UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 2004

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _______________ to _________________

Commission File Number 001-31617

Offshore Logistics, Inc.
(Exact name of registrant as specified in its charter)

        Registrant’s telephone number, including area code: (337) 233-1221

        Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: NONE

        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   X    NO___

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   

   X   

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934.)

YES   X    NO___

        The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing price on the New York Stock Exchange, as of September 30, 2003 was $428,891,681.

        The number of shares outstanding of the registrant’s Common Stock as of June 4, 2004 was 22,633,721.

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the Definitive Proxy Statement for the 2004 Annual Meeting of Stockholders (the “2004 Proxy”) are incorporated by reference into Part III hereof.

OFFSHORE LOGISTICS, INC.
INDEX—FORM 10-K

PART I

PART II

PART III

PART IV

OFFSHORE LOGISTICS, INC.
ANNUAL REPORT (FORM 10-K)

INTRODUCTION

        This Annual Report on Form 10-K is filed by Offshore Logistics, Inc., a Delaware corporation, which we refer to separately as Offshore Logistics or the registrant. We use the pronouns “we,” “our” and “us” to refer collectively to Offshore Logistics, Bristow Aviation Holdings, Ltd. and our consolidated subsidiaries. We also own interests in other entities that we do not consolidate for financial reporting purposes, which we refer to as unconsolidated affiliates. Offshore Logistics, its subsidiaries and the unconsolidated affiliates are each a separate corporation, limited liability company or other legal entity. Our use of the terms “we,” “our” and “us” does not suggest that we have abandoned their separate identities or the legal protections given to them as separate legal entities.

FORWARD-LOOKING STATEMENTS

        This Annual 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 Annual 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 Annual 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 all of the following:

• The risks and uncertainties described below under the heading "Risk Factors";
  
  
• The major oil companies do not continue to expand internationally;
  
  
• We are not able to achieve anticipated savings from our North Sea restructuring;
  
  
• Changes in North Sea market conditions occur that reverse that area's current downward trend;
  
  
• We are not able to re-deploy certain aircraft in Mexico;
  
  
• We are not able to favorably resolve our labor mediation efforts or our contingency plans are not successful; and
  
  
• We do not achieve anticipated benefit of fleet renewal program.

        All forward-looking statements in this Annual Report are qualified by these cautionary statements and are only made as of the date of this Annual 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.

RISK FACTORS

        If you hold our securities or are considering an investment in our securities, you should carefully consider the following risks, together with the other information contained in this Annual Report.

The demand for our services is substantially dependent on the level of activity in the oil and gas industry.

        We provide helicopter services to oil and gas exploration, development and production companies. As a result, demand for our services is substantially dependent on activity levels and transportation needs in that industry, and our revenue and profitability are largely dependent upon the worldwide levels of activity in oil and gas exploration, development and production. These activity levels are principally affected by trends in, and expectations regarding, oil and gas prices, as well as the capital expenditure budgets of oil and gas companies. We cannot predict future oil and gas price movements. Historically, the prices for oil and gas have been volatile and are subject to factors beyond our control, such as:

• the supply of and demand for oil and gas and market expectations for such supply and demand;
  
  
• actions of OPEC and other oil producing countries to control prices or change production levels;
  
  
• general economic and political conditions, both worldwide and in particular regions;
  
  
• governmental regulation; and
  
  
• the price and availability of alternative fuels.

        In addition, oil and gas companies are continually seeking to implement measures aimed at greater cost savings. As part of these measures, these companies are attempting to improve cost efficiencies with respect to helicopter transportation services. For example, these companies may reduce staffing levels on both old and new installations by using new technology to permit unmanned installations and may reduce the frequency of transportation of employees by increasing the length of shifts offshore. The continued implementation of these kinds of measures could reduce the demand for helicopter transportation services and have a material adverse effect on our business, financial condition and results of operations.

We are highly dependent upon the level of activity in the Gulf of Mexico and the North Sea.

        Approximately 55% of our fiscal 2004 operating revenue was derived from our helicopter services provided to customers operating in North America and the North Sea. If activity in oil and gas exploration, development and production in either of these areas declines, our business, financial condition and results of operations could be materially and adversely affected. A decline in activity in fiscal 2004 in the North Sea negatively impacted our revenue in that region. We cannot predict the levels of activity in these areas in future periods.

Our operations and future growth depend on the level of international oil and gas activity and our ability to operate in these regions.

        Approximately 31% of our fiscal 2004 operating revenue was attributable to our helicopter services provided to oil and gas customers operating outside of North America and the North Sea. The demand for our helicopter services in our International Operations depends on the level of oil and gas exploration, development and production activity in these regions. We cannot predict the level of activity in these areas in future periods.

        In addition, our ability to conduct our International Operations may be adversely affected by:

• local regulations restricting foreign ownership of helicopter operators;
  
  
• requirements to award contracts to local operators and to employ local citizens; and
  
  
• the number and location of new drilling concessions granted by foreign sovereigns.

        If we are unable to continue to operate or retain contracts in foreign countries, our future business, financial condition and results of operations may be adversely affected and our International Operations may not grow in accordance with our expectations.

        Our International Operations are also subject to various risks inherent in conducting business outside the United States, including:

• political, social and economic instability, including risks of war, general strikes, civil disturbances and guerilla activity;
  
  
• governmental actions that restrict payments or the movement of funds or result in the deprivation of contract rights;
  
  
• the taking of property without fair compensation; and
  
  
• the lack of well developed legal systems in some countries which could make it difficult for us to enforce our contractual rights.

        For example, there has been continuing unrest in Nigeria where we derived 42% of our fiscal 2004 International Operations operating revenue. While this unrest has not adversely affected our International Operations, any future unrest in Nigeria or our other operating regions could adversely affect our business, financial condition and results of operations. We cannot predict whether any of these events will occur in the future in Nigeria or elsewhere.

Foreign exchange risks and controls may affect our financial position and results of operations.

        Through our foreign operations, we are exposed to currency fluctuations and exchange rate risks. The majority of our revenue and expenses from our North Sea Operations are in British Pound Sterling. In addition, some of our contracts to provide services internationally provide for payment in foreign currencies. Our foreign exchange rate risk is even greater when our revenue is denominated in a currency different from the associated costs. We attempt to minimize our foreign exchange rate risk exposure by contracting the majority of our services other than in our North Sea Operations in U.S. dollars. As a result, a strong U.S. dollar may increase the local cost of our services that are provided under U.S. dollar denominated contracts, which may reduce the demand for our services in foreign countries. Generally, we do not enter into hedging transactions to protect against foreign exchange risks related to our operating revenue.

        Because we maintain our financial statements in U.S. dollars, we are vulnerable to fluctuations in the exchange rate between the British Pound Sterling and the U.S. dollar and between other foreign currencies and the U.S. dollar. In preparing our financial statements, we must convert all non-U.S. dollar currencies to U.S. dollars. The effect of foreign currency translation is reflected in a component of stockholders’ investment while foreign currency transaction gains or losses are credited or charged to income and reflected in other income (expense). In the past three fiscal years our stockholders’ investment has increased by $62.4 million as a result of translation adjustments. Changes in exchange rates could cause significant changes in our financial position and results of operations in the future.

        We operate in countries with foreign exchange controls. These controls may limit our ability to repatriate funds from our International Operations and unconsolidated affiliates or otherwise convert local currencies into U.S. dollars. These limitations could adversely affect our ability to access cash from these operations.

We operate in many international areas through entities that we do not control.

        We conduct many of our international operations through entities in which we have a minority investment or through strategic alliances with foreign partners. For example, we have acquired interests in, and in some cases have lease and service agreements with, entities that operate aircraft in Brazil, Egypt, Mexico and Norway. We derive significant amounts of lease and service revenue and dividend income from these entities. In fiscal 2004 we derived approximately $4.9 million of dividend income from our unconsolidated affiliates. More significantly, we received approximately $54.1 million in fiscal 2004 from the provision of aircraft and other services to unconsolidated affiliates. Because we do not own a majority or maintain voting control of these entities, we do not have the ability to control their policies, management or affairs. The interests of persons who control these entities or partners may differ from ours, and they may cause such entities to take actions which are not in our best interest. If we are unable to maintain our relationships with our partners in these entities, we could lose our ability to operate in these areas which could materially adversely affect our business and results of operations.

We face substantial competition in both of our business segments.

        The helicopter business is highly competitive. Chartering of helicopters is usually done on the basis of competitive bidding among those having the necessary equipment, experience and resources. Factors that affect competition in our industry include price, reliability, safety record, reputation, availability, equipment and quality of service.

        In our North American Operations, we face competition from a number of providers. One of our competitors has more helicopters in service in the Gulf of Mexico than we do. We have one significant competitor in the North Sea and expect another competitor to enter the North Sea in the summer of 2004. In our International Operations, we also face significant competition. In addition, foreign regulations may also require the awarding of contracts to local operators.

        Many of our customers have the capability to perform their own helicopter operations should they elect to do so, which has a limiting effect on our rates. The loss of a significant number of our customers or termination of a significant number of our contracts could materially adversely affect our business, financial condition and results of operations.

        The production management services business is also highly competitive. There are a number of competitors that maintain a presence throughout the Gulf of Mexico. In addition, there are many smaller operators that compete with us on a local basis or for single projects or jobs. Contracts for our Production Management Services are generally for a year or less and could be awarded to our competitors upon expiration. Many of our customers are also able to perform their own Production Management Services should they choose to do so.

        As a result of significant competition, we must continue to provide safe and efficient service or we will lose market share, which could materially adversely affect our business, financial condition and results of operations.

Labor problems could adversely affect us.

        The pilots in our North American Operations and approximately 500 employees in our North Sea Operations are represented under collective bargaining agreements. Any disputes over the terms of these agreements or our potential inability to negotiate acceptable contracts with the unions that represent our employees under these agreements could result in strikes, work stoppages or other slowdowns by the affected workers. The collective bargaining agreement that covers our North American pilots became amendable in May 2003. Following approximately eight weeks of negotiations with union representatives, an agreement could not be reached on several key areas, most notably compensation levels. We and the union representatives agreed to seek assistance from the National Mediation Board in appointing an independent mediator to assist with the negotiations. A mediator was assigned by the NMB and sessions have continued to date with some progress being made. In the future, all negotiations will be at the behest of the NMB mediator. If the mediator and the NMB should determine that no further progress is being made toward resolution, then the NMB can seek a number of alternatives which include:

        We cannot predict whether our negotiations will be successful or, if not, what action our pilots might take if a “cooling-off period” is declared. If our unionized workers engage in a strike, work stoppage or other slowdown, or other employees elect to become unionized or existing labor agreements are renegotiated on, or future labor agreements contain, terms that are unfavorable to us, we could experience a disruption of our operations or higher ongoing labor costs which could adversely affect our business, financial condition and results of operations.

