031
				1,561			350,680			507,333			—			859,574
Less: accumulated depreciation and amortization				(1,398	)		(100,549	)		(148,565	)		—			(250,512	)
				163			250,131			358,768			—			609,062
Goodwill				—			18,593			8,105			111			26,809
Other assets				6,543			634			36,908			—			44,085
			$	903,278		$	399,106		$	735,224		$	(888,032	)	$	1,149,576
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current liabilities:
	Accounts payable		$	673		$	10,997		$	29,176		$	(5,206	)	$	35,640
	Accrued liabilities			9,364			22,868			88,472			(18,800	)		101,904
	Deferred taxes			4,740			—			13,000			—			17,740
	Current maturities of long-term debt			—			—			6,413			—			6,413
		Total current liabilities		14,777			33,865			137,061			(24,006	)		161,697
Long-term debt, less current maturities				230,000			—			25,667			—			255,667
Intercompany notes payable				10,246			86,103			469,033			(565,382	)		—
Other liabilities and deferred credits				3,065			416			161,247			—			164,728
Deferred taxes				37,307			1,773			30,897			—			69,977
Minority interest				2,131			—			2,383			—			4,514
Stockholders’ investment:
	Common stock			233			4,062			13,941			(18,003	)		233
	Additional paid-in capital			157,100			51,169			13,477			(64,646	)		157,100
	Retained earnings			389,715			221,718			(5,723	)		(215,995	)		389,715
	Accumulated other comprehensive income (loss)			58,704			—			(112,759	)		—			(54,055	)
				605,752			276,949			(91,064	)		(298,644	)		492,993
			$	903,278		$	399,106		$	735,224		$	(888,032	)	$	1,149,576

24

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

Supplemental Condensed Consolidating Statement of Cash Flows

Three Months Ended June 30, 2005

(In thousands)

		Parent						Non-
		Company			Guarantor			Guarantor
		Only			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities		$	(13,035	)	$	25,830		$	(15,357	)	$	(7,213	)	$	(9,775	)
Cash flows from investing activities:
	Capital expenditures		(4	)		(22,544	)		(7,582	)		—			(30,130	)
	Proceeds from asset dispositions		68			502			1,824			—			2,394
Net cash provided by (used in) investing activities			64			(22,042	)		(5,758	)		—			(27,736	)
Cash flows from financing activities:
	Repayment of debt		—			—			(798	)		—			(798	)
	Repayment of intercompany debt		(1	)		(3,700	)		(12	)		3,713			—
	Dividends paid		—			(3,500	)		—			3,500			—
	Partial prepayment of put/call obligation		(34	)		—			—			—			(34	)
	Issuance of common stock		530			—			—			—			530
Net cash provided by (used in) financing activities			495			(7,200	)		(810	)		7,213			(302	)
Effect of exchange rate changes on cash and cash equivalents			—			—			(2,405	)		—			(2,405	)
Net decrease in cash and cash equivalents			(12,476	)		(3,412	)		(24,330	)		—			(40,218	)
Cash and cash equivalents at beginning of period			23,947			7,907			114,586			—			146,440
Cash and cash equivalents at end of period		$	11,471		$	4,495		$	90,256		$	—		$	106,222

25

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

Condensed Notes to Consolidated Financial Statements — (Continued)

Supplemental Condensed Consolidating Statement of Cash Flows

Three Months Ended June 30, 2004

(Restated)

(In thousands)

		Parent						Non-
		Company			Guarantor			Guarantor
		Only			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities		$	6,593		$	11,263		$	25,847		$	(18,866	)	$	24,837
Cash flows from investing activities:
	Capital expenditures		(77	)		(13,912	)		(989	)		—			(14,978	)
	Proceeds from asset dispositions		4			4,226			8,527			—			12,757
	Investments in subsidiaries		—			—			—			—			—
Net cash provided by (used in) investing activities			(73	)		(9,686	)		7,538			—			(2,221	)
Cash flows from financing activities:
	Proceeds from borrowings		—			—			226			(226	)		—
	Repayment of debt		(18,092	)		(1,000	)		(249	)		19,092			(249	)
	Re-purchase of shares from minority interests		(7,389	)		—			—			—			(7,389	)
	Issuance of common stock		3,285			—			—			—			3,285
Net cash used in financing activities			(22,196	)		(1,000	)		(23	)		18,866			(4,353	)
Effect of exchange rate changes on cash and cash equivalents			—			—			(325	)		—			(325	)
Net increase (decrease) in cash and cash equivalents			(15,676	)		577			33,037			—			17,938
Cash and cash equivalents at beginning of period			31,106			7,892			46,681			—			85,679
Cash and cash equivalents at end of period		$	15,430		$	8,469		$	79,718		$	—		$	103,617

26

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Offshore Logistics, Inc.:

      We have reviewed the condensed consolidated balance sheet of Offshore Logistics, Inc. and subsidiaries as of June 30, 2005 and the related condensed consolidated statements of income and cash flows for the three-month periods ended June 30, 2005 and 2004. These condensed consolidated financial statements are the responsibility of the Company’s management.

      We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

      Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

      As discussed in Note A to the Condensed Notes to Consolidated Financial Statements, the condensed consolidated statements of income and cash flows for the three months ended June 30, 2004 have been restated.

      We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Offshore Logistics, Inc. and subsidiaries as of March 31, 2005, and the related consolidated statements of income, stockholders’ investment, and cash flows for the year then ended (not presented herein); and in our report dated June 9, 2005, except for the “Restatement of Previously Reported Amounts” section in Note A, the ninth paragraph of Note B, the “Internal Review” section of Note D, and Note M, as to which the date is December 9, 2005, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 2005, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ KPMG LLP

New Orleans, Louisiana

January 6, 2006

27

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

      Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto as well as our Annual Report on Form 10-K for the fiscal year ended March 31, 2005 (“Annual Report”) and the MD&A contained therein. In the discussion that follows, the terms “Current Quarter” and “Comparable Quarter” refer to the three months ended June 30, 2005 and 2004, respectively.

      Amounts previously reported for the Comparable Quarter have been restated to reflect adjustments to accrue for liabilities and expenses identified in connection with the Internal Review, to properly report customer reimbursables as revenues rather than offsetting such amounts against the related expenses and to properly record expenses for severance benefits and payroll taxes associated with certain foreign subsidiaries. See “Restatement of Previously Reported Amounts” in Note A and “Internal Review” in Note E in the “Condensed Notes to Consolidated Financial Statements” as well as “Investigations” and “Restatement of Previously Reported Amounts” below for further discussion of these matters.

Forward-Looking Statements

      This Form 10-Q for June 30, 2005 (“Quarterly Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements about our future business, strategy, operations, capabilities and results; financial projections; plans and objectives of our management; expected actions by us and by third parties, including our customers, competitors and regulators; and other matters. Some of the forward-looking statements can be identified by the use of words such as believes, belief, expects, plans, anticipates, intends, projects, estimates, may, might, would, could or other similar words. All statements in this Quarterly Report, other than statements of historical fact or historical financial results, are forward-looking statements.

      Our forward-looking statements reflect our views and assumptions on the date of this Quarterly Report regarding future events and operating performance. We believe that they are reasonable, but they involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control, that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements. Accordingly, you should not put undue reliance on any forward-looking statements. Factors that could cause our forward-looking statements to be incorrect and actual events or our actual results to differ from those that are anticipated include those Risk Factors disclosed in our Annual Report; the cautionary statements made in our Annual Report with respect to our forward-looking statements; the risks cited in, and the cautionary statements made in, our Forms 10-Q and 8-K filed during the current fiscal year; the level of activity in the oil and natural gas industry; production related activities becoming more sensitive to variances in commodity prices; and the DOJ or the SEC investigation having a greater than anticipated financial impact.

      All forward-looking statements in this Quarterly Report are qualified by these cautionary statements and are only made as of the date of this Quarterly Report. We do not undertake any obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Executive Overview

      This Executive Overview only includes what management considers to be the most important information and analysis for evaluating our financial condition and operating performance. It provides the context for the discussion and analysis of the financial statements which follows and does not disclose every item bearing on our financial condition and operating performance.

