Global Aircraft Solutions: Why I'm Not Selling

| About: Global Aircraft (GACFQ)

The Microcap Speculator submits: By any measure, Global Aircraft Solutions' (GACF) third quarter report was disappointing. Revenue declined 22% from second quarter 2006 to $7.9 million, net profits before taxes declined 75% from the prior sequential quarter, and EBITDA slid 56% to $770,580. The only thing not dropping was expenses--capital expenditures for the quarter rose to $307,132 from $27,140 in the second quarter 2006.

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GACF October 20 - November 20

Nonetheless, I am holding on to my shares for another quarter. The company gave investors every reason to believe it will close the year on a strong note:

* Four large maintenance checks scheduled for the third quarter were deferred into the fourth quarter by three separate customers: [1] a"C" check on an Avolar plane; [2] a maintenance check for a 737 in the Mexican presidential fleet; and [3]-[4] two "D" checks for BCI Aircraft Leasing. Avolar's maintenance extension expires mid-November and the aircraft will be put into maintenance at Hamilton Aerospace immediately at that time. The Mexican Presidential fleet 737 was input for maintenance at Hamilton late in October, and last week, both BCI aircraft due "D" checks were delivered to the Hamilton facility.

* Collectively, these maintenance contracts represent over $2.9 million in anticipated revenue and over $435,000 in gross profit for Hamilton Aerospace and World Jet postponed to the fourth quarter.

* In the third quarter, the Company incurred a one-time interest charge of approximately $250,000 for a deposit made to a Middle Eastern national carrier in a bid to acquire eleven wide-body aircraft and associated spare parts.

* On November 17, 2006, the Company announced four additional maintenance, modification, and parts contracts valued at $4 million. President John Sawyer stated that the four contracts brought the company up to "full capacity."

* GACF could be an unrecognized beneficiary of the US Air (LCC) bid for Delta (DALRQ). According to the third quarter release, GACF's 30%-owned subsidiary, JetGlobal, has filed a $51 million claim against Delta's bankruptcy estate, joining a long line of unsecured creditors. By my calculations the part of that bid attributable to GACF is a little over $16 million. If the claim is not disputed, and US Air pays out 50 cents on the dollar as has been reported, then GACF could receive a windfall of up to $8 million [probably half in cash, half in US Air stock].

DISCLOSURE: I am long GACF. I have no position in US Air or Delta.