Helicopter operations involve risks that may not be covered by our insurance or may increase our operating costs.

        The operation of helicopters inherently involves a degree of risk. Hazards such as harsh weather and marine conditions, mechanical failures, crashes and collisions are inherent in our business and may result in personal injury, loss of life, damage to property and equipment and suspension or reduction of operations. Our aircraft have been involved in accidents in the past, some of which have included loss of life and property damage. We may experience similar accidents in the future. In addition, Grasso Production Management’s operations are subject to the normal risks associated with working on oil and gas production facilities. These risks include injury to or death of personnel and damage to or loss of property.

        We attempt to protect ourselves against these losses and damage by carrying insurance, including hull and liability, general liability, workers’ compensation and property and casualty insurance. Our insurance coverage is subject to deductibles and maximum coverage amounts, and we do not carry insurance for all types of losses, including business interruption. We cannot assure you that our existing coverage will be sufficient or that in the future we will be able to maintain our existing coverage or that the premiums will not increase substantially. In addition, future terrorist activity, accidents or other events could increase our insurance rates. The loss of our liability insurance coverage, inadequate coverage from our liability insurance or future substantial increases in premiums could materially and adversely affect our business, financial condition and results of operations.

We are subject to government regulation that limits foreign ownership of aircraft companies.

        United States. We are subject to regulations pursuant to the Federal Aviation Act of 1958, as amended, and other statutes. Under the Federal Aviation Act, it is unlawful to operate certain aircraft for hire within the United States unless such aircraft are registered with the Federal Aviation Administration, or FAA, and the operator of such aircraft has been issued an operating certificate by the FAA. As a general rule, aircraft may be registered under the Federal Aviation Act only if the aircraft is owned or controlled by one or more citizens of the United States, and an operating certificate may be granted only to a citizen of the United States. For purposes of these requirements, a corporation is deemed to be a citizen of the United States only if, among other things, at least 75% of its voting interests are owned or controlled by U.S. citizens. If persons other than U.S. citizens should come to own or control more than 25% of the voting interests in us, we have been advised that our aircraft may be subject to deregistration under the Federal Aviation Act and we may lose the privilege of operating within the United States. Deregistration of our aircraft or loss of our operating license for any reason, including foreign ownership in excess of the permitted levels, would materially adversely affect our ability to conduct our North American Operations. As of March 31, 2004, approximately 5.9% of our outstanding common shares were held by persons with foreign addresses. Because a substantial portion of our common stock is publicly traded, our foreign ownership may fluctuate on each trading day. In addition, these foreign ownership limitations restrict our ability to issue or sell our common stock to non-U.S. citizens which could hurt our ability to raise equity or acquire assets or businesses for common stock in the future.

        United Kingdom. We are subject to the Licensing of Air Carriers Regulations 1992, and Regulations made under the Civil Aviation Act 1992 and other statutes. We carry persons and property in our helicopters pursuant to an operating license issued by the Civil Aviation Authority, or CAA.

        Under the Licensing of Air Carriers Regulations 1992, it is unlawful to operate certain aircraft for hire within the United Kingdom unless such aircraft are approved by the CAA. The holder of an operating license must meet the ownership and control requirements of Council Regulation 2407/92. This means that the entity that operates under the license must be owned directly or through majority ownership by United Kingdom and European Economic Union Area nationals and must at all times be effectively controlled by them. We own 49% of the common stock of Bristow and have put/call arrangements with the other two stockholders. If we were to purchase any Bristow shares pursuant to this arrangement, we would be required to find a qualified European owner to acquire those shares to retain Bristow’s CAA operating license. Revocation of the CAA operating license for any reason would have a material adverse effect on our North Sea Operations.

    International. Certain of our International Operations are subject to restrictions on foreign ownership. Because of this, these operations are conducted primarily through unconsolidated affiliates in which local citizens own interests or pursuant to arrangements under which we operate assets or conduct operations under contracts with local entities. If changes in local regulation further limit foreign ownership, we may not be permitted to operate in certain regions under our existing arrangements.

        We cannot assure you that there will not be changes in or adoptions of U.S., U.K. or other foreign laws, regulations or administrative requirements in any region where we operate, or the interpretation thereof, which could restrict or prohibit our ability to operate in certain regions. Any such restriction or prohibition on our ability to operate may materially adversely affect our business, financial condition and results of operations.

Failure to maintain an acceptable safety record may have an adverse impact on our ability to attract and retain customers.

        Our customers consider safety and reliability as primary concerns in selecting a provider of helicopter transportation services. If we fail to maintain a record of safety and reliability that is satisfactory to our customers, our ability to retain current customers and attract new customers may be adversely affected.

Our failure to attract and retain qualified personnel could have an adverse effect on us.

        Our ability to attract and retain qualified pilots, mechanics and other highly trained personnel is an important factor in determining our future success. Many of our customers require pilots of aircraft that service them to have very high levels of flight experience. The market for these experienced and highly trained personnel is competitive and will become more competitive if oil and gas industry activity levels increase. Accordingly, we cannot assure you that we will be successful in our efforts to attract and retain such persons. Some of our pilots and mechanics and those of our competitors are members of the U.S. military reserves who have been called to active duty, and more could be called. If significant numbers of such persons are called to active duty, it would reduce the supply of such workers and likely increase our labor costs.

Our operations are subject to weather related and seasonal fluctuations.

        Generally, our operations can be impaired by harsh weather conditions. Poor visibility, high wind and heavy precipitation can affect the operation of helicopters and result in a reduced number of flight hours. A significant portion of our operating revenue is dependent on actual flight hours and a substantial portion of our direct costs is fixed. Thus, prolonged periods of harsh weather can materially and adversely affect our business, financial condition and results of operations.

        In the Gulf of Mexico, the months of December through March have more days of harsh weather conditions than the other months of the year. Heavy fog during those months often limits visibility. In addition, in the Gulf of Mexico, June through November is tropical storm season. When a tropical storm is about to enter or begins developing in the Gulf of Mexico, flight activity may increase because of evacuations of offshore workers. However, during tropical storms, we are unable to operate in the area of the storm. In addition, as a significant portion of our facilities are located along the Gulf of Mexico coast, tropical storms may cause substantial damage to our property there, including helicopters. Additionally, we incur costs in evacuating our aircraft, personnel and equipment prior to tropical storms.

        The fall and winter months have fewer hours of daylight, particularly in the North Sea. Consequently, flight hours are generally lower at these times, which typically results in a reduction in operating revenue during those months. While some of our aircraft are equipped to fly at night, we generally do not do so. Accordingly, our reduced ability to operate in harsh weather conditions and darkness may adversely affect our business, financial condition and results of operations.

Environmental regulations and liabilities may increase our costs and adversely affect us.

        All of our operations are subject to local environmental laws and regulations that impose limitations on the discharge of pollutants into the environment and establish standards for the treatment, storage, recycling, and disposal of toxic and hazardous wastes. The nature of the business of operating and maintaining helicopters requires that we use, store, and dispose of materials that are subject to environmental regulation. Liabilities associated with environmental matters could have a material adverse impact on our business, financial condition and results of operations. For additional information see “Legal Proceedings.”

PART I

ITEM 1. Business

OVERVIEW

        We are a leading provider of helicopter transportation services to the worldwide offshore oil and gas industry with major operations in the 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 Australia, Brazil, China, Mexico, Nigeria and Trinidad. As of March 31, 2004, we operated 332 aircraft and our unconsolidated affiliates operated an additional 96 aircraft throughout the world. We are also a leading provider of production management services for oil and gas production facilities in the Gulf of Mexico.

        We provide helicopter transportation services through our consolidated subsidiaries, our interest in Bristow Aviation Holdings, Ltd., or Bristow, and our unconsolidated affiliates. Our Production Management Services are conducted through our wholly-owned subsidiary, Grasso Production Management, or GPM.

        The United Kingdom, as do most countries, limits foreign ownership of aviation companies. To comply with these restrictions, we own only 49% of the common stock of Bristow, but we own 100% of Bristow’s subordinated debt. In addition, we have a put/call agreement with the other two stockholders of Bristow which grants us the right to buy all of their shares of Bristow common stock (and them the right to require us to buy all of their shares). Under U.K. law, to maintain Bristow’s operating license, we would be required to find a qualified European owner to acquire any of the Bristow shares that we have the right or obligation to acquire under the agreement.

        To comply with other foreign ownership limitations, yet expand internationally, we have formed or acquired interests in numerous foreign helicopter operations. These interests typically combine local ownership interest with our experience in providing helicopter services to the oil and gas industry. Because we do not own a majority of the equity or maintain voting control of these entities, we may not have the ability to control their policies, management or affairs. We refer to these entities as unconsolidated affiliates.

        For a further description of our unconsolidated affiliates, see the statements under “Introduction” and “Risk Factors” and Note C in our “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report. For a further discussion of Bristow see Note K in our “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report.

        We operate our business in two segments: Helicopter Activities and Production Management Services. We conduct our Helicopter Activities through four business units:

• North American Operations;
  
  
• North Sea Operations;
  
  
• International Operations; and
  
  
• Technical Services.

        For additional information about our two segments, see Note L in our “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report. For a description of certain risks affecting our business and operations, see “Risk Factors” included in this Annual Report.

        We are a Delaware corporation incorporated in 1969. Our executive offices are located at 224 Rue de Jean, Post Office Box 5-C, Lafayette, Louisiana, 70505. Our telephone number is (337) 233-1221.

        All of our periodic report filings with the Securities and Exchange Commission, or SEC, pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, for fiscal periods ending on or after December 15, 2002 are made available, free of charge, through our website located at http://www.olog.com, including our Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and any amendments to these reports. These reports are available through our website as soon as reasonably practicable after we electronically file or furnish such material to the Securities and Exchange Commission. In addition, the public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549 or on their Internet website located at http://www.sec.gov. The public may obtain information on the operation of the Public Reference Room and the SEC’s Internet website by calling the SEC at 1-800-SEC-0330.