28

      We are a leading provider of helicopter transportation services to the worldwide offshore oil and gas industry with major operations in the U.S. Gulf of Mexico and the North Sea. We also have operations, both directly and indirectly, in most of the other major offshore oil and gas producing regions of the world, including Alaska, Australia, Brazil, China, Mexico, Nigeria, Russia and Trinidad. Additionally, we are a leading provider of production management services for oil and gas production facilities in the U.S. Gulf of Mexico. As of June 30, 2005, we operated 322 aircraft and our unconsolidated affiliates operated an additional 140 aircraft throughout the world. The following table sets forth the number of our aircraft operated as of the dates indicated:

		As of March 31,		As of June 30,		As of September 30,
		2005		2005		2005
North America			166		170		174
South and Central America			34		32		34
Europe			45		45		47
West Africa			45		43		44
Southeast Asia			22		24		24
Other International			8		8		8
	Total		320		322		331
Additional aircraft operated by unconsolidated affiliates			113		140		140

Market Outlook

      Worldwide demand for hydrocarbons is expected to continue to grow for the foreseeable future. This growth, driven largely by economic expansion, is expected to result in sustained strength in oil and natural gas prices, driving further increases in offshore exploration and development activity by our customers. This increase in offshore exploration and development activity is also likely to lead to growth in production related activities as these development projects come on stream. As a result of the current commodity price environment, we have experienced an increase in aircraft fleet utilization in all of our present markets and expect this trend to continue. In addition, as operators increasingly pursue prospects in deepwater and push further offshore, we expect demand for medium and large helicopters to be further stimulated.

      In particular, we expect growth in demand for additional helicopter support in North and South America, West Africa and Asia, including the Caspian Sea region. This growth will provide us with opportunities to add new aircraft to our fleet, as well as opportunities to redeploy aircraft from weaker markets into markets that will sustain higher rates for our services. Currently, helicopter manufacturers are indicating very limited supply availability during the next three years. We expect that this tightness in aircraft availability from the manufacturers and the lack of suitable aircraft in the secondary market, coupled with the increase in demand for helicopter support, will result in upward pressure on the rates we charge for our services. At the same time, we believe that our recent aircraft acquisitions and commitments position us to capture a portion of the upside created by the current market conditions.

      Current activity levels in the Gulf of Mexico are at or near all-time highs. In the near term, we also believe that the impact of hurricanes Katrina and Rita will result in higher activity levels as operators repair facilities and work to bring production back on line. Furthermore, our North Sea activities are under strong pricing pressure as one particular competitor is aggressively seeking to gain market share with lower rates. At the same time, while contracts in the North Sea are generally long term, we have experienced a recent trend of increased spot market contracting of helicopters as exploration activity has increased in the North Sea. Our Other International operations have experienced high aircraft utilization and we expect this trend to continue. Due to the current high levels of fleet utilization, we have experienced, along with other helicopter operators, some difficulty in meeting our customers’ needs for short notice exploration drilling support, particularly in remote international locations. Our operations in Nigeria and a South American country are likely to be

29

negatively affected as a result of our actions taken in connection with the Internal Review, as discussed in more detail below under “Investigations.”

Operating Results

      The following table presents our operating results and other income statement information for the applicable periods:

		Three Months Ended
		June 30,
		2005			2004(1)
					(Restated)
		(Unaudited)
		(In thousands)
Operating revenues		$	180,937		$	160,401
Direct costs			(141,214	)		(121,877	)
Depreciation and amortization			(10,307	)		(10,450	)
General and administrative			(14,963	)		(11,321	)
Gain on disposal of assets			592			2,598
	Operating income		15,045			19,351
Earnings from unconsolidated affiliates, net of losses			46			1,520
Interest expense, net			(2,676	)		(3,493	)
Other income, net			2,783			88
	Income before provision for income taxes and minority interest		15,198			17,466
Provision for income taxes			(3,176	)		(5,790	)
Minority interest			(50	)		(89	)
	Net income	$	11,972		$	11,587

(1)  Amounts previously reported for the Comparable Quarter have been restated to reflect adjustments to accrue for liabilities and expenses identified in connection with the Internal Review, to properly report customer reimbursables as revenues rather than offsetting such amounts against the related expenses and to properly record expenses for severance benefits and payroll taxes associated with certain foreign subsidiaries. See “Restatement of Previously Reported Amounts” in Note A and “Internal Review” in Note E in the “Condensed Notes to Consolidated Financial Statements” as well as “Investigations” and “Restatement of Previously Reported Amounts” below for further discussion of these matters.

Investigations

      In February 2005, we voluntarily advised the staff of the Securities and Exchange Commission (“SEC”) that the Audit Committee of our Board of Directors had engaged special outside counsel to undertake a review of certain payments made by two of our affiliated entities in a foreign country. The review of these payments, which initially focused on Foreign Corrupt Practices Act matters, was subsequently expanded to cover operations in other countries and other issues (the “Internal Review”). In connection with this review, special outside counsel to the Audit Committee retained forensic accountants.

      The SEC then notified us that it had initiated an informal inquiry and requested that we provide certain documents on a voluntary basis. Subsequently, the SEC advised us that the inquiry had become an investigation. We have responded to the SEC’s requests for documents and are continuing to do so.

      The Internal Review is complete and the accompanying financial statements reflect all known required restatements. As a follow-up to matters identified during the course of the Internal Review, Special Counsel to the Audit Committee is completing certain work, and may be called upon to undertake additional work in the future to assist in responding to inquiries from the SEC, from other governmental authorities or customers, or as follow-up to the steps being performed by Special Counsel.

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      In October 2005, the Audit Committee reached certain conclusions with respect to findings to date from the Internal Review. The Audit Committee concluded that, over a considerable period of time, (a) improper payments were made by, and on behalf of, certain foreign affiliated entities directly or indirectly to employees of the Nigerian government, (b) improper payments were made by certain foreign affiliated entities to Nigerian employees of certain customers with whom we have contracts, (c) inadequate employee payroll declarations and, in certain instances, tax payments were made by us or our affiliated entities in certain jurisdictions, (d) inadequate valuations for customs purposes may have been declared in certain jurisdictions resulting in the underpayment of import duties, and (e) an affiliated entity in a South American country, with the assistance of our personnel and two of our other affiliated entities, engaged in transactions which appear to have assisted the South American entity in the circumvention of currency transfer restrictions and other regulations. In addition, as a result of the Internal Review, the Audit Committee and management determined that there were deficiencies in our books and records and internal controls with respect to the foregoing and certain other activities.

      Based on the Audit Committee’s findings and recommendations, the Board of Directors has taken disciplinary action with respect to our personnel who it determined bore responsibility for these matters. The disciplinary actions included termination or resignation of employment (including of certain members of senior management), changes of job responsibility, reductions in incentive compensation payments and reprimands. One of our affiliates has also obtained the resignation of certain of its personnel.

      We have initiated remedial action, including initiating action to correct underreporting of payroll tax, disclose to certain customers inappropriate payments made to customer personnel and terminate certain agency, business and joint venture relationships. We also have taken steps to reinforce our commitment to conduct our business with integrity by creating an internal corporate compliance function, instituting a new code of business conduct (our new code of business conduct entitled “Code of Business Integrity” is available on our website, http://www.olog.com), and developing and implementing a training program for all employees. In addition to the disciplinary actions referred to above, we have also taken steps to strengthen our control environment by hiring new personnel and realigning reporting lines within the accounting function so that field accounting reports directly to the corporate accounting function instead of operations management.

      Following the Audit Committee’s conclusions, we initiated the process of voluntarily advising governmental authorities in certain countries of the Audit Committee’s findings. We have not yet advised such foreign governmental authorities of the Audit Committee findings, but intend to do so. Such disclosure may result in legal and administrative proceedings, the institution of administrative, civil injunctive or criminal proceedings involving us and/or current or former employees, officers and/or directors who are within the jurisdictions of such authorities, the imposition of fines and other penalties, remedies and/or sanctions, including precluding us from participating in business operations in their countries. To the extent that violations of the law may have occurred in several countries in which we operate, we do not yet know whether such violations can be cured merely by the payment of fines or whether other actions may be taken against us, including requiring us to curtail our business operations in one or more such countries for a period of time. In the event that we curtail our business operations in any such country, we may face difficulties exporting our aircraft. As of November 30, 2005, the book values of our aircraft in Nigeria and the South American country where certain improper activities took place were approximately $101.7 million and $2.9 million, respectively.

      We cannot predict the ultimate outcome of the SEC investigation, nor can we predict whether other applicable U.S. and foreign governmental authorities will initiate separate investigations. The outcome of the SEC investigation and any related legal and administrative proceedings could include the institution of administrative, civil injunctive or criminal proceedings involving us and/or current or former employees, officers and/or directors, the imposition of fines and other penalties, remedies and/or sanctions, modifications to business practices and compliance programs and/or referral to other governmental agencies for other appropriate actions. It is not possible to accurately predict at this time when matters relating to the SEC investigation will be completed, the final outcome of the SEC investigation, what if any actions may be taken by the SEC or by other governmental agencies in the U.S. or in foreign jurisdictions, or the effect that such actions may have on our consolidated financial statements. In addition, in view of the findings of the Internal Review, we expect to encounter difficulties in the future conducting business in Nigeria and a

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South American country, and with certain customers. It is also possible that certain of our existing contracts may be cancelled and that we may become subject to claims by third parties, possibly resulting in litigation. The matters identified in the Internal Review and their effects could have a material adverse effect on our business, financial condition and results of operations.

