Pemco Aviation Group and TAECO announce Cargo Conversion Partnership

    Business Editors

    JINAN, China--(BUSINESS WIRE)--Jan. 10, 2005--Pemco Aviation Group (NASDAQ: PAGI), Taikoo (Xiamen) Aircraft Engineering Company (TAECO), and Taikoo (Shandong) Aircraft Engineering Company (STAECO) signed an agreement in Jinan on January 7th establishing a cargo conversion partnership for China and the Asia Pacific region. Under the agreement, the companies will jointly market freighter conversions and perform conversions at TAECO / STAECO's facilities in China.
    Participating in the ceremony from Pemco were Harold "Skip" Bowling, Vice Chairman of the Board of Pemco Aviation Group; Kevin Casey, Vice President, Commercial Business Development; and Bob Watson, Managing Director, Asia Pacific. Prominent among the many TAECO and STAECO executives present were P.K. Chan, Chairman of TAECO and Hong Kong-based HAECO; Joseph Wong, TAECO Board member and HAECO executive; Jia Fu Wen, Chairman of STAECO and President of Shandong Airlines; John Chi, Chief Operating Officer of TAECO; Huang En Fang, General Manager of STAECO and Vice President of Shandong Airlines; and Sam Goh, General Manager, Engineering and Projects of TAECO.
    The alliance will focus initially on B737 aircraft, and plans to cooperate on other aircraft models, both those for which Pemco currently holds Supplemental Type Certificates (STCs) and other models as markets develop. Pemco will provide technical, operational and quality oversight and guidance while TAECO / STAECO will provide Mainland-based production facilities, a seasoned workforce, and draw on their relationships with aircraft operators in the region.
    In attendance representing General Administration of Civil Aviation of China (CAAC) was Mr.Xu Chao Qun, Deputy Director General, Flight Standards Department. Commenting on the significance of the event, Mr. Xu stated, "This is an historic hour in China Aviation and CAAC will fully support this program."
    Mr. Ron Aramini, President and Chief Executive Officer of Pemco Aviation Group, explained the significance of the agreement. "The air cargo market in China is experiencing the fastest growth in the world, with more than 20% annual growth over the past five years and projected growth exceeding 10% annually. In order to effectively pursue this market and support our current and future customers, Pemco felt it important to have a strong Chinese partner. Through this alliance with TAECO / STAECO, we now have a partner that will provide excellent customer relationships and extensive experience in freighter conversion programs and aircraft maintenance."
    Mr. P.K Chan, Chairman of TAECO stated, "This partnership is very beneficial for both parties. It allows us to offer our customers an expanded spectrum of cargo conversions. Pemco's B737-300 freighter and QC are the only B737 conversions currently approved by the CAAC and we are pleased to be able to provide this program to our customers."
    Aramini added, "This partnership firmly establishes Pemco's presence and commitment to China and the rest of the Asia Pacific region. It is an important step in our strategy to significantly expand our cargo conversion business in 2005. We look forward to working with our new partners, TAECO / STAECO." The companies plan to begin conversions in China this year.
    Pemco Aviation Group, Inc., with executive offices in Birmingham, Alabama, and facilities in Alabama, Florida, and California, performs maintenance and modification of aircraft for the U.S. Government and foreign and domestic commercial customers. The company also provides aircraft parts and support and engineering services and full service overhaul and repair for a wide range of aircraft. Pemco Aviation Group also develops and manufactures aircraft cargo systems, rocket vehicles and control systems, and precision components for the aviation industry.
    TAECO operates three hangars in Xiamen and is the premier independent maintenance and modification organization in Mainland China. Formed in 1993, its shareholders are Hong Kong Aircraft Engineering Company (HAECO), Cathay Pacific Airways, Japan Airlines, The Boeing Corporation, Xiamen Aviation Industry Co (Xiamen City), and Beijing Kailan Aviation Technology (CAAC). The company provides maintenance and modification services to commercial airlines and performs passenger to freighter conversions. STAECO, a Joint Venture between TAECO and Shandong Airlines, performs maintenance and modification services at the company's facilities in Jinan, China.
    Certain statements in this release that are not historical fact may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results to differ materially from historical results or from any results expressed or implied by such forward-looking statements, including but not limited to: changes in economic conditions, Pemco's ability to obtain additional contracts and perform under existing contracts, the outcome of pending and future litigation, potential environmental and other liabilities, and other risks detailed from time to time in Pemco's SEC reports, including its Annual Report on Form 10-K/A filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2003. Pemco cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. Pemco does not undertake any obligation to update or revise any forward-looking statements and is not responsible for changes made to this release by wire services or Internet services.

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CONTACT: Pemco Aviation Group, Inc. Doris Sewell or Hal Chrisman, 205-510-4935

KEYWORD: CALIFORNIA ALABAMA CHINA INTERNATIONAL ASIA PACIFIC INDUSTRY KEYWORD: AEROSPACE/DEFENSE AIRLINES TRANSPORTATION MARKETING AGREEMENTS SOURCE: Pemco Aviation Group, Inc.

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