HELICOPTER ACTIVITIES

        Our customers charter our helicopters to transport personnel and time-sensitive equipment from onshore bases to offshore drilling rigs, platforms and other installations. We classify our aircraft fleet into three categories: small, medium and large. Small aircraft typically hold four to six passengers and are better suited for daytime flights and shorter routes. Medium aircraft hold up to 13 passengers and are the most versatile part of our fleet as they can fly in a variety of different operating conditions and a variety of distances. Large aircraft hold up to 18 passengers and are capable of flying in harsh weather conditions.

        The following table sets forth the number of our aircraft operated as of the dates indicated:

        The following table shows the distribution of our small, medium and large aircraft among our business units as of March 31, 2004:

North American Operations

        We conduct our North American Helicopter Activities primarily from 12 operating facilities along the Gulf of Mexico, with additional operations in Alaska. As of March 31, 2004, we operated 157 aircraft in the Gulf of Mexico and 15 aircraft in Alaska. We are the second largest supplier of helicopter services in the Gulf of Mexico and a major supplier in Alaska, where we fly the entire length of the Alyeska pipeline every day. The Gulf of Mexico is a major offshore oil and gas producing region with approximately 4,000 production platforms. These platforms are typically unmanned and are most efficiently serviced by our small aircraft.

North Sea Operations

        We are the second largest provider of helicopter services in the North Sea, where there are harsh weather conditions and geographically concentrated offshore facilities. The facilities in the North Sea are large and require frequent crew change flight services. We deploy a majority of our large aircraft in this region. In addition to our oil and gas helicopter services, we are the sole civil supplier of search and rescue services to Her Majesty’s Coast Guard. As of March 31, 2004, we operated 53 aircraft in the North Sea. We also have a service agreement with, and ownership interest in, an unconsolidated affiliate in Norway whereby we provide services and technical support to this entity and lease them aircraft for use in their operations.

International Operations

        We also provide helicopter services to most of the major offshore oil and gas producing regions of the world beyond the Gulf of Mexico and the North Sea. Our International Operations are conducted in a variety of different locales, where we deploy small, medium and large aircraft dependent on the mission requirements and local operating conditions. As of March 31, 2004, our International fleet was composed of 101 aircraft in 10 different countries. Of these aircraft, 38 helicopters were operated in Central and South America (Brazil, Colombia, Mexico and Trinidad), 41 aircraft in Nigeria, 11 aircraft in Australia and 11 aircraft elsewhere throughout the world.

Unconsolidated Affiliates

        Most countries limit foreign ownership of aviation companies. To comply with these regulations and yet expand internationally, we have formed or acquired interests in numerous foreign helicopter operations. These investments typically combine a local ownership interest with our experience in providing helicopter services to the oil and gas industry. These arrangements have allowed us to expand operations while diversifying the risks and reducing the capital outlays associated with independent expansion. We lease many of our own aircraft to these unconsolidated affiliates to service customers in foreign countries. Set forth below is a brief description of our significant unconsolidated affiliates:

Technical Services

        Our Technical Services business unit provides helicopter repair and overhaul services from facilities located in Tucson, Arizona, New Iberia, Louisiana, and Redhill, England. These services include airframe refurbishments, engine overhauls, major inspections, engineering and design services, technical manpower support and transmission testing. While a portion of this work is performed on our own aircraft, the majority of these services are performed for third parties. Our Technical Services business unit also provides engineering and administrative support to the 53 aircraft operated by FBS, FBH and FBL for training the British military.

PRODUCTION MANAGEMENT SERVICES

        We are also a leading independent contract operator of oil and gas production facilities in the Gulf of Mexico. As of March 31, 2004, we managed or had personnel assigned to 288 production facilities in the Gulf of Mexico. Our customers are typically independent oil and gas companies who hire us to monitor and maintain their offshore production facilities and provide other services for certain onshore facilities. When servicing offshore oil and gas production facilities, our employees normally live on the facility for a seven-day rotation. Our services include furnishing personnel, engineering services, production operating services, paramedic services and providing transportation of personnel and supplies between onshore bases and offshore facilities. This provides us additional opportunities to use our helicopter transportation services. We also handle regulatory and production reporting for some of our customers.

        The production management business depends primarily on production activity levels in the offshore oil and gas industry. Since 90% of our production management costs consist of labor and contracted transportation services, we are able to scale our operations to market conditions.

AIRCRAFT FLEET

        The composition of our fleet as of March 31, 2004, and some of the characteristics of the individual types of aircraft we own or lease are as follows:

        We owned 326 of the 332 aircraft that we operated as of March 31, 2004. We hold the remaining six aircraft under operating leases.

Fleet Management

        We are able to deploy our aircraft to the regions with the greatest demand. There are also additional markets for helicopter services beyond the oil and gas industry. These other markets include emergency medical transportation, agricultural and forestry support and general aviation activities. While we do not service these markets, they enable us to better manage our helicopter fleet by providing both a source of additional aircraft during times of high demand in the oil and gas industry and potential purchasers for our excess aircraft during times of reduced demand in the oil and gas industry.

        In fiscal year 2003, we initiated a fleet renewal program. In December 2002, we entered into a contract with Sikorsky Aircraft Corporation, a major helicopter manufacturer, to acquire 15 new medium-sized helicopters, which are our most versatile aircraft. This agreement includes a trade-in feature for the first 15 new aircraft acquired. Six of the 15 initial aircraft were delivered in fiscal 2004 and the remaining nine aircraft are expected to be delivered at a rate of three aircraft per year from calendar 2004 through 2006. In addition, the contract gives us the option to purchase up to 24 additional aircraft with deliveries through 2008.

        In connection with our fleet renewal plan, in March 2003, we also entered into a contract with Bell Helicopter Textron Canada Ltd., a major helicopter manufacturer, to acquire 14 new small helicopters. Two of these aircraft were delivered in 2003, seven are expected to be delivered in 2004 and five are expected to be delivered in 2005. In addition, the contract gives us the option to purchase an additional five aircraft for delivery in 2004 and 2005.

        In January 2004, we entered into a purchase agreement with Eurocopter for two new large aircraft to be delivered in calendar 2005. In connection with this purchase agreement, Eurocopter has found a purchaser for five of our used large aircraft. The proceeds from the sale of the five used aircraft and some surplus spares will fund the purchase of the two new aircraft.

        Additionally, in March 2004, we entered into another contract with Bell Helicopter Textron Canada Ltd. to acquire a new medium aircraft. This aircraft is expected to be delivered in the third quarter of fiscal year 2005.

CUSTOMERS AND CONTRACTS

        The principal customers for our Helicopter Activities are national and international oil and gas companies. During fiscal 2004, 2003 and 2002, Shell Oil Company accounted for 11%, 15% and 14%, respectively, of our operating revenue. No other customer accounted for 10% or more of our operating revenue during those fiscal years.

        Our customers charter helicopters for varying periods and, in some cases, these contracts may permit the customer to cancel the charter before the end of the contract term. Our charges under these charter contracts are generally based on either a daily or monthly fixed fee plus additional fees for each hour flown. We also provide services to customers on a basis we refer to as “ad hoc”, which usually entails a shorter notice period and shorter duration. Our charges for ad hoc services are generally based on either an hourly rate, or a daily or monthly fixed fee plus additional fees for each hour flown. Our rate structure is based on fuel costs remaining at or below a predetermined threshold. Fuel costs in excess of this threshold are charged to the customer.

        Customers of our production management business are primarily independent oil and gas companies that own oil and gas production facilities in the Gulf of Mexico. These companies outsource production management to companies such as GPM. This allows the customers to focus on their core activities, which are the exploration for and development of oil and gas reserves. During the past three fiscal years, no single production management customer accounted for more than 10% of our operating revenue.

GOVERNMENT REGULATION

        United States. As a commercial operator of small aircraft, our U.S. operations are subject to regulations under the Federal Aviation Act of 1958 and other laws. We carry persons and property in our helicopters under an Air Taxi Certificate granted by the Federal Aviation Administration, or FAA. The FAA regulates our U.S. flight operations and, in this respect, exercises jurisdiction over personnel, aircraft, ground facilities and certain technical aspects of our operations. The National Transportation Safety Board is authorized to investigate aircraft accidents and to recommend improved safety standards. Our U.S. operations are also subject to the Federal Communications Act of 1934 because we use radio facilities in our operations.

        Under the Federal Aviation Act, it is unlawful to operate certain aircraft for hire within the United States unless such aircraft are registered with the FAA and the FAA has issued an operating certificate to the operator. As a general rule, aircraft may be registered under the Federal Aviation Act only if the aircraft are owned or controlled by one or more citizens of the United States and an operating certificate may be granted only to a citizen of the United States. For purposes of these requirements, a corporation is deemed to be a citizen of the United States only if, among other things, at least 75% of its voting interests are owned or controlled by United States citizens. If persons other than United States citizens should come to own or control more than 25% of our voting interest, we have been advised that our aircraft may be subject to deregistration under the Federal Aviation Act and we may lose our ability to operate within the United States. Deregistration of our aircraft for any reason, including foreign ownership in excess of permitted levels, would materially adversely affect our ability to conduct our North American Operations. As of March 31, 2004, approximately 1,341,500 of our common shares were held by persons with foreign addresses. These shares represented approximately 5.9% of our total outstanding common shares as of March 31, 2004. Because a substantial portion of our common stock is publicly traded, our foreign ownership may fluctuate on each trading day.

        United Kingdom. Our U.K. operations are subject to the Licensing of Air Carriers Regulations 1992, and Regulations made under the Civil Aviation Act 1982 and other laws. We carry persons and property in our helicopters under an operating license issued by the Civil Aviation Authority, or CAA.

        The CAA regulates our U.K. flight operations, exercises jurisdiction over personnel, aircraft, ground facilities and certain technical aspects of those operations. Accident investigations are carried out by an inspector from the Air Accident Investigation Branch of the Department of the Environment, Transport and Regions. The CAA often imposes improved safety standards on the basis of a report of the inspector.

        Under the Licensing of Air Carriers Regulations 1992, it is unlawful to operate certain aircraft for hire within the United Kingdom unless such aircraft are approved by the CAA. Under Council Regulation 2407/92, majority ownership of a holder of an operating license must be held by United Kingdom or European Economic Area nationals and must at all times be effectively controlled by them, as control is defined by the CAA.