      As discussed further in our Annual Report, in connection with its conclusions regarding payroll declarations and tax payments, the Audit Committee determined on November 23, 2005, following the recommendation of our senior management, that there is a need to restate our historical consolidated financial statements, including those for the quarterly periods in fiscal year 2005. As of June 30, 2005, we have accrued $16.7 million for the taxes, penalties and interest attributable to underreported employee payroll. Operating income for the Current and Comparable Quarters includes $0.9 million and $0.9 million, respectively, attributable to this accrual. At this time, we cannot estimate what additional payments, fines, penalties and/or litigation and related expenses may be required in connection with the matters identified as a result of the Internal Review, the SEC investigation, any other regulatory investigation that may be instituted or third-party litigation; however, such payments, fines, penalties and/or expenses could have a material adverse effect on our business, financial condition and results of operations.

      As we continue to respond to the SEC investigation and other governmental authorities and take other actions relating to improper activities that have been identified in connection with the Internal Review, there can be no assurance that additional restatements will not be required or that the historical financial statements included in this Quarterly Report will not change or require amendment. In addition, new issues may be identified that may impact our financial statements and the scope of the restatements described in this Quarterly Report and our Annual Report and lead us to take other remedial actions or that may otherwise adversely impact us.

      Through November 30, 2005, we have incurred approximately $11.2 million, including $3.2 million in the Current Quarter, in legal and other professional costs in connection with the Internal Review. We expect to incur additional costs associated with the Internal Review, which will be expensed as incurred and which could be significant in the fiscal quarters in which they are recorded.

      As a result of the disclosure and remediation of a number of activities identified in the Internal Review, we expect to encounter difficulties conducting business in certain foreign countries and retaining and attracting additional business with certain customers. We cannot predict the extent of these difficulties; however, our ability to continue conducting business in these countries and with these customers may be significantly impacted.

      We have commenced actions to disclose activities in Nigeria identified in the Internal Review to affected customers, and one or more of these customers may seek to cancel their contracts with us. One such customer has already commenced its own investigation. Among other things, we have been advised that such customer intends to exercise its rights to audit a specific contract, as well as to review its other relations with us. Although we have no indication as to what the final outcome of the audit and review will be, it is possible that such customer may seek to cancel one or more existing contracts if it believes that they were improperly obtained or that we breached any of their terms. Since our customers in Nigeria are affiliates of major international petroleum companies, with whom we do business throughout the world, any actions which are taken by certain customers could have a material adverse effect on our business, financial position and results of operations, and these customers may preclude us from bidding on future business with them either locally or on a worldwide basis. In addition, applicable governmental authorities may preclude us from bidding on contracts to provide services in the countries where improper activities took place.

      In connection with the Internal Review, we also have terminated our business relationship with certain agents and have taken actions to terminate business relationships with other agents. One of the terminated agents and his affiliated entity have commenced litigation against two of our foreign affiliated entities claiming damages of $16.3 million for breach of contract. We may be required to indemnify certain of our agents to the extent that regulatory authorities seek to hold them responsible in connection with activities identified in the Internal Review.

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      In a South American country where certain improper activities took place, we are negotiating to terminate our ownership interest in the joint venture that provides us with the local ownership content necessary to meet local regulatory requirements for operating in that country. During fiscal year 2005, we derived approximately $9.9 million of leasing and other revenues, of which $3.2 million was paid by us to a third party for the use of the aircraft, and received approximately $0.3 of dividend income from this joint venture. During the Current Quarter, we derived approximately $2.0 million of leasing and other revenues, of which $1.3 million was paid by us to a third party for the use of the aircraft, and received no dividend income from this joint venture. Without a joint venture partner, we will be unable to maintain an operating license and our future activities in that country may be limited to leasing our aircraft to unrelated operating companies. Our joint venture partners and agents are typically influential members of the local business community and instrumental in aiding us in obtaining contracts and managing our affairs in the local country. As a result of terminating these relationships, our ability to continue conducting business in these countries where the improper activities took place may be negatively affected. We may not be successful in our negotiations to terminate our ownership interest in the joint venture, and the outcome of such negotiations may negatively affect our ability to continue leasing our aircraft to the joint venture or other unrelated operating companies or conducting other business in that country, to export our aircraft or to recover its investment in the joint venture.

      Many of the improper actions identified in the Internal Review resulted in decreasing the costs incurred by us in performing our services. The remedial actions we are taking will result in an increase in these costs and, if we cannot raise our prices simultaneously and to the same extent of our increased costs, our operating income will decrease.

Document Subpoena from U.S. Department of Justice

      On June 15, 2005, we issued a press release disclosing that one of our subsidiaries received a document subpoena from the Antitrust Division of the U.S. Department of Justice (“DOJ”). The subpoena pertains to a grand jury investigation of potential antitrust violations among providers of helicopter transportation services in the U.S. Gulf of Mexico. We are continuing to investigate this matter and intend to comply with requests for information from the DOJ in connection with this investigation. The outcome of the DOJ investigation and any related legal and administrative proceedings could include civil injunctive or criminal proceedings, the imposition of fines and other penalties, remedies and/or sanctions and/or referral to other governmental agencies and/or the payment of damages in civil litigation. To date, we have not identified any material adjustments to our financial statements in connection with the investigation and do not expect, based on information developed to date, that any such adjustment is likely to be required. We expect to incur costs associated with this investigation, which will be expensed as incurred and which could be significant in the fiscal quarters in which they are recorded. For additional information regarding the DOJ investigation, see “Document Subpoena from U.S. Department of Justice” in Note E in the “Condensed Notes to Consolidated Financial Statements.”

Restatement of Previously Reported Amounts

      As a result of the Internal Review findings discussed further in Note E in the “Condensed Notes to Consolidated Financial Statements”, we restated our historical financial statements to accrue for payroll taxes, penalties and interest attributable to underreported employee payroll. For further information regarding the Internal Review and related matters, including our restatement of our historical financial statements, refer to the Annual Report. Our restated condensed consolidated statements of income included in this Quarterly Report reflect reductions in operating income of $0.9 million for the Comparable Quarter in connection with this matter. As of June 30, 2005, accrued liabilities includes $16.7 million related to this matter. At this time, we cannot estimate what additional payments, fines and/or penalties may be required in connection with the matters identified as a result of the Internal Review or the related SEC investigation; however, such payments, fines and/or penalties could have a material adverse effect on our business, financial condition and results of operations.

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      Our management has separately determined that we were not reporting reimbursements received from our customers for costs incurred on their behalf in accordance with United States generally accepted accounting principles (“GAAP”). Our customers reimburse us for certain costs incurred on their behalf, which have historically been recorded by offsetting such amounts against the related expenses. In addition, our management has determined that we did not properly record expenses related to severance benefits for certain employees of a foreign subsidiary and we did not properly record expenses related to payroll taxes incurred by one of our foreign subsidiaries. In accordance with GAAP, we have restated our historical financial statements for the Comparable Quarter, to reflect such reimbursement as an increase in revenue and a corresponding increase in expense, and we increased direct costs to reflect the severance obligation and payroll taxes in the applicable periods. With respect to customer reimbursements, operating revenues and direct costs were increased $13.0 million for the Comparable Quarter, from previously reported amounts, with no impact on income from operations or net income. With respect to the severance benefits and payroll taxes, direct costs were increased by $0.2 million for the Comparable Quarter.

      The impact of these adjustments on the consolidated statements of income and cash flows is reflected in the tables below (in thousands, except per share amounts):

	Three Months Ended
	June 30, 2004
	As
	Previously
	Reported			Restated
	(Unaudited)
Statements of Income
Operating revenues	$	147,382		$	160,401
Direct costs		107,668			121,877
Total operating expenses		129,439			141,050
Operating income		20,541			19,351
Income before provision for taxes and minority interests		18,656			17,466
Provision for income taxes		5,597			5,790
Net income		12,970			11,587
Basic EPS		0.57			0.51
Diluted EPS		0.57			0.51
Statements of Cash Flows
Net income	$	12,970		$	11,587
Deferred taxes		2,043			2,358
Decrease in accrued liabilities		(7,655	)		(6,587	)
Net cash provided by operating activities		24,837			24,837

      In addition, certain information in Notes B, G, H and J in the “Condensed Notes to Consolidated Financial Statements” has been restated to reflect the effect of these adjustments. Certain amounts in the above presentation for 2004 have been reclassified to conform to the current year presentation. Specifically, gains and losses on asset disposals were previously included in revenues but are now included in operating expenses.

Other Matters

      We employ approximately 300 pilots in our North American Operations who are represented by the Office and Professional Employees International Union (“OPEIU”) under a collective bargaining agreement. We and the pilots represented by the OPEIU ratified an amended collective bargaining agreement on April 4, 2005. The terms under the amended agreement are fixed until October 3, 2008 and include a wage increase for the pilot group and improvements to several benefit plans. We do not expect the new agreement to have a material effect on our future operating expenses.