        International. Our operations in areas other than the United States and the United Kingdom are subject to local governmental regulations in those areas. Because of the impact of local laws, we conduct these operations primarily through entities in which local citizens own a majority interest and we hold only a minority interest, or under contracts that provide for us to operate assets for the local companies or to conduct their flight operations. Changes in local laws, regulations or administrative requirements or their interpretation may have a material adverse effect on our business or financial condition or on our ability to continue operations in these areas.

        Production Management. The Minerals Management Service Bureau of the United States Department of the Interior regulates the operations of oil and gas producers in the outer continental shelf of the Gulf of Mexico and, in this respect, exercises jurisdiction over personnel, production facilities and certain technical aspects of GPM’s operations.

COMPETITION

        The helicopter transportation business is highly competitive throughout the world. We compete against several providers in almost all of our regions of operations. We have one significant competitor in the Gulf of Mexico and another significant competitor in the North Sea. We believe that it is difficult for additional significant competitors to enter our industry because it requires considerable working capital, a complex system of onshore and offshore bases, personnel and operating experience. However, these requirements can be overcome with the appropriate level of customer support and commitment. For example, a new competitor will be entering the North Sea in the summer of 2004.

        Customers charter helicopters on the basis of competitive bidding among providers who have the necessary experience, equipment, resources and professional reputation. As contracts expire, our customers typically negotiate renewal terms with us for the next contract period. Sometimes, however, customers may solicit new bids. Contracts in our North American Operations are generally renewable on an annual or shorter basis, which subjects us to competition on a regular basis. In our North Sea and International Operations, contracts tend to be of longer duration.

        In addition, many of our customers in the oil and gas industry have the capability to perform their own helicopter services should they elect to do so, which has a limiting effect on our rates.

        The production management business is also highly competitive. There are a number of competitors that maintain a presence throughout the Gulf of Mexico. In addition, there are many smaller operators that compete locally or for single projects or jobs. The two key elements in competing for production management contracts are personnel costs and transportation costs. In addition, the reliability of the production manager and the quality of its personnel, training programs and safety record are also important competitive factors.

INDUSTRY HAZARDS AND INSURANCE

        Hazards, such as harsh weather and marine conditions, mechanical failures, crashes and collisions are inherent in the offshore transportation industry and may cause losses of equipment, revenue and death of personnel.

        In fiscal 2004, we did not have any helicopter accidents involving fatalities. However, subsequent to year end, we had a helicopter accident in Alaska that resulted in one fatality. In fiscal 2003, we had three helicopter accidents involving fatalities: an accident in Greece resulted in five fatalities; an accident in the North Sea resulted in 11 fatalities; and an accident in the Gulf of Mexico resulted in one fatality and three people being injured. We maintain insurance with respect to the aircraft involved and related liabilities and believe that our insurance coverage will be adequate to cover any claims ultimately paid.

        We maintain hull and liability insurance, which generally insures us against damage to our aircraft, as well as certain legal liabilities to others. We also carry workers’ compensation, auto liability, property and casualty coverages for most of our U.S. and U.K. operations. It is also our policy to carry insurance for or require our customers to indemnify us against expropriation, war risk and confiscation of the helicopters we use in our international operations.

        Recent terrorist attacks, the continuing threat of terrorist activity and economic and political uncertainties have led to significant increases in our premiums for much of our insurance protection. There is no assurance that in the future we will be able to maintain our existing coverage or that we will not experience further substantial increases in premiums. There can also be no assurance that our liability coverage will be adequate to cover all potential claims that may arise.

        Our production management operations are subject to the normal risks associated with working on oil and gas production facilities. These risks could result in damage to or loss of property and injury to or death of personnel. We carry customary business insurance including general liability, workers’ compensation, automobile liability and property and casualty coverages.

ENVIRONMENTAL

        All of our operations are subject to national and local laws and regulations controlling the discharge of materials into the environment or otherwise relating to the protection of the environment. To date, such laws and regulations have not had a material adverse effect on our business, results of operations or financial condition. Increased public awareness and concern over the environment, however, may result in future changes in the regulation of the oil and gas industry, which in turn could adversely affect us. We have been named as a potentially responsible party in connection with certain sites. See “Item 3. Legal Proceedings.”

EMPLOYEES

        As of March 31, 2004, we employed approximately 3,300 employees.

        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. Because this agreement became amendable in May 2003, we began negotiations with union representatives in March 2003. After approximately eight weeks of discussions, an agreement could not be reached on several key areas, most notably compensation levels. Both the union representatives and we agreed to seek assistance from the National Mediation Board, or NMB, in appointing an independent mediator to assist with the negotiations. A mediator was assigned by the NMB and sessions have continued to date with some progress being made. In the future, all negotiations will be at the behest of the NMB mediator. If the mediator and the NMB should determine that no further progress is being made toward resolution, then the NMB can seek a number of alternatives which include:

        We have contingency plans in place to respond to these scenarios and believe we will be able to continue operations with limited or no disruption in services. However, no assurances can be given that these plans will be effective.

        We do not believe that current ongoing efforts will place us at a disadvantage with our competitors as we believe that pay scales, benefits, and work rules will continue to be similar throughout the industry.

        We employ approximately 500 employees (pilots, air crewman, mechanics, and support staff) in our North Sea Operations and certain Technical Services Operations that are represented by collective bargaining agreements which are ongoing with no specific termination dates.

        We believe that our relations with our employees are satisfactory.

ITEM 2. Properties

        We describe the number and types of aircraft we operate under “Business—Aircraft Fleet” above. In addition, we lease the significant properties listed below for use in our operations. These facilities are generally suitable for our operations and in most cases can be replaced with other available facilities if necessary.

• Approximately 16.8 acres of land at the Acadiana Regional Airport in New Iberia, Louisiana, under a lease expiring in fiscal 2030. We have constructed on that site office, training, parts facilities and helicopter maintenance facilities containing about 84,000 square feet of floor space. The property has access to the airport facilities, as well as to a major highway.
  
  
• Approximately 14,440 square feet of office space in a building in Lafayette, Louisiana under a lease expiring in 2005.
  
  
• Land and facilities at Redhill Aerodrome near London, England under a lease expiring in 2075. Other leases of certain hangars, offices and aviation fuel facilities at Redhill Aerodrome expire on June 30, 2004.
  
  
• A helicopter terminal, offices and hangar facilities at Aberdeen Airport, Scotland under a lease expiring in 2013 with an option to extend to 2023. We also maintain additional hangar and office facilities at Aberdeen Airport under a lease expiring in 2030.
  
  
• Various hangars and terminal access at Norwich Airport, England under a lease expiring in 2008.
  
  
• Office space and hangar facilities at Sumburgh Airport in Sumburgh, Shetland under a lease expiring in 2019.
  
  
• Approximately 8,036 square feet of office space in a building in Houston, Texas, under a lease expiring in 2006, which is used by our production management business.
  
  
• Approximately 8,201 square feet of office space in a building in Lafayette, Louisiana, under a lease expiring in 2007.
  
  
• Approximately 42,000 square feet of office and shop space in a building in Tucson, Arizona under a lease expiring in 2007, which is used by our technical services business unit.
  
  

        In addition to these facilities, we lease various office and operating facilities worldwide, including facilities along the Gulf of Mexico which support our North American Operations and numerous residential locations near our operating bases in the United Kingdom, Australia, China, Nigeria, and in the Caribbean primarily for housing pilots and staff supporting those areas of operation.

ITEM 3. Legal Proceedings

        The United States Environmental Protection Agency, also referred to as the EPA, has in the past notified us that we are a potential responsible party, or PRP, at three 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. We were 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, and at the Gulf Coast Vacuum Services Superfund site near Abbeville, Louisiana in 1989. We have 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. Although we have not obtained a formal release of liability from the EPA with respect to any of these sites, we believe that our potential liability in connection with these sites is not likely to have a material adverse effect on our business or financial condition.

        We are involved from time to time in various litigation and regulatory matters arising in the ordinary course of business. The amount, if any, of our ultimate liability with respect to these matters cannot be determined, but we do not expect the resolution of any pending matters to have a material adverse effect on our business or financial condition.

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

        Not applicable.

ITEM 4a. Executive Officers of the Registrant

        Under our by-laws, our board of directors elects our executive officers annually. Each executive officer remains in office until his or her successor is elected. There are no family relationships among any of our executive officers. At March 31, 2004, our executive officers were as follows:

    Mr. Small joined us in 1977 as Controller. He was elected Vice President — Treasurer in 1979, Chief Financial Officer and Secretary in 1986, President in 1997 and Chief Executive Officer in 2002. On April 28, 2004, we announced that Mr. Small would retire later in the year and that our Board of Directors has begun a search for a replacement. Mr. Small will remain with us for six months following the naming of a new CEO to provide for a smooth transition in leadership.

    Mr. Milke joined us in 1988 as Director of Planning and Development and was elected Vice President in 1990, Chief Financial Officer and Secretary in 1998, Executive Vice President – International Operations in 1999 and President, Air Logistics, LLC in 2002.

    Mr. Chanter joined Bristow in 1997 as Finance Director. He was appointed Managing Director of Bristow in 1999. Prior to joining us, Mr. Chanter held a variety of financial roles within the BOC Group.

    Mr. Donaldson joined us in 1995 as Vice President, Marketing of GPM. In 1996, he was appointed President of GPM and currently serves in that position. Mr. Donaldson has 40 years experience in the offshore oil service business in the Gulf of Mexico. Prior to joining us, Mr. Donaldson held the positions of President of Savage Drilling, Inc. and Vice President, Operations for Tidewater, Inc.

    Mr. Dupuis joined us in 1998 as Controller. He was elected Vice President, Chief Financial Officer and Secretary in 1999. Prior to joining us, Mr. Dupuis was a Manager with Arthur Andersen LLP.

PART II

ITEM 5.Market for the Registrant's Common Equity and Related Stockholder Matters

        Since March 12, 2003, our common stock has been listed on the New York Stock Exchange under the symbol “OLG”. Prior to becoming listed on the NYSE, the common stock had been quoted on the Nasdaq National Market system since 1984.

         The following table shows the range of closing prices for our common stock during each quarter of our last two fiscal years.

        As of April 30, 2004, there were approximately 818 holders of record of the common stock.

        We have not paid dividends on our common stock since January 1984. On June 20, 2003, Offshore Logistics issued $230 million of 6 1/8% Senior Notes due 2013. The terms of the Senior Notes restrict our payment of cash dividends to shareholders.

        Please refer to Item 12 of this Annual Report for information concerning securities authorized under our equity compensation plans.

        During the fiscal year ended March 31, 2004, we issued securities without registration under the Securities Act of 1933, as amended, not previously reported on the quarterly reports on Form 10-Q filed by us. In January 2004 we issued general contractual obligations (the “Deferred Compensation Obligations”) to pay or distribute to the participants in its Deferred Compensation Plan an indeterminate amount of future compensation, the receipt of which the participants elected to defer in accordance with the terms of the Plan. The Deferred Compensation Obligations are payable in cash in a lump-sum distribution or in installments, in accordance with the terms of the Plan, upon participants’ termination of employment for any reason, including but not limited to death, disability or retirement. The Deferred Compensation Obligations are not convertible into any other security of ours. As of March 31, 2004, the Issuer’s outstanding Deferred Compensation Obligations were $0.2 million.

        The above private issuances of securities were issued in reliance upon the exemption for sales of securities not involving a public offering, under section 4(2) of the Securities Act of 1933, as amended. The transactions were made in accordance with Rule 506 of Regulation D and we filed a Notice of Sale on Form D with the SEC on January 12, 2004.

ITEM 6. Selected Financial Data

        The following table contains selected historical consolidated financial data for us. You should read this table along with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and “Notes to Consolidated Financial Statements” that are included elsewhere in this Annual Report.

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(1)     Effective April 1, 2001, we no longer consolidate the results of our Norwegian affiliate.

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

        Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with “Forward-Looking Statements”, “Risk Factors” and our Consolidated Financial Statements for the fiscal years ended March 31, 2004, March 31, 2003 and March 31, 2002, and the related notes thereto, included elsewhere in this Annual Report.

Overview

        We are a leading provider of helicopter transportation services to the worldwide offshore oil and gas industry with major operations in the 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 Australia, Brazil, China, Mexico, Nigeria and Trinidad. Additionally, we are a leading provider of production management services for oil and gas production facilities in the Gulf of Mexico. As of March 31, 2004, we operated 332 aircraft and our unconsolidated affiliates operated an additional 96 aircraft throughout the world.

        The following table presents our operating results and other income statement information for the fiscal years ended March 31, 2004, 2003 and 2002:

        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. Because this agreement became amendable in May 2003, we began negotiations with union representatives in March 2003. After approximately eight weeks of discussions, an agreement could not be reached on several key areas, most notably compensation levels. Both the union representatives and we agreed to seek assistance from the National Mediation Board, or NMB, in appointing an independent mediator to assist with the negotiations. A mediator was assigned by the NMB and sessions have continued to date with some progress being made. In the future, all negotiations will be at the behest of the NMB mediator. If the mediator and the NMB should determine that no further progress is being made toward resolution, then the NMB can seek a number of alternatives which include:

        We have contingency plans in place to respond to these scenarios and believe we will be able to continue operations with limited or no disruption in services. However, no assurances can be given that these plans will be effective. We cannot reasonably estimate the financial impact of a work stoppage should one occur, on our results of operations. Based on our latest proposals made to the union, base salary expense would increase by approximately 11% annually.  Given that the pilot group represents only 33% of our North American workforce, we do not believe that this level of adjustment or the results of our negotiations will place us at a competitive financial or operational disadvantage.

        Demand for our helicopter services in the North Sea in support of oil and gas production (excluding Search and Rescue and Norway) has declined in the current fiscal year as evidenced by a 12.8% decrease in flight hours for the year ended March 31, 2004 compared to the year ended March 31, 2003. We are not aware of any changes in market conditions that would reverse this downward trend. Therefore, the demand for our helicopter services in the North Sea in support of oil and gas production may continue to decline in forthcoming years.

        In October 2003, we announced that we had begun a restructuring of our North Sea Operations. The restructuring is designed to reduce costs and promote operational and managerial efficiencies to enable us to remain competitive in the North Sea offshore helicopter market. As part of the restructuring program, we will reduce staffing levels by approximately 100 positions, or 11%, of our United Kingdom workforce over a nine-month period. We will incur approximately £2.8 million ($5.2 million) in severance and other restructuring costs of which £2.2 million ($4.1 million) has been accrued at March 31, 2004; £0.6 million ($1.1 million) is expected to be expensed in fiscal 2005. The reductions will generate approximately £3.5 million ($6.4 million) in savings during fiscal 2005, on an annualized basis, primarily from decreased salary costs.

        Also as part of the restructuring, in January 2004, we amended our only defined benefit pension plan covering certain United Kingdom and other overseas employees. The amendment, which is effective February 1, 2004, essentially removes the defined benefit feature for a participant’s future services and replaces it with a defined contribution arrangement. Under the new defined contribution feature, we will contribute 5% of a participant’s non-variable salary to a defined contribution section of the plans. The participant will be required to contribute a minimum of 5% of non-variable salary. Participants were also given the option to transfer out of the plans. The net impact on our statement of income as a result of these changes was a reduction in pension expense of approximately £1.4 million ($2.6 million) for our fourth quarter of fiscal 2004. On an annual basis, we estimate that the net impact on our statement of income will be a reduction of approximately £4.8 million ($8.6 million) in pension expense. In accordance with SFAS No. 88 “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits”, the above change to the plans constitutes a “curtailment” of benefits and accordingly, all previously deferred service gains or losses are immediately recognized in the statement of income. At the date of the amendment we had a deferred prior service gain of £11.9 million ($21.7 million), or $0.65 per diluted share, related to prior plan amendments. This amount was recorded as a gain in fiscal 2004.

        In November 2003, our 49%-owned Mexican affiliate was unsuccessful in renewing a contract for seven aircraft contracted to PEMEX that it leases from us. The current contract with PEMEX expires September 30, 2004. We are optimistic that, given the long and constructive history between PEMEX and our affiliate and the expanding demand for helicopter services by PEMEX and other customers in Mexico, our affiliate will continue to operate most of the aircraft in the Mexican offshore market. Alternatively, we believe these aircraft can be redeployed to other international markets in a reasonable time period.

        In conjunction with our previously announced fleet and facilities renewal and refurbishment program, we changed the residual value estimate of certain aircraft and the useful lives estimate of certain aircraft, effective July 1, 2003. This will more closely reflect the actual salvage values realized and useful lives experienced by us. The effect of this change was a reduction in depreciation expense of $3.2 million, $2.3 million net of tax, for the fiscal year ended March 31, 2004.

General

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

• North American Operations;
• North Sea Operations;
• International Operations; and
• Technical Services.

        In fiscal 2004, our North American Operations, North Sea Operations, International Operations and Technical Services contributed 26%, 29%, 31% and 5%, respectively, of our operating revenue. While operating revenue from our Helicopter Activities segment has increased over the past three fiscal years, we expect that the percentage of our overall revenue derived from our International Operations will continue to increase as the major oil and gas companies continue to focus their operations in these regions.

        Our Production Management Services segment contributed the remaining 9% of our operating revenue in fiscal 2004. Operating revenue from this segment in fiscal 2004 increased from fiscal 2003 primarily due to the addition of a contract with a major customer.

        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 our production-related activities are less sensitive to variances in commodity prices, and accordingly, provide a more stable activity base for our flight operations. We estimate that a majority of our operating revenue from Helicopter Activities is related to the production activities of the oil and gas companies.

        We generate additional revenue, which we refer to as corporate revenue, from intercompany leases of aircraft within our Helicopter Activities segment. This revenue is eliminated in consolidation.

        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 charged to 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 our North American Operations, we typically enter into short term contracts for 12 months or less. In our North Sea Operations, contracts are longer term, generally between two and five years. In our International Operations, contract length generally ranges from three to five years. At the expiration of a contract, our customers typically negotiate renewal terms with us for the next contract period. Sometimes 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. Certain 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. 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 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 to an estimated residual value of 30% to 50% of their original cost. We generally estimate the life of a helicopter to be seven, 10 or 15 years depending on its size and condition. We estimate the residual value of our helicopters based on the type of the aircraft.

        We only own 49% of the common stock of Bristow, but we own 100% of Bristow’s subordinated debt. In addition, we have a put/call agreement with the other two stockholders of Bristow which grants us the right to buy all of their shares of Bristow common stock and grants to each of them the right to require us to buy their shares. The per share price in any such sale would be equal to its par value plus a factor representing a guaranteed return on investment. In March 2004, we prepaid a portion of the put/call option price representing the amount of guaranteed return since inception, amounting to $11.4 million. The payment was charged against minority interest on our balance sheet where this obligation had been accrued. In consideration of this, the other shareholders of Bristow agreed to reduce the guaranteed return factor used in calculating the put/call option price, effective April 1, 2004, from 12% per annum to LIBOR plus 3%. In May 2004, we acquired eight million shares of deferred stock, essentially a subordinated class of stock with no voting rights, from Bristow for £1 per share ($14.4 million in total). Bristow used these proceeds to redeem £8 million of its ordinary share capital at par value on a pro rata basis from all of its outstanding shareholders, including ourselves. The result of these changes will be to reduce the cost of the guaranteed return to the other shareholders, which we record as minority interest expense, by approximately $2.4 million on an annual basis. Under U.K. law, to maintain Bristow’s operating license, we would be required to find a qualified European owner to acquire any of the Bristow shares that we have the right or obligation to acquire under the agreement. The only restriction under the put/call agreement limiting our ability to exercise the put/call option is a requirement to consult with the CAA regarding the suitability of the new holder of the Bristow shares. The put/call agreement does not contain any provisions should the CAA not approve the new holder of the Bristow shares. However, we would work diligently to find a European owner suitable to the CAA. As a result of our ownership and contractual arrangements, we consolidate the results of Bristow and its subsidiaries. For additional information about Bristow, see Note A and Note K in the “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report.

        As a result of local laws limiting foreign ownership of aviation companies, we conduct helicopter activities in many foreign countries through interests in unconsolidated affiliates. In some cases, 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 elsewhere in this Annual Report.

Critical Accounting Policies

        Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, whereas, in other circumstances, we are required to make estimates, judgments and assumptions that we believe are reasonable based upon information available. We base our estimates and judgments on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions. We believe that of our significant accounting policies, as discussed in the “Notes to our Consolidated Financial Statements”, the following involve a higher degree of judgment and complexity.