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      In January 2005, Bristow was awarded two contracts to provide helicopter services in the North Sea. The first is a seven-year contract that began on July 1, 2005 at the conclusion of the current seven-year contract, and is for a total of two large and four medium aircraft. The second contract is a five-year contract that began on April 1, 2005 and utilizes two large aircraft. Additionally, Bristow was awarded the renewal of a contract in Nigeria with an international oil company in January 2005 for a minimum of five medium aircraft. The contract term is for five years beginning on April 1, 2005.

      In May 2005, Bristow was awarded a three-year extension to the Integrated Aviation Consortium (“IAC”) contract. This extension began on July 1, 2005 and will continue the utilization of five large aircraft.

      In December 2005, we were informed that we were not awarded the contract extension commencing in mid-2007 to provide search and rescue services using seven S-61 aircraft and operate four helicopter bases for the U.K. Maritime and Coastguard Agency. During fiscal year 2005 and for the Current Quarter, we had $26.4 million and $6.9 million, respectively, in operating revenues associated with this contract.

      On December 30, 2005, we sold nine aircraft for $68.6 million in aggregate to a subsidiary of General Electric Capital Corporation, and then leased back each of the nine aircraft under separate operating leases with terms of ten years expiring in January 2016. There was a deferred gain on the sale of the aircraft in the amount of approximately $10.8 million in aggregate. See “— Liquidity and Capital Resources — Financing Activities” for further information related to this transaction.

General

      We operate our business in two segments: Helicopter Services and Production Management Services. We conduct our Helicopter Services through the following six business units:

•  North America;

•  South and Central America;

•  Europe;

•  West Africa;

•  Southeast Asia; and

•  Other International.

      For the Current Quarter, our North America, South and Central America, Europe, West Africa, Southeast Asia and Other International contributed 27%, 5%, 33%, 15%, 8% and 3%, respectively, of our operating revenue. We expect that the percentage of our operating revenue derived from our Southeastern Asia and Other International operations will continue to increase as the major oil and gas companies increasingly focus on prospects outside of North America and the North Sea. Our Production Management Services segment contributed the remaining 9% of our operating revenue for the Current Quarter.

      Helicopter Services are seasonal in nature, as our flight activities are influenced by the length of daylight hours and weather conditions. The worst of these conditions typically occurs during the winter months when our ability to safely fly and our customers’ ability to safely conduct their operations is inhibited. Accordingly, our flight activity is generally lower in the fourth fiscal quarter.

      Our operating revenue depends on the demand for our services and the pricing terms of our contracts. We measure the demand for our helicopter services in flight hours. Demand for our services depends on the level of worldwide offshore oil and gas exploration, development and production activities. We believe that our customers’ exploration and development activities are influenced by actual and expected trends in commodity prices for oil and gas. Exploration and development activities generally use medium-size and larger aircraft on which we typically earn higher margins. We believe that production-related activities are less sensitive to variances in commodity prices, and accordingly provide a more stable activity level and revenue stream. We estimate that a majority of our operating revenue from Helicopter Services is related to the production activities of the oil and gas companies.

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      Our helicopter contracts are generally based on a two-tier rate structure consisting of a daily or monthly fixed fee plus additional fees for each hour flown. We also provide services to customers on an “ad hoc” basis, which usually entails a shorter notice period and shorter duration. Our charges for ad hoc services are generally based on an hourly rate, or a daily or monthly fixed fee plus additional fees for each hour flown. We estimate that our ad hoc services have a higher margin than our other helicopter contracts due to supply and demand dynamics. Our rate structure is based on fuel costs remaining at or below a predetermined threshold. Fuel costs in excess of this threshold are generally reimbursed by the customer.

      Our helicopter contracts are for varying periods and generally permit the customer to cancel the charter before the end of the contract term. In North America, we typically enter into short-term contracts for twelve months or less, although we occasionally enter into longer-term contracts. In Europe, contracts are longer term, generally between two and five years. In South and Central America, West Africa, Southeast Asia and Other International, contract length generally ranges from three to five years. At the expiration of a contract, our customers often negotiate renewal terms with us for the next contract period. In other instances, customers solicit new bids at the expiration of a contract. Contracts are generally awarded based on a number of factors, including price, quality of service, equipment and record of safety. An incumbent operator has a competitive advantage in the bidding process based on its relationship with the customer, its knowledge of the site characteristics and its understanding of the cost structure for the operations.

      Maintenance and repair expenses, training costs, employee wages and insurance premiums represent a significant portion of our overall expenses. Our production management costs also include contracted transportation services. We expense maintenance and repair costs, including major aircraft component overhaul costs, as the costs are incurred. As a result, our earnings in any given period are directly impacted by the amount of our maintenance and repair expenses for that period. In certain instances, major aircraft components, primarily engines and transmissions, are maintained by third-party vendors under contractual arrangements. The maintenance costs related to these contractual arrangements are recorded ratably as the components are used to generate flight revenue.

      In addition to our variable operating expenses, we incur fixed charges for depreciation of our property and equipment. For accounting purposes, we depreciate our helicopters on a straight-line basis over their estimated useful lives, taking into account an estimated residual value of 30% to 50% of their original cost. We generally estimate the useful life of a helicopter to be seven to 15 years. Our estimates of useful lives and residual values are based upon our historical experience, aircraft type and aircraft condition, as well as our judgment and expectations regarding future operations and market conditions.

      As a result of local laws limiting foreign ownership of aviation companies, we conduct helicopter services in many foreign countries through interests in unconsolidated affiliates. Generally, we realize revenue from these foreign operations by leasing aircraft and providing services and technical support to those entities. We also receive dividend income from the earnings of some of these entities. We report lease revenue as operating revenue and dividend income as part of earnings from unconsolidated affiliates, as the results of these foreign operations are not included in our revenue or operating income. For additional information about these unconsolidated affiliates, see Note C in the “Notes to Consolidated Financial Statements” included in our Annual Report.

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Results of Operations

      The following tables set forth certain operating information, which forms the basis for discussion of our Helicopter Services and Production Management Services, and for the six business units comprising our Helicopter Services segment. Certain reclassifications have been made to prior year information to conform to the current presentation of the Helicopter Services segment’s business units. See Note H in the “Condensed Notes to Consolidated Financial Statements” for further information. The tables also present certain operating information about our corporate activities which primarily relate to intercompany leasing of aircraft and are eliminated in consolidation. Amounts previously reported for 2004 have been restated to reflect adjustments to accrue for liabilities and expenses identified in connection with the Internal Review and to properly report customer reimbursables as revenues rather than offsetting such amounts against the related expenses. See above and “Restatement of Previously Reported Amounts” in Note A and “Internal Review” in Note E in the “Condensed Notes to Consolidated Financial Statements” for further discussion of these matters.

				Three Months Ended
				June 30,
				2005		2004
Flight hours (excludes unconsolidated affiliates)
	Helicopter Services:
		North America			35,778		31,818
		South and Central America			9,516		11,879
		Europe			9,731		10,757
		West Africa			8,635		7,797
		Southeast Asia			2,722		2,687
		Other International			1,312		586
			Total		67,694		65,524

				Three Months Ended
				June 30,
				2005			2004(2)
							(Restated)
				(In thousands, except
				percentages)
Operating revenue:
	Helicopter Services:
		North America		$	52,449		$	45,191
		South and Central America			9,906			14,060
		Europe			64,293			59,582
		West Africa			27,618			22,013
		Southeast Asia			13,808			12,056
		Other International			6,013			2,574
		Intrasegment eliminations			(8,759	)		(8,148	)
	Total Helicopter Services				165,328			147,328
	Production Management Services				16,969			13,692
	Corporate				2,799			3,795
	Intersegment eliminations				(4,159	)		(4,414	)
			Consolidated total	$	180,937		$	160,401

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				Three Months Ended
				June 30,
				2005			2004(2)
							(Restated)
				(In thousands, except
				percentages)
Operating expenses(1):
	Helicopter Services
		North America		$	42,666		$	37,318
		South and Central America			9,471			10,818
		Europe			58,794			56,353
		West Africa			25,249			19,656
		Southeast Asia			13,101			10,953
		Other International			5,107			3,160
	Intrasegment eliminations				(8,759	)		(8,148	)
	Total Helicopter Services				145,629			130,110
	Production Management Services				15,649			12,927
	Gain on disposal of assets				(592	)		(2,598	)
	Corporate				9,365			5,025
	Intersegment eliminations				(4,159	)		(4,414	)
			Consolidated total	$	165,892		$	141,050
Operating income:
	Helicopter Services
		North America		$	9,783		$	7,873
		South and Central America			435			3,242
		Europe			5,499			3,229
		West Africa			2,369			2,357
		Southeast Asia			707			1,103
		Other International			906			(586	)
	Total Helicopter Services				19,699			17,218
	Production Management Services				1,320			765
	Gain on disposal of assets				592			2,598
	Corporate				(6,566	)		(1,230	)
			Consolidated total	$	15,045		$	19,351
Operating margin:
	Helicopter Services
		North America			18.7	%		17.4	%
		South and Central America			4.4	%		23.1	%
		Europe			8.6	%		5.4	%
		West Africa			8.6	%		10.7	%
		Southeast Asia			5.1	%		9.2	%
		Other International			15.1	%		(22.8)	%
	Total Helicopter Services				11.9	%		11.7	%
	Production Management Services				7.8	%		5.6	%
			Consolidated total		8.3	%		12.1	%