        Income Taxes. We recognize foreign tax credits available to us to offset the U.S. income taxes due on income earned from foreign sources. These credits are limited by the total income tax on the U.S. income tax return as well as by the ratio of foreign source income in each statutory category to total income. In estimating the amount of foreign tax credits that are realizable, we estimate future taxable income in each statutory category. These estimates are subject to change based on changes in the market condition in each statutory category and the timing of certain deductions available to us in each statutory category. We periodically reassess these estimates and record changes to the amount of realizable foreign tax credits based on these revised estimates. Changes to the amount of realizable foreign tax credits can be significant given any material change to our estimates on which the realizability of foreign tax credits is based.

        Impairment of Long-Lived Assets. We review long-lived assets for impairment whenever events occur or changes in circumstances indicate that the carrying amount of assets may not be recoverable. We measure recoverability of assets by comparing the estimated future undiscounted cash flows expected to result from these assets throughout their estimated useful lives to the carrying amount of the asset. If the sum of the expected future cash flows is less than the carrying amount of the asset, we would be required to recognize an impairment loss. When determining fair value, we utilize various assumptions, including projections of future cash flows. A change in these underlying assumptions will cause a change in the results of the tests and, as such, could cause fair value to be less than the carrying amounts. In such event, we would then be required to record a corresponding charge, which would reduce our earnings. We continue to evaluate our estimates and assumptions and believe that our assumptions, which include an estimate of future cash flows based upon the anticipated performance of the underlying business units, are appropriate.

        Revenue Recognition. Revenue from charters of helicopters is recognized as performed based on contractual charter rates. The helicopter charters are for varying periods and generally permit the customer to cancel the charter before the end of the contract term. The charges under these charter contracts are generally based on either a daily or monthly fixed fee plus additional fees for each hour flown. Additionally, we also provide services to customers on a basis we refer to as “ad hoc”, which usually entails a shorter notice period and shorter duration. Our charges for ad hoc services are generally based on either an hourly rate, or a daily or monthly fixed fee, plus additional fees for each hour flown. Our rate structure is based on fuel costs remaining at or below a predetermined threshold. Fuel costs in excess of this threshold are charged to the customer. Revenue from Production Management Services is recognized as these services are performed.

        Allowance for Doubtful Accounts. We routinely review our accounts receivable balances and make adequate provisions for doubtful accounts based on historical experience, our customers’ financial strength and other information. If our evaluation of our customers’ creditworthiness changes or is incorrect, we may have to adjust the allowance for our receivables.

        Inventory Reserve. We maintain inventory that primarily consists of spare parts to service our aircraft. We periodically review the condition and continuing usefulness of the parts to determine the adequacy of the valuation reserve. If our valuation of these parts is significantly different from the realizable value of the parts, an additional provision may be required.

    Insurance. We are self-insured for our group medical insurance program and must make estimates to record the expenses related to this program. We also have deductibles on our workers’ compensation program and estimate the expenses related to the retained portion of that risk. If actual experience under any of our insurance programs is significantly different from our estimates, we may have to record charges to income when we identify the risk of additional loss. Conversely, if actual costs are lower than our estimates or return premiums are larger than originally projected, then we may have to record credits to income when we identify the excess return premiums.

Results of Operations

        The following table sets forth, for the periods indicated, certain operating information for our two segments, Helicopter Activities and Production Management Services, and for the four business units comprising our Helicopter Activities segment. The table also presents certain operating information about our corporate activities which primarily relate to intercompany leasing of aircraft and are eliminated in consolidation. Certain reclassifications have been made to prior year information to conform to the current presentation of Technical Services as a separate business unit within the Helicopter Activities segment. For additional information about our business segments, see Note L in the “Notes to Consolidated Financial Statements” included elsewhere in this Annual Report.

_________________

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

Fiscal 2004 compared to Fiscal 2003

        Consolidated Results

        During fiscal 2004, our operating revenue increased to $563.6 million, or 1.5%, from $555.1 million in fiscal 2003. The increase in operating revenue was primarily a result of increased oil and gas activity in our International Operations and rate increases on customer contracts in our North American Operations. Our fiscal 2004 consolidated operating expenses increased to $495.9 million, or 1.2%, from $490.1 million in fiscal 2003. This increase in operating expenses was due primarily to $4.1 million in restructuring charges related to our North Sea Operations. In connection with this restructuring, we amended our defined benefit pension plan which resulted in the recognition of a non-cash curtailment gain of $21.7 million in fiscal 2004. As a result, operating income for fiscal 2004 increased to $93.4 million as compared to $68.8 million for fiscal 2003.

        Our fiscal 2004 net income was $53.1 million, representing a 23.2% increase from fiscal 2003. This increase primarily resulted from the curtailment gain discussed above offset by the restructuring charges related to our North Sea Operations, debt restructuring charges and higher foreign currency transaction losses. Set forth below is a discussion of the results of our segments and business units.

         Helicopter Activities

        Production Management Services

        Operating revenue from our Production Management Services segment increased to $49.8 million, or 4.5%, in fiscal 2004 from $47.7 million in fiscal 2003, primarily due to the addition of a contract with a major customer. Operating expenses in this segment increased to $47.3 million, or 5.8%, in fiscal 2004 from $44.7 million in fiscal 2003 due to higher transportation charges. Our operating margin decreased to 5.0% from 6.2% in fiscal 2003.

        General and Administrative Costs

        Consolidated general and administrative costs increased by $4.4 million in fiscal 2004 primarily due to restructuring charges for our North Sea Operations of $3.1 million.

        Earnings from Unconsolidated Affiliates

        Earnings from unconsolidated affiliates decreased in fiscal 2004 by $1.0 million primarily due to a decrease in dividends received from investments accounted for under the cost method of accounting. The decrease was primarily due to a reduction in dividends from our unconsolidated affiliate in Egypt partially offset by higher earnings from equity method investees.

        Interest Expense, net

        Interest expense, net, increased in fiscal 2004 by $1.8 million primarily due to the debt refinancing transaction that took place in June and July 2003. See Note B to the consolidated financial statements for further discussion. This interest was offset by $1.2 million of interest capitalized in fiscal 2004 related to progress payments for our fleet and facilities renewal and refurbishment program and $0.3 million of interest income from the investment of the proceeds of the debt refinancing for approximately one month.

        Loss on extinguishment of debt

        A loss on extinguishment of debt of $6.2 million was recognized in fiscal 2004 related to the redemption on July 29, 2003 of our 6% Convertible Subordinated Notes and our 7 7/8% Senior Notes. Approximately $4.7 million of the loss pertains to the payment of redemption premiums and $1.5 million pertains to the write-off of unamortized debt issuance costs relating to the 6% Convertible Subordinated Notes and 7 7/8% Senior Notes.

        Other Income (Expense)

        Other expense, net, for fiscal 2004 was $7.8 million compared to other expense, net, of $3.3 million in fiscal 2003 and primarily represents foreign currency transaction losses. These 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. The weakening of the U.S. dollar against the British Pound since March 31, 2003 is the primary reason for these losses. The average British Pound to U.S. dollar exchange rate for the fiscal year ended March 31, 2004 was one British Pound = $1.70 compared to one British Pound = $1.55 for the fiscal year ended March 31, 2003.

Fiscal 2003 compared to Fiscal 2002

        Consolidated Results

        During fiscal 2003, our operating revenue increased to $555.1 million, or 9.2%, from $508.6 million in fiscal 2002. The increase in operating revenue was primarily a result of increased oil and gas activity in our International Operations and rate increases on customer contracts in our North Sea Operations. Our fiscal 2003 consolidated operating expenses increased to $490.1 million, or 11.4%, from $440.0 million in fiscal 2002. This increase in operating expenses was due primarily to higher labor and insurance costs and had the effect of lowering our operating margin to 12.4% from 14.2% in the prior fiscal year. As a result, operating income for fiscal 2003 decreased to $68.8 million as compared to $72.1 million for fiscal 2002.

        Our fiscal 2003 net income was $43.1 million, representing a 3.0% decrease from fiscal 2002. This decrease primarily resulted from our reduced operating income, which was partially offset by a $5.5 million increase in earnings from unconsolidated affiliates primarily due to dividends from our unconsolidated affiliate in Egypt. Set forth below is a discussion of the results of our segments and business units.

        Helicopter Activities

        Production Management Services

        Operating revenue from our Production Management Services segment increased to $47.7 million, or 4.4%, in fiscal 2003 from $45.7 million in fiscal 2002, primarily due to the addition of a contract with a major customer in January 2002. Operating expenses in this segment increased to $44.7 million, or 2.8%, in fiscal 2003 from $43.5 million in fiscal 2002 due to higher transportation charges offset by a reduction in goodwill amortization expense of $1.1 million due to the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” on April 1, 2002. Our operating margin improved to 6.2% from 4.8% in fiscal 2002.

        General and Administrative Costs

        Consolidated general and administrative costs increased by $2.7 million in fiscal 2003 primarily due to an increase in professional fees and higher salary expenses. Professional fees in fiscal 2003 included legal fees incurred in connection with our listing on the New York Stock Exchange and new corporate governance legislation, and fees for various consulting services.

        Earnings from Unconsolidated Affiliates

        Earnings from unconsolidated affiliates increased in fiscal 2003 by $5.5 million primarily due to an increase in dividends received from investments accounted for under the cost method of accounting. The increase was primarily due to dividends from our unconsolidated affiliate in Egypt.

        Other Income (Expense)

        Other expense, net, for fiscal 2003 was $3.3 million compared to other income, net, of $1.1 million in fiscal 2002. The expense in fiscal 2003 was primarily the result of foreign currency exchange losses.

Liquidity and Capital Resources

        During fiscal 2004, our primary source of funds to meet working capital needs, service debt and fund capital expenditures was cash from operations and the debt refinancing completed in July 2003. We believe that our future cash flow from operations, available lines of credit and other available financing will be sufficient to meet our working capital, capital expenditure and debt service needs in the foreseeable future.

        Operating Activities

        Cash and cash equivalents were $85.7 million, $56.8 million and $42.7 million as of March 31, 2004, 2003 and 2002, respectively. Working capital as of March 31, 2004, 2003 and 2002 was $251.9 million, $112.5 million and $147.0 million, respectively. The increase in working capital in fiscal 2004 was due primarily to the classification in fiscal 2003 of the $90.9 million outstanding principal amount of the 6.0% convertible subordinated notes due in December 2003 in current maturities of long-term debt. In July 2003, we redeemed all the outstanding notes. See Financing Activities below.