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(1)  Operating expenses include depreciation and amortization in the following amounts for the periods presented:

			Three Months Ended
			June 30,
			2005			2004
			(In thousands)
Helicopter Services:
	North America		$	4,099		$	3,537
	South and Central America			538			550
	Europe			3,768			4,762
	West Africa			293			263
	Southeast Asia			(49	)		58
	Other International			468			171
Total Helicopter Services				9,117			9,341
Production Management Services				50			47
Corporate				1,140			1,062
		Consolidated total	$	10,307		$	10,450

(2)  Amounts previously reported for the Comparable Quarter have been restated to reflect adjustments to accrue for liabilities and expenses identified in connection with the Internal Review, to properly report customer reimbursables as revenues rather than netting such amounts against the related expenses and to properly record expenses for severance benefits and payroll taxes associated with certain foreign subsidiaries. See “Restatement of Previously Reported Amounts” in Note A and “Internal Review” in Note E in the “Condensed Notes to Consolidated Financial Statements” as well as “Investigations” and “Restatement of Previously Reported Amounts” above for further discussion of these matters.

Quarter ended June 30, 2005 compared to Quarter ended June 30, 2004

Consolidated Results

      Our operating revenues increased to $180.9 million for the Current Quarter from $160.4 million for the Comparable Quarter. The increase in operating revenues occurred in both our Helicopter Services segment and our Production Management Services segment. Our operating expenses for the Current Quarter increased to $165.9 million from $141.1 million for the Comparable Quarter. The increase was primarily a result of higher costs associated with higher activity levels, higher maintenance costs and higher professional fees due to the Internal Review. In addition, we had lower gains from disposals of assets. As a result, our operating income and operating margin for the Current Quarter decreased to $15.0 million and 8.3%, respectively, compared to $19.4 million and 12.1%, respectively, for the Comparable Quarter.

      Net income for the Current Quarter of $12.0 million represents a $0.4 million increase from the Comparable Quarter primarily as a result of higher interest income, an increase in other income and a lower effective tax rate for the Current Quarter. Set forth below is a discussion of the results of operations of our segments and business units.

Helicopter Services

      Operating revenues from Helicopter Services increased to $165.3 million for the Current Quarter from $147.3 million for the Comparable Quarter, and operating expenses increased to $145.6 million from $130.1 million. This resulted in an operating margin of 11.9% as compared to 11.7% in the Comparable Quarter. Helicopter Services results are further explained below by business unit.

      North America. Operating revenues from North America increased by 16.1% during the Current Quarter from the Comparable Quarter, and flight activity increased by 12.4%. The increase in operating

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revenues is due to the increase in flight hours and a rate increase of 8% for the U.S. Gulf of Mexico that is being phased in beginning in May 2005.

      Operating expenses from North America increased to $42.7 million for the Current Quarter from $37.3 million for the Comparable Quarter primarily due to higher labor and maintenance costs.

      Our operating margin in North America increased to 18.7% for the Current Quarter from 17.4% for the Comparable Quarter primarily due to the higher revenues discussed above.

      South and Central America. Operating revenues for South and Central America decreased by 29.5% for the Current Quarter from the Comparable Quarter due to a 19.9% reduction in flight activity in Brazil and Mexico. In Mexico, activity is lower due to the conclusion of the contract with Petroleós Mexicanos (“PEMEX”) in February 2005. As a result, the Company’s 49% owned unconsolidated affiliates, Hemisco Helicopters International, Inc. (“Hemisco”) and Heliservicio Campeche, S.A. de C.V. (“Heliservicio” and together “HC”) have experienced difficulties in meeting their obligations to make lease rental payments to the Company and Rotorwing Leasing Resources, L.L.C. (“RLR”). During the three months ended June 30, 2005, the Company and RLR made a determination that because of the uncertainties as to collectibility, lease revenues from HC would be recognized as they were collected. For the Current Quarter, $2.2 million of revenues billed but not collected from HC have not been recognized in the Company’s results, and the Company’s 49% share of the equity in earnings of RLR has been reduced by $1.4 million for revenues billed but not collected from HC. Brazil’s activity decreased due to the conclusion of contracts for two aircraft, one in August 2004 and the other in October 2004. We are negotiating the termination of our ownership interest in the joint venture that operates in Brazil, and upon such termination, absent our development of a satisfactory relationship with another local operating company, we expect to experience a substantial reduction in business activity in Brazil in future periods.

      Operating expenses for South and Central America decreased by $1.3 million during the Current Quarter from the Comparable Quarter as a result of lower maintenance and lease costs due to the reduction in flight activity.

      Since the conclusion of the PEMEX contract in February 2005, we have taken several actions to improve the financial condition and profitability of HC, and as discussed further in Note I in the “Condensed Notes to Consolidated Financial Statements,” on August 19, 2005, a recapitalization of Heliservicio was completed. We are continuing to evaluate certain actions to return HC’s operations to profitability, including reducing the number of aircraft to a lower level based on current utilization, and we are actively seeking other markets in which to redeploy the aircraft in Mexico that are currently operating on an ad hoc basis. Although not anticipated or known at this time, such actions could result in future losses.

      Operating income for South and Central America decreased to $0.4 million for the Current Quarter from $3.2 million for the Comparable Quarter as a result of the lower operating revenues discussed above. The operating margin for this business unit decreased to 4.4% for the Current Quarter from 23.1% for the Comparable Quarter due to the lower operating revenues for the Current Quarter.

      Europe. Operating revenues from Europe increased for the Current Quarter to $64.3 million, or 7.9%, from $59.6 million for the Comparable Quarter. Excluding foreign exchange effects, revenue from these operations increased by 5.8%. Flight hours decreased by 9.5% between the Current Quarter and the Comparable Quarter. The reduction in flight hours was due primarily to a change in our lease arrangements in Norway and the sale of certain technical services contracts in November 2004. While we continue to lease aircraft to our unconsolidated affiliate, Norsk Helikopter AS, we no longer provide maintenance services for these aircraft. Therefore, we no longer report the flight hours. Operating revenues for technical services in the U.K. decreased to $2.8 million for the Current Quarter from $6.9 million for the Comparable Quarter due to the downsizing of our technical services operations in the U.K. in fiscal year 2005.

      Excluding the flight hours for Norway and the technical services contracts that were sold, flight activity increased by 20.7%. The majority of this increase in flight hours related to the start of a new contract in April 2005.

      Operating expenses for Europe, excluding foreign exchange effects, increased 2.3% for the Current Quarter as compared to the Comparable Quarter. The increase in operating expenses in our North Sea

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operations was noted in salary costs and maintenance costs due to the increase in activity. The operating margin in Europe increased to 8.6% from 5.4% between the Current Quarter and the Comparable Quarter.

      West Africa. Operating revenues from West Africa increased in the Current Quarter to $27.6 million, or 25.5%, from $22.0 million in the Comparable Quarter, primarily as a result of a 10.7% increase in flight activity from the Comparable Quarter. Additional ad hoc flying in Nigeria and a contract for two medium aircraft in Mauritania that began in September 2004 were the principle drivers for the increased flight activity.

      Operating expenses for West Africa increased in the Current Quarter to $25.2 million, or 27.9%, from $19.7 million in the Comparable Quarter. The increase was primarily a result of higher salary and maintenance expense due to the increase in activity. The operating margin in Africa decreased to 8.6% in the Current Quarter from 10.7% in the Comparable Quarter.

      Approximately 14.8% of our revenues for the Current Quarter came from Nigeria. As a result of the potential cancellation by customers of their contracts with us, we may experience a substantial reduction in business activity in Nigeria in future periods.

      Southeast Asia. Operating revenues from Southeast Asia increased in the Current Quarter to $13.8 million, or 14.0%, from $12.1 million in the Comparable Quarter, primarily as a result of a 1.3% increase in flight activity. The increase primarily relates to Australia where we began a 15-month contract in July 2004 and where we had higher ad hoc flying activity in the Current Quarter.

      Operating expenses for Southeast Asia increased in the Current Quarter to $13.1 million, or 19.1%, from $11.0 million in the Comparable Quarter as a result of increased activity. The operating margin in Southeast Asia decreased to 5.1% in the Current Quarter from 9.2% in the Comparable Quarter.

      Other International. Operating revenues for Other International increased to $6.0 million, or 130.8%, during the Current Quarter from $2.6 million for the Comparable Quarter. Flight activity increased by 123.9%. The increase in operating revenue and flight activity is primarily due to the acquisition of a 51% interest in a company operating in Russia in July 2004. Excluding these results from the Current Quarter, operating revenues and flight activity increased 27.3% and 36.3%, respectively.

      Operating expenses increased from $3.2 million for the Comparable Quarter to $5.1 million for the Current Quarter. Excluding the Russia acquisition, operating expense for the Current Quarter would have been $2.7 million. As a result of the higher operating revenue, our operating margin for Other International increased to 15.1% in the Current Quarter from (22.8)% in the Comparable Quarter.

Production Management Services

      Operating revenues from the Production Management Services segment increased by 23.9% during the Current Quarter, as compared to the Comparable Quarter primarily due to increased activity with a customer that acquired additional properties. Operating expenses increased to $15.6 million for the Current Quarter from $12.9 million for the Comparable Quarter, primarily due to higher labor and transportation costs associated with the increase in activity. As a result of the higher revenue, our operating margin increased to 7.8% from 5.6% in the Comparable Quarter.

General and Administrative Costs

      Excluding the restructuring charges for our U.K. operations of $1.2 million that are included within the Comparable Quarter, consolidated general and administrative costs increased by $4.9 million for the Current Quarter. This increase is primarily due to professional fees of $3.2 million incurred in connection with the Internal Review.

Other Income, Net

      Other income, net, for the Current Quarter was $2.8 million compared to $0.1 million for the Comparable Quarter and primarily reflects foreign currency transaction gains and losses. These gains and losses arise from the consolidation of our United Kingdom operations, whose functional currency is the British pound sterling, yet contracts for a portion of its revenue and expense in U.S. dollars and other currencies for operations outside of the North Sea.

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Provision for Income Taxes

      The provision for income taxes decreased in the Current Quarter by $2.6 million as a result of a decrease in the Company’s overall effective tax rate from 33.2% for the Comparable Quarter to 20.9% for the Current Quarter. This decrease is primarily attributable to the impact of the reversal of reserves for tax contingencies due to expiration of the related statutes of limitations.

Liquidity and Capital Resources

      During the Current Quarter, our primary source of funds to meet working capital needs, service debt and fund capital expenditures was existing cash and cash equivalents. We believe that our future cash flow from operations, our existing U.S. revolving credit facility and alternative financing sources will be sufficient to meet our working capital, capital expenditure and debt service needs in the foreseeable future. We will likely need to raise additional funds through public or private debt or equity financings to finance existing commitments under our fleet renewal program and to execute our growth strategy. See “Risk Factors — In order to grow our business, we may require additional capital in the future, which may not be available to us” in the Annual Report.

Operating Activities

      Cash and cash equivalents were $106.2 million as of June 30, 2005, a $40.2 million decrease from March 31, 2005. Working capital as of June 30, 2005 was $257.1 million, a $13.6 million decrease from March 31, 2005. The decrease in working capital during the Current Quarter was primarily the result of the decrease in cash and cash equivalents of $40.2 million, offset in part by an increase in accounts receivable and inventories.

      For the Current Quarter, the Company had net cash flows used in operating activities of $9.8 million as compared to net cash flows provided by operating activities of $24.8 million for the Comparable Quarter. This decrease was primarily a result of an increase in accounts receivable and inventories during the Current Quarter and a decline in dividends received from unconsolidated affiliates.

Investing Activities

      Cash flows used in investing activities were $27.7 million and $2.2 million for the Current and Comparable Quarters, respectively. The following table shows capital expenditures for the period (in thousands):

	Three Months Ended
	June 30,
	2005		2004
Aircraft and related equipment	$	17,865	$	5,125
Other		12,265		9,853
Total capital expenditures	$	30,130	$	14,978

      During the Current Quarter, we received proceeds of $2.4 million primarily from the disposal of two aircraft and certain equipment, which resulted in a net gain of $0.6 million. During the Comparable Quarter, we received proceeds of $12.8 million primarily from the disposal of six aircraft and certain equipment, which resulted in a net gain of $2.6 million.

      In fiscal year 2003, we initiated a fleet renewal program. Under the program, we expect to incur additional capital expenditures over the next five to seven fiscal years to replace certain of our aircraft and upgrade strategic base facilities. As of June 30, 2005, we have expended $113.1 million as deposits and progress payments toward firm purchase commitments of $426.3 million under our fleet renewal program. Subsequent to June 30, 2005, we made additional payments under the program of $50.6 million, and we did not enter into any additional firm purchase commitments. To the extent that they occur, any sales and trade-ins of older aircraft will reduce these projected expenditures. We plan to use internally generated funds and alternative financing sources, if needed, to meet our obligations under the program.

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      Apart from commitments under our fleet renewal program, we purchased four small aircraft for $5.1 million and paid deposits of $7.3 million for three large aircraft during the Current Quarter. Additionally, subsequent to June 30, 2005, we purchased one small aircraft for $1.4 million and paid deposits of $9.3 million for two large aircraft and four medium aircraft. These aircraft acquisitions were made with existing cash and were made to fulfill customer contract requirements. As of June 30, 2005, we have expended $26.4 million in deposits and progress payments (including $19.1 million from trade-ins) pursuant to firm purchase commitments of $81.1 million (excluding commitments under our fleet renewal program). Subsequent to June 30, 2005, we also entered into firm purchase commitments for aircraft outside of our fleet renewal program of $74.8 million.

Financing Activities

      Cash flows used in financing activities were $0.3 million and $4.4 million for the Current and Comparable Quarters, respectively. Total debt as of June 30, 2005 was $261.5 million and was substantially unchanged since March 31, 2005.

      On December 30, 2005, we sold nine aircraft for $68.6 million in aggregate to a subsidiary of General Electric Capital Corporation, and then leased back each of the nine aircraft under separate operating leases with terms of ten years expiring in January 2016. Each “net” lease agreement requires us to be responsible for all operating costs and has an effective interest rate of approximately 5%. Rent payments under each lease are payable monthly and total $6.3 million and $7.6 million annually during the first 60 months and second 60 months, respectively, for all nine leases. Each lease has an end of lease purchase option at ten years, an early purchase option at 60 months (January 2011), and an early termination option at 24 months (January 2008). The early purchase option price for the nine aircraft at 60 months is approximately $52 million in aggregate. There was a deferred gain on the sale of the aircraft in the amount of approximately $10.8 million in aggregate. The deferred gain will be amortized as a reduction in lease expense over the 10 year lease term in proportion to the rent payments. Additional collateral in the amount of at least $11.8 million is to be provided until the conclusion of the SEC investigation related to the Internal Review. A portion of the proceeds ($10.3 million) has been retained by the lessor pending the provision of such collateral.

      Revolving Credit Facility. As of June 30, 2005, we had a $30.0 million revolving credit facility with a U.S. bank that expires on August 31, 2006. This facility is subject to a sub-limit of $10.0 million for the issuance of letters of credit. Borrowings bear interest at a rate equal to one month LIBOR plus a spread ranging from 1.25% to 2.0%. The rate of the spread depends on a financial covenant ratio under this facility. Borrowings under this facility are unsecured and are guaranteed by certain of our U.S. subsidiaries. We had no amounts drawn under this facility as of June 30, 2005, but did have $0.7 million of letters of credit utilized which reduced availability under this facility. As of June 30, 2005, we were in default of various financial information reporting covenants for not providing financial information for fiscal year 2005 when due, and also for not providing similar information to other creditors. This situation resulted from the activities identified in the Internal Review discussed earlier which prevented us from filing our financial report for fiscal year 2005 on time. The bank initially provided a waiver through August 14, 2005, and subsequently provided a second waiver through November 15, 2005. Waivers were extended through December 15, 2005 upon payment of a fee of $30,000, and further extended through January 16, 2006 upon payment of an additional fee of $30,000.

      U.K. Facilities. As of June 30, 2005, Bristow had a £6 million ($10.8 million) facility for letters of credit, of which £3.6 million ($6.4 million) was outstanding, and a £1 million ($1.8 million) net overdraft facility, of which no borrowings were outstanding. Both facilities are with a U.K. bank. The letter of credit facility is provided on an uncommitted basis, and outstanding letters of credit bear a rate of 0.7% per annum. Borrowings under the net overdraft facility are payable on demand and bear interest at the bank’s base rate plus a spread that can vary between 1% and 3% per annum depending on the net overdraft amount. The net overdraft facility was scheduled to expire on August 31, 2005, but has been extended to August 31, 2006.

      6¹/8% Senior Notes. We have $230.0 million aggregate principal amount outstanding of 6¹/8% senior notes due 2013 (“Senior Notes”). The Senior Notes are unsecured and are guaranteed by certain of our U.S. subsidiaries. The Senior Notes are redeemable at our option. On June 16, 2005, we received notice from the trustee of the indenture underlying the Senior Notes that we were in default of financial reporting

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covenants in the indenture as we were not able to provide the required financial reporting information within the time period specified in the covenants and that, unless the deficiency was remedied within 60 days, an event of default would occur under the indenture. On August 16, 2005, we completed a consent solicitation with the holders of the Senior Notes to waive defaults under and make amendments to the indenture. Under the terms of the consent solicitation, a consent fee of $6.25 per $1,000 principal amount of Senior Notes, or $1.4 million, was paid on August 17, 2005 to holders of Senior Notes on July 25, 2005 that delivered (and did not revoke) valid consents on or prior to August 15, 2005. The majority of Senior Note holders waived the defaults under the indenture through November 15, 2005. Further, we extended the waivers through December 15, 2005 upon payment of an additional fee of $0.6 million, and further extended the waivers through January 16, 2006 upon payment of another additional fee of $0.6 million. See Note D in the “Condensed Notes to Consolidated Financial Statements” for further discussion.

      RLR Note. As of June 30, 2005, we were in default of the various financial information reporting covenants in its revolving credit facility and a five-year $31.8 million term loan (the “RLR Note”) under which an unconsolidated affiliate, Rotorwing Leasing Resources, L.L.C., is a borrower and we are a guarantor. The defaults were as a result of not providing financial information for fiscal year 2005 when due, and also for not providing similar information to other creditors. This situation resulted from activities identified in connection with the Internal Review discussed in Note E in the “Condensed Notes to Consolidated Financial Statements” which prevented us from filing the financial report for fiscal year 2005 on time. The bank initially provided waivers through August 14, 2005, and subsequently provided additional waivers through November 15, 2005. The waivers were extended at our election through December 15, 2005 upon payment of $26,000, and were further extended through January 16, 2006 upon payment of an additional fee of $26,000.

      Pension Plan. As of June 30, 2005, we had recorded on our balance sheet a $150.0 million pension liability and a $35.2 million prepaid pension asset related to the Bristow pension plan. The liability represents the excess of the present value of the defined benefit pension plan liabilities over the fair value of plan assets that existed at that date. The asset represents the cumulative contributions made by Bristow in excess of accrued net periodic pension cost. In addition to the recognition of the minimum pension liability, the United Kingdom rules governing pension plan funding require us to make additional cash contributions to the plan. In March 2005, we agreed, subject to our review every three years, to increase the monthly contributions to £0.4 million ($0.8 million) for the next 20 years beginning May 2005. Nevertheless, regulatory agencies in the United Kingdom may require us to increase the monthly contributions further.

      Contractual Obligations and Commercial Commitments. We have the following contractual obligations and commercial commitments as of June 30, 2005:

			Payments Due by Period
					Less Than		1-3		4-5		After 5
			Total		1 Year		Years		Years		Years
			(In thousands)
Contractual obligations:
	Long-term debt		$	261,484	$	6,476	$	25,008	$	—	$	230,000
	Operating leases			17,381		2,170		7,385		2,737		5,089
	Pension obligation			190,400		9,600		28,800		19,200		132,800
	Purchase obligations(2)			367,910		94,846		165,028		48,161		59,875
		Total contractual cash obligations	$	837,175	$	113,092	$	226,221	$	70,098	$	427,764

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			Amount of Commitment Expiration per Period
					Less Than		1-3		4-5		Over 5
			Total		1 Year		Years		Years		Years
			(In thousands)
Other commercial commitments:
	Debt guarantee(1)		$	32,284	$	—	$	—	$	14,356	$	17,928
	Letters of credit and surety bond			15,146		14,879		267		—		—
		Total commercial commitments	$	47,430	$	14,879	$	267	$	14,356	$	17,928

(1)	We have guaranteed the repayment of up to £10 million ($17.9 million) of the debt of FBS Limited (“FBS”) and $14.4 million of the debt of Rotorwing Leasing Resources, Ltd. (“RLR”), both unconsolidated affiliates.
(2)	Since June 30, 2005, we have entered into purchase obligations of $74.8 million for additional aircraft and ten year operating leases on nine aircraft with annual lease payments of $6.3 million for the first five years and $7.6 million for the next five years. Both of these items are not reflected in the table above.

Critical Accounting Policies and Estimates

      See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” in the Annual Report for a discussion of our critical accounting policies. There have been no material changes to our critical accounting policies and estimates provided in this Quarterly Report.

Recent Accounting Pronouncements

      See Note A in the “Condensed Notes to Consolidated Financial Statements” for a discussion of certain new accounting pronouncements and their potential impact on the Company.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

      As of June 30, 2005, we have $261.5 million of debt outstanding, none of which carries a variable rate of interest. However, the market value of our fixed rate debt fluctuates with changes in interest rates.

      We occasionally use off-balance sheet hedging instruments to manage our risks associated with our operating activities conducted in foreign currencies. In limited circumstances and when considered appropriate, we will use forward exchange contracts to hedge anticipated transactions. We have historically used these instruments primarily in the buying and selling of certain spare parts, maintenance services and equipment. We attempt to minimize our exposure to foreign currency fluctuations by matching our revenue and expenses in the same currency for our contracts. Most of our revenue and expenses from our North Sea Operations are denominated in British pounds sterling. Approximately 33% of our operating revenue for the Current Quarter was translated for financial reporting purposes from British pounds sterling into U.S. dollars. As of June 30, 2005, we did not have any nominal forward exchange contracts outstanding. Subsequent to June 30, 2005, we have not entered into any nominal forward exchange contracts.

Item 4. Controls and Procedures.

Material Weaknesses Previously Disclosed

      As discussed in Item 9a of our Annual Report, our management, including our Chief Executive Officer (principal executive officer, “CEO”) and Chief Financial Officer (principal financial officer, “CFO”), concluded that, as of March 31, 2005, the Company did not maintain effective internal control over financial reporting because of the material weaknesses described below.

      Our former senior management and other personnel failed to establish or adhere to appropriate internal controls related to the control environment of the Company. Specifically, former management failed to establish and act with appropriate integrity and ethical values. As a result of this deficiency the following

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incidents occurred (as further described in Note E in the “Condensed Notes to Consolidated Financial Statements”):

      (a) improper payments to government officials and personnel of customers,

      (b) understated employee payroll tax declarations and payments,

      (c) improper valuations for customs purposes may have been declared in certain jurisdictions resulting in the underpayment of import duties,

      (d) assistance in the apparent circumvention of legal requirements in at least one country in which we operate, through the use of false invoices and misleading representations and

      (e) the related balance sheet amounts being not properly described or classified in the Company’s books and records.

      Furthermore:

•  We did not follow accounting controls related to the affiliate accounts receivable reconciliation process that would have detected the false invoices described above.

•  We failed to follow procedures that addressed concerns raised by employees about improper activities, and certain members of our former senior management failed to set the proper ethical tone.

•  We did not provide sufficient training to personnel engaged in key elements of the financial reporting process, including training on relevant regulations such as the Foreign Corrupt Practices Act.

•  We failed to educate and train employees in identifying, monitoring or reporting and responding to alleged misconduct or unethical behavior.

      This material weakness resulted in an under payment and accrual of payroll and other taxes. Accordingly, we restated our Consolidated Financial Statements for fiscal years 2004 and 2003 and for the first three quarters of fiscal year 2005 to accrue payroll and other taxes, penalties and interest.

      We did not have sufficient technical expertise to address or establish adequate policies and procedures associated with accounting matters. In addition, we did not maintain policies and procedures to ensure adequate management review of the information supporting the financial statements. As a result:

•  We did not have personnel with adequate technical expertise to effectively carry out the Company’s policies and procedures related to the review of technical accounting matters and to ensure adequate management review of information supporting the financial statements.

•  We did not establish or maintain adequate policies and procedures over the selection and application of appropriate accounting policies.

•  We failed to establish controls to properly identify and record expenses related to severance benefits for certain employees of a foreign subsidiary.

      This material weakness resulted in an underreporting of revenue and direct costs. Accordingly, we restated our Consolidated Financial Statements for fiscal years 2004 and 2003 and for the first three quarters of fiscal year 2005 to report customer reimbursements in revenue and direct costs and to record additional operating expense for the severance benefits.

      We did not have sufficient technical tax expertise to establish and maintain adequate policies and procedures associated with the operation of certain complex tax structures. As a result, we failed to establish proper procedures to ensure the actions required to enable us to realize the benefits of these structures as previously recognized in our financial statements were performed.

      This material weakness resulted in an underreporting of direct costs and income tax expense. Accordingly, we restated our Consolidated Financial Statements for fiscal years 2004 and 2003 and for the first three quarters of fiscal year 2005 to report an increase in direct costs and income tax expense.

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      As also disclosed in our Annual Report, management has taken a series of actions to remediate these weaknesses in the control environment, including the following:

•  Former senior management and other management personnel were terminated or required to resign.

•  New key members of senior and financial management were or are being hired, including persons with appropriate technical accounting expertise.

•  Functional reporting lines of field accounting personnel were realigned to report directly to the corporate accounting function and not through operations management.

•  Policies and procedures over the selection and application of appropriate accounting policies and account analyses and reconciliations have been or will be developed and implemented.

•  A comprehensive compliance program was adopted and implemented, including the introduction and dissemination of a new Code of Business Integrity to all employees, which included the following:

•  A position for a Chief Compliance Officer with primary responsibility to administer and set compliance policy and report to the CEO and Board of Directors on matters concerning legal and ethical compliance;

•  A zero tolerance policy with respect to facilitation payments;

•  Mandatory employee and director participation in company-wide business integrity training;

•  Strict requirements on engaging or conducting business through intermediaries, including joint venture partners and agents;

•  Membership in a non-profit organization that specializes in anti-bribery due diligence reviews and compliance training for international commercial intermediaries; and

•  An enhanced “Whistleblower” hotline.

•  Internal audits to ensure that the compliance program is followed are planned.

      While we have made progress in remediating the material weakness associated with the overall control environment, we are continuing to address the issues underlying the material weaknesses.

Evaluation of Disclosure Controls and Procedures

      As of June 30, 2005, we carried out an evaluation, under the supervision of our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. In light of the material weaknesses associated with the control environment previously disclosed, which had not been completely remediated as of June 30, 2005, our CEO and CFO concluded, after the evaluation described above, that our disclosure controls and procedures were not effective, as of such date.

Changes in Internal Control Over Financial Reporting

      Except for the remediation activities described above, all of which began in the first quarter of fiscal 2006 and continued into the third quarter of fiscal 2006, there has been no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

      We have certain actions or claims pending that have been discussed and previously reported in Part I. Item 3. “Legal Proceedings” in the Annual Report. There have been no material developments in these previously reported matters.

      See also Note E in the “Condensed Notes to Consolidated Financial Statements” in Part I. Item 1. “Financial Statements” of this Quarterly Report, which is incorporated herein by reference, for discussion of certain of our legal matters.

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Item 1A. Risk Factors.

      If you hold our securities or are considering an investment in our securities, you should carefully consider the risks discussed under “Risk Factors” beginning on page 3 of our Annual Report, which is incorporated herein by reference.

Item 3. Defaults Upon Senior Securities.

      As of June 30, 2005, we were in default of the various financial information reporting covenants in our revolving credit facility and the limited recourse term loans as a result of not providing financial information for fiscal 2005 when due, and also for not providing similar information to other creditors. For a discussion of these defaults, see “Defaults Under Certain Long-Term Debt Agreements” in Note D in the “Condensed Notes to Consolidated Financial Statements” and Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Financing Activities” of this Quarterly Report, which are incorporated herein by reference.

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

      On July 26, 2005, we solicited consents from all holders of our Senior Notes to extend until November 15, 2005 (or, at our election and upon the payment of additional fees, until December 15, 2005 or January 15, 2006, as applicable) the period in which we must file and deliver our financial reports and related documents, and to waive certain past defaults under the indenture relating to our failure to timely file and deliver our Annual Report. We amended the terms of our solicitation of consents on August 9, 2005 and August 11, 2005. On August 16, 2005, we completed the consent solicitation. Holders of $227.9 million principal amount of the Senior Notes, which constituted a majority of the $230 million aggregate principal amount outstanding, delivered consents in connection with the consent solicitation. For additional information on this consent solicitation, see “Defaults Under Certain Long-Term Debt Agreements” in Note D in the “Condensed Notes to Consolidated Financial Statements” and Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Financing Activities” of this Quarterly Report.

Item 6. Exhibits.

      The following exhibits are filed as part of this quarterly report:

Exhibit
Number			Description of Exhibit
	*3	.1	Delaware Certificate of Incorporation of the Company dated December 2, 1987.
	*3	.2	Certificate of Amendment of Certificate of Incorporation dated November 30, 1989.
	*3	.3	Certificate of Amendment of Certificate of Incorporation dated December 9, 1992.
	*3	.4	Amended and Restated By-laws.
	*3	.5	Certificate of Designation of Series A Junior Participating Preferred Stock.
	*10	.1	New Helicopter Sales Agreement dated December 19, 2002 between the Company and Sikorsky Aircraft Corporation (“Sikorsky Agreement”).+
	*10	.2	Amendment Number 1 to Sikorsky Agreement dated February 14, 2003.+
	*10	.3	Amendment Number 2 to Sikorsky Agreement dated April 1, 2003.+
	*10	.4	Amendment Number 3 to Sikorsky Agreement dated January 22, 2004.+
	*10	.5	Amendment Number 4 to Sikorsky Agreement dated March 5, 2004.+
	*10	.6	Amendment Number 5 to Sikorsky Agreement dated July 13, 2004.+
	*10	.7	Amendment Number 6 to Sikorsky Agreement dated October 11, 2004.+
	*10	.8	Amendment Number 7 to Sikorsky Agreement dated January 5, 2005.+
	*10	.9	Amendment Number 8 to Sikorsky Agreement dated May 5, 2005.+
	*10	.10	Amendment Number 9 to Sikorsky Agreement dated June 14, 2005.+
	10	.11	Employment Agreement with Brian C. Voegele dated June 1, 2005 (filed as exhibit 10.1 to the Company’s Form 8-K dated July 12, 2005 and incorporated herein by reference).
	*15	.1	Letter from KPMG LLP dated January 6, 2006, regarding unaudited interim financial information.

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Exhibit
Number			Description of Exhibit
	*31	.1	Rule 13a-14(a) Certification by the Chief Executive Officer, President and Chief Financial Officer of the Registrant.
	*32	.1	Section 1350 Certification of the Chief Executive Officer, President and Chief Financial Officer of the Registrant.

*  Furnished herewith.

+  Confidential information has been omitted from this exhibit and filed separately with the SEC pursuant to a confidential treatment request under Rule 246-2.

49

SIGNATURES

      Pursuant to the requirements 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.

OFFSHORE LOGISTICS, INC.

By:  /s/ William E. Chiles

William E. Chiles

Chief Executive Officer, President and

Chief Financial Officer

By:  /s/ Elizabeth D. Brumley

Elizabeth D. Brumley

Vice President and Chief Accounting Officer

January 11, 2006

50

Index to Exhibits

Exhibit
Number			Description of Exhibit
	*3	.1	Delaware Certificate of Incorporation of the Company dated December 2, 1987.
	*3	.2	Certificate of Amendment of Certificate of Incorporation dated November 30, 1989.
	*3	.3	Certificate of Amendment of Certificate of Incorporation dated December 9, 1992.
	*3	.4	Amended and Restated By-laws.
	*3	.5	Certificate of Designation of Series A Junior Participating Preferred Stock.
	*10	.1	New Helicopter Sales Agreement dated December 19, 2002 between the Company and Sikorsky Aircraft Corporation (“Sikorsky Agreement”).+
	*10	.2	Amendment Number 1 to Sikorsky Agreement dated February 14, 2003.+
	*10	.3	Amendment Number 2 to Sikorsky Agreement dated April 1, 2003.+
	*10	.4	Amendment Number 3 to Sikorsky Agreement dated January 22, 2004.+
	*10	.5	Amendment Number 4 to Sikorsky Agreement dated March 5, 2004.+
	*10	.6	Amendment Number 5 to Sikorsky Agreement dated July 13, 2004.+
	*10	.7	Amendment Number 6 to Sikorsky Agreement dated October 11, 2004.+
	*10	.8	Amendment Number 7 to Sikorsky Agreement dated January 5, 2005.+
	*10	.9	Amendment Number 8 to Sikorsky Agreement dated May 5, 2005.+
	*10	.10	Amendment Number 9 to Sikorsky Agreement dated June 14, 2005.+
	10	.11	Employment Agreement with Brian C. Voegele dated June 1, 2005 (filed as exhibit 10.1 to the Company’s Form 8-K dated July 12, 2005 and incorporated herein by reference).
	*15	.1	Letter from KPMG LLP dated January 6, 2006, regarding unaudited interim financial information.
	*31	.1	Rule 13a-14(a) Certification by the Chief Executive Officer, President and Chief Financial Officer of the Registrant.
	*32	.1	Section 1350 Certification of the Chief Executive Officer, President and Chief Financial Officer of the Registrant.

*  Furnished herewith.

+  Confidential information has been omitted from this exhibit and filed separately with the SEC pursuant to a confidential treatment request under Rule 246-2.