        Cash flows provided by operating activities were $83.3 million in fiscal 2004 as compared to $62.4 million in fiscal 2003 and $64.3 million in fiscal 2002. The increase in cash flows provided by operating activities in fiscal 2004 was primarily the result of a decrease in accounts receivable. The decrease in cash flows in fiscal 2003 from fiscal 2002 was a result of decreased accrued liabilities and other payables.

        Investing Activities

        Cash flows used in investing activities were $62.6 million, $48.2 million and $64.2 million for fiscal 2004, 2003 and 2002, respectively.

        Fiscal 2004. During fiscal 2004, we received proceeds of $6.9 million primarily from the disposal of aircraft and equipment, which resulted in a gain of $3.9 million. Apart from commitments under our fleet and facilities renewal and refurbishment program discussed further below, we purchased one small aircraft for $1.0 million and three medium aircraft for $12.6 million. These aircraft acquisitions were made with existing cash and were made to fulfill customer contract requirements.

        In March 2004, we entered a purchase agreement with Bell Helicopter Textron Canada Ltd. for a new medium sized aircraft. The total purchase price for the aircraft is $6.3 million, of which we have already paid a deposit of $0.3 million subsequent to March 31, 2004. The balance of the purchase price will be paid with cash from operations.

        In January 2004, we entered into a purchase agreement with Eurocopter for two new large aircraft to be delivered in calendar 2005. In connection with this purchase agreement, Eurocopter has found a purchaser for five of our used large aircraft. The proceeds from the sale of the five used aircraft and some surplus spares will fund the purchase of the two new aircraft.

        In May 2003, we entered into a purchase agreement with Bell Helicopter Textron Canada, Ltd. for five new medium aircraft. The total purchase price of the five aircraft was $30.1 million. We funded $12.2 million of the purchase price from available cash and the balance of $17.9 million was financed by the manufacturer for 90 days with interest payable at 3-month LIBOR plus 2.95%. In addition, we purchased a sixth medium aircraft for $5.3 million. These aircraft were purchased to meet the contract renewal requirements of an existing customer of our unconsolidated affiliate in Mexico, and replaced older aircraft currently being used on the contract.

        On July 11, 2003, we sold these six aircraft, at our cost, to a newly formed limited liability company, Rotorwing Leasing Resources, L.L.C. or RLR. The capital stock of RLR is owned 49% by us and 51% by the same principal with whom we have other jointly owned businesses operating in Mexico. RLR financed 90% of the purchase price of these aircraft through a five year term loan with a bank requiring monthly principal and interest payments of $346,047 and a balloon payment of $18.3 million due July 11, 2008 (the RLR Note). The RLR Note is secured by the six aircraft. We have guaranteed 49% of the RLR Note ($15.6 million) and the other shareholder has guaranteed the remaining 51% of the RLR Note ($16.2 million). In addition, we have given the bank a put option which the bank may exercise if the aircraft are not returned to the United States within 30 days of a default on the RLR Note. Any such exercise would require us to purchase the RLR Note from the bank. We simultaneously entered into a similar agreement with the other RLR shareholder which requires that, in event of exercise by the bank of its put option to us, the other shareholder will be required to purchase 51% of the RLR Note from us. As of March 31, 2004, a liability of $1.0 million representing the fair value of this guarantee is reflected in our balance sheet in other liabilities and deferred credits. The fair value of the guarantee is being amortized over the term of the RLR Note.

        We used the proceeds received from the sale of the aircraft to RLR to repay the $17.9 million short-term note to the manufacturer in July 2003. No gain or loss was recognized on the sale.

        As of March 31, 2004, we have expended $57.4 million as deposits and progress payments, and incurred firm purchase commitments of $138.6 under the November 2002 Fleet and Facilities Renewal and Refurbishment program. Subsequent to March 31, 2004, we made additional payments under this program of $6.0 million. Sales and trade-ins of older aircraft will reduce the projected expenditures discussed above. We plan to use internally generated funds and available financing, if needed, to meet our obligations under the program.

        Fiscal 2003. During fiscal 2003, we received proceeds of $22.8 million primarily from the disposal of aircraft and equipment, which resulted in a gain of $5.0 million, and we purchased twelve small aircraft for $14.4 million and four medium aircraft for $8.5 million. In addition, we paid $3.5 million of the balance due on an AS 332L2 Super Puma. An additional approximately $4.4 million is payable in November 2003 on this aircraft. Subsequent to the end of fiscal 2003, we purchased one small aircraft for $0.9 million.

        In November 2002, our Board of Directors approved a fleet and facilities renewal and refurbishment program. Under the program, we expect to incur approximately $150.0 million of capital expenditures over the next five to seven years to replace certain of our aircraft and upgrade strategic base facilities. As of March 31, 2003, we have expended $18.2 million as deposits and progress payments, and incurred firm purchase commitments of $125.2 under this program. Subsequent to March 31, 2003, we made additional payments under this program of $10.0 million. Sales and trade-ins of older aircraft will reduce the projected expenditures discussed above. We plan to use internally generated funds and available financing, if needed, to meet our obligations under the program.

        Fiscal 2002. During fiscal 2002, we received proceeds of $11.4 million primarily from disposals of aircraft, which resulted in a gain of $3.6 million and we purchased 21 small aircraft for $24.8 million and seven medium aircraft for $31.5 million. In addition, we placed a deposit of $3.7 million on an AS 332L2 Super Puma. These aircraft acquisitions were made with existing cash and were made to fulfill customer contract requirements.

        Financing Activities

        Cash flows provided by (used in) financing activities were $3.5 million, ($1.1 million) and ($12.0 million) in fiscal 2004, 2003 and 2002, respectively. Total debt as of March 31, 2004 was $255.5 million as compared to $232.8 million and $208.0 million as of March 31, 2003 and 2002, respectively.

        U.S. Credit Facility. As of March 31, 2004, we had a $30.0 million unsecured working capital line of credit with a U.S. bank that expires on August 31, 2005. The line of credit is subject to a sublimit 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 certain ratios under the credit facility. Borrowings under this credit facility are unsecured and are guaranteed by certain of our U.S. subsidiaries. We had no amounts drawn under this facility as of March 31, 2004, but did have $0.7 million of letters of credit utilized which reduced availability under the line. As of March 31, 2004, we were in compliance with all of the covenants under this credit facility. As of March 31, 2003, we had $14.0 million drawn under our U.S. credit facility and we were in compliance with all covenants under this credit facility.

        U.K. Credit Facility. As of March 31, 2004, Bristow had a $22.1 million revolving credit facility, of which $11.0 million is only available for letters of credit, with a United Kingdom bank on which any borrowings are payable on demand and matures on June 30, 2004. Borrowings under this credit facility bear interest at a blended rate approximating 0.7% above the Bank’s base rate. This credit facility is guaranteed by certain of Bristow’s subsidiaries and is secured by helicopter mortgages and a negative pledge of all of Bristow’s assets. As of March 31, 2004, Bristow had outstanding $2.8 million of letters of credit under this facility; however, no funds were drawn under this credit facility. As of March 31, 2004, Bristow was in compliance with all of the covenants under this credit facility. We are in the process of renewing the line of credit and expect it to be finalized before June 30, 2004.

        6.0% Convertible Subordinated Notes. In December 1996, we issued $98.0 million aggregate principal amount of 6.0% convertible subordinated notes due 2003. During 1999, we repurchased $7.1 million in principal amount of the notes in the open market. The notes were convertible at any time into our common stock at a conversion price of $22.86 per share, or approximately 43.74 shares per $1,000 principal amount, and were redeemable at our option. In July 2003, we redeemed all the outstanding notes, $90.9 million, as discussed in Note B to our financial statements.

        7 7/8% Senior Notes. In January 1998, we issued $100.0 million aggregate principal amount of 7 7/8% senior notes due 2008. The notes were unsecured and were guaranteed by certain of our U.S. subsidiaries. The notes became redeemable in full at our option beginning in January 2003. In July 2003, we redeemed all the outstanding notes, $100.0 million, as discussed in Note B to our financial statements.

        6 1/8% Senior Notes. In June 2003, we issued $230.0 million aggregate principal amount of 6 1/8% senior notes due 2013. The notes are unsecured and are guaranteed by certain of our U.S. subsidiaries. The notes become redeemable at our option on or after June 15, 2008. A portion of the net proceeds from the issuance and sale of these notes was used to redeem all our outstanding 7 7/8% Senior Notes and 6.0% Convertible Subordinated Notes. The remaining net proceeds were used for general corporate purposes.

        Limited Recourse Term Loan. Our balance sheet reflects a term loan of approximately $22.1 million as of March 31, 2004. The loan is secured by two aircraft that we operate under an operating lease and we have provided a guarantee of up to $3.8 million of the original cost of the aircraft. The guarantee represents our maximum amount of credit exposure. The rate of interest payable under the loan is 7.1%, requires quarterly payments of $0.6 million and has a balloon payment of $19.0 million due in 2007.

        Short term advance from customer. This $3.4 million advance from a customer is reimbursement for value added taxes paid by us, the ultimate obligation for which is currently under dispute between ourselves and the customer and the tax authorities. The advance is non-interest bearing and will be repaid as taxes are refunded to us by the applicable governmental agency.

        U.K. Taxes. During January 2004, we reached a settlement with the United Kingdom Inland Revenue regarding the tax treatment for certain aircraft maintenance expenditures by our primary United Kingdom operating company. These expenditures are contractual cash payments made to certain repair and maintenance service providers in advance of the actual repair requirement. We have historically deducted these expenditures for tax purposes as the payments were made, but will now treat these expenditures as prepayments for United Kingdom income tax purposes to be deducted when the repair or maintenance service actually occurs. This change in treatment was made effective April 1, 2002, and has resulted in a cash payment for taxes and interest of £4.0 million ($7.4 million) in the last quarter of fiscal 2004, with a further payment due during the first quarter of fiscal 2005 of £4.9 million ($9.0 million). The payment of these taxes will not affect total tax expense on our income statement but will instead be treated as a deferred tax asset to be deducted in the future when the repair and maintenance services are provided.

        Pension Plan. As of March 31, 2004, we had recorded on our balance sheet a $140.0 million pension liability 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. 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 February 2004, we agreed to a schedule of contributions for our defined benefit pension plan in order to comply with the minimum funding rules of the United Kingdom. Those rules require us to make scheduled contributions in amounts sufficient to bring the plan up to 90% funded (as defined by United Kingdom legislation) within three years and 100% funded within ten years. In recognition of participants’ concerns regarding the under-funded position of the plan as well as other changes we are making to the plan (as more fully described under “Management’s Discussion and Analysis of Financial Condition”), on February 1, 2004, we contributed £5.2 million ($9.6 million) to the plan to reach the 90% funded level, and agreed to monthly contributions of £0.2 million ($0.4 million) for the next ten years to comply with the 100% funding requirement. The £5.2 million ($9.6 million) contribution was made from existing cash balances and does not materially impact our working capital position.

        Minority Interest. We prepaid $11.4 million, representing a portion of the put/call option price over the 51% of the ordinary share capital of Bristow that we do not own. This payment was made with existing cash balances. In May 2004, we acquired eight million shares of deferred stock (essentially a subordinated class of stock with no voting rights) from Bristow for £1 per share ($14.4 million in total). Bristow used the proceeds to redeem £8 million of its ordinary share capital at par value from all of its outstanding shareholders, including ourselves. The result of these changes will be to reduce the cost of the guaranteed return to the other shareholders, which we record as minority interest expense, by $2.4 million on an annual basis.

        Contractual Obligations and Commercial Commitments. The Company has the following contractual obligations and commercial commitments as of March 31, 2004:

(1)     We have guaranteed the repayment of up to £10 million ($18.4 million) of the debt of FBS and $15.6 million of the debt of RLR, both unconsolidated affiliates.

        Income Taxes

        Our effective income tax rates from continuing operations were 27.6%, 30.0% and 30.6% for fiscal 2004, 2003 and 2002, respectively. The variance between the Federal statutory rate and the effective rate for these periods is due primarily to non-taxable foreign source income available to reduce U.S. taxable income. Our effective tax rate is impacted by the amount of our foreign source income and our ability to realize foreign tax credits.

Currency Fluctuations

        Through our foreign operations, we are exposed to currency fluctuations and exchange rate risks. The majority of our revenue and expenses from our North Sea Operations are in British Pound Sterling. In addition, some of our contracts to provide services internationally provide for payment in foreign currencies. Our foreign exchange rate risk is even greater when our revenue is denominated in a currency different from the associated costs. We attempt to minimize our foreign exchange rate risk exposure by contracting the majority of our services other than our North Sea Operations in U.S. dollars. As a result, a strong U.S. dollar may increase the local cost of our services that are provided under U.S. dollar denominated contracts, which may reduce the demand for our services in foreign countries. Generally, we do not enter into hedging transactions to protect against foreign exchange risks related to our operating revenue.

        Because we maintain our financial statements in U.S. dollars, we are vulnerable to fluctuations in the exchange rate between the British Pound Sterling and the U.S. dollar and between other foreign currencies and the U.S. dollar. In preparing our financial statements, we must convert all non-U.S. dollar currencies to U.S. dollars. The effect of foreign currency translation is reflected in a component of stockholders’ investment and foreign currency transaction gains or losses are credited or charged to income and reflected in other income (expense). In the past three fiscal years our stockholders’ investment has increased by $62.4 million as a result of translation adjustments. Changes in exchange rates could cause significant changes in our financial position and results of operations in the future.

        The British Pound Sterling is the currency in which most of Bristow’s revenue and expenses are paid. Approximately 41% of our operating revenue for fiscal 2004 was translated for financial reporting purposes from British Pound Sterling into U.S. dollars. In addition, we receive other revenue that is not in U.S. dollars or British Pound Sterling, such as Australian Dollars, Euros, Nigerian Naira, and Trinidad and Tobago Dollars. We can reduce or eliminate our exposure to exchange rate fluctuations to the extent that we also have expenses that are payable in the same foreign currency as our revenue. Our principal exposure is to changes in the value of the British Pound relative to the U.S. dollar. During fiscal 2004, the British Pound to U.S. dollar exchange rate ranged from a low of one British Pound = U.S. $1.55 to a high of one British Pound = U.S. $1.90, with an average of one British Pound = U.S. $1.70 for the fiscal year. As of March 31, 2004, the exchange rate was one British Pound = U.S. $1.84. During fiscal 2003, the British Pound to U.S. dollar exchange rate ranged from a low of one British Pound = U.S. $1.43 to a high of one British Pound = U.S. $1.65 for the fiscal year, with an average of one British Pound = U.S. $1.55. As of March 31, 2003, the exchange rate was one British Pound = U.S. $1.58.

Seasonality

        Helicopter Activities 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 occur during the winter months when our ability to safely fly and our customers’ ability to safely conduct their operations is inhibited. Accordingly, our operating revenue is generally lower in the fourth fiscal quarter.

Recent Accounting Pronouncements

        In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, “Accounting for Asset Retirement Obligations,” effective for fiscal years beginning after June 15, 2002. This statement requires us to record the fair value of liabilities related to future asset retirement obligations in the period the obligation is incurred. We adopted SFAS No. 143 on April 1, 2003. The adoption of SFAS No. 143 did not have an impact on our financial statements.

        In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 eliminates SFAS No. 4 and as a result, gains and losses from extinguishments of debt should be classified as extraordinary items only if they meet the criteria in APB Opinion No. 30. SFAS No. 145 amends SFAS No. 13, “Accounting for Leases,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS No. 145 also updates and amends existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. We implemented SFAS No. 145 on April 1, 2003, and determined that it had no impact on prior year financial statements. On July 29, 2003, we redeemed all of the then outstanding principal amount of our 7 7/8% Senior Notes due 2008 and our 6% Convertible Subordinated Notes due 2003 which resulted in a loss on extinguishment of debt of $6.2 million comprised of unamortized debt issuance costs and a premium payment. In accordance with SFAS No. 145 the loss on extinguishment of debt was recognized as a component of income from continuing operations.

        In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which is effective for fiscal periods after December 31, 2002. SFAS No. 146 requires companies to recognize costs associated with restructurings, discontinued operations, plant closings, or other exit or disposal activities, when incurred rather than at the date a plan is committed to. We have implemented the provisions of this statement on a prospective basis for exit or disposal activities initiated after December 31, 2002.

        In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 expands existing accounting guidance and disclosure requirements for certain guarantees and requires recognition, at the inception of a guarantee, of a liability for the fair value of an obligation undertaken in connection with issuing a guarantee. The disclosure requirements of FIN 45 were effective for our March 31, 2003 financial statements and the remaining provisions of FIN 45 apply to guarantees issued or modified after December 31, 2002.

        In December 2003, the FASB published a revision to Interpretation 46 (“FIN 46R”) to clarify certain provisions of FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,” and to exempt certain entities from its requirements. FIN 46R requires a company to consolidate a variable interest entity (VIE), as defined, when the company will absorb a majority of the variable interest entity’s expected losses, receive a majority of the variable interest entity’s expected residual returns, or both. FIN 46R also requires consolidation of existing, non-controlled affiliates if the VIE is unable to finance its operations without investor support, or where the other investors do not have exposure to the significant risks and rewards of ownership. FIN 46R is effective by the end of the first reporting period beginning after December 15, 2003. The adoption of FIN 46R did not have a material impact on our consolidated financial statements.

ITEM 7a. Quantitative and Qualitative Disclosures about Market Risk

        We have $255.5 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 Pound Sterling. As of March 31, 2004, we did not have any nominal forward exchange contracts outstanding. Management does not believe that our limited exposure to foreign currency exchange risk necessitates the extensive use of forward exchange contracts.

ITEM 8. Consolidated Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Offshore Logistics, Inc.:

        We have audited the accompanying consolidated balance sheets of Offshore Logistics, Inc. (the Company) and subsidiaries as of March 31, 2004 and 2003, and the related consolidated statements of income, stockholders’ investment and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The Company’s consolidated financial statements as of March 31, 2002 and for the year then ended were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those financial statements in their report dated May 15, 2002.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the 2004 and 2003 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Offshore Logistics, Inc. and subsidiaries as of March 31, 2004 and 2003, and the results of their operations and their cash flows for the fiscal years then ended, in conformity with accounting principles generally accepted in the United States of America.

        As discussed above, the 2002 financial statements of Offshore Logistics, Inc. and subsidiaries were audited by other auditors who have ceased operations. As described in Note A, these financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, which was adopted by the Company as of April 1, 2002. In our opinion, the disclosures for 2002 in Note A are appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2002 financial statements of Offshore Logistics, Inc. and subsidiaries other than with respect to such disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2002 financial statements taken as a whole.

/s/ KPMG LLP

New Orleans, Louisiana
May 21, 2004

        The following report is a copy of the audit report previously issued by Arthur Andersen LLP in connection with Offshore Logistics, Inc.‘s annual report on Form 10-K for the period ended March 31, 2002. This audit report has not been reissued by Arthur Andersen LLP in connection with this filing on Form 10-K for the fiscal year ended March 31, 2004. The previously issued report refers to financial statements not physically included in this document.

To the Stockholders of Offshore Logistics, Inc.:

        We have audited the accompanying consolidated balance sheets of Offshore Logistics, Inc. (a Delaware corporation) and subsidiaries as of March 31, 2002 and 2001, and the related consolidated statements of income, stockholders’ investment and cash flows for each of the three years in the period ended March 31, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Offshore Logistics, Inc. and subsidiaries as of March 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2002 in conformity with accounting principles generally accepted in the United States.

/S/ ARTHUR ANDERSEN LLP

New Orleans, Louisiana
May 15, 2002

        In June of 2002, Arthur Andersen was convicted of obstructing justice, which is a felony offense.  The SEC prohibits firms convicted of a felony from auditing public companies.  Arthur Andersen is thus unable to consent to the incorporation of its audit opinion on our 2001 and 2002 financial statements into this Annual Report on Form 10-K.  Under these circumstances, Rule 437a under the Securities Act permits us to include this opinion in this Form 10-K, which is incorporated by reference into registration statements on file with the SEC, without a written consent from Arthur Andersen.  

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ INVESTMENT

        The accompanying notes are an integral part of these statements.

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

        The accompanying notes are an integral part of these statements.

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ INVESTMENT

        The accompanying notes are an integral part of these statements.

OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS