current fiscal year will pose a "significant challenge'' for the company due to a decline in the number of aircraft arrivals to Bermuda.

In his annual report to shareholders he noted that Condor and Kiwi had stopped coming to Bermuda, while British Airways and Continental Airlines have reduced the number of weekly flights.

But he remained optimistic about the company's ability to produce good results. BAS profits fell 16 percent to $580,068 or 54 cents a share for the year ended March 31, 1997.

In the previous fiscal year ended March 31, 1996 the company's net income was $692,094 or 61 cents a share, a 50 percent rise over the 1995 results.

Mr. Conyers attributed the drop to higher expenses due to the accelerated depreciation and redundancy costs associated with the closure of the company's two restaurants at the Airport last year.

While revenue for the fiscal year was up four percent over the previous year to $12,175,508, expenses rose six percent to $11,550,997. Income from operations declined 24 percent to $624,511. BAS closed its two airport restaurants last year due to renovations at the airport. About 15 staff were laid off. BAS did not participate in the subsequent bidding to put in another restaurant, although it won the contract to open new bar facilities. BAS currently has 200 employees.

Mr. Conyers stated in his report to shareholders that even with the decline in income, the board of directors thought the company had performed "quite well'' during the past year.

"Again, the company's performance was negatively influenced by changes beyond our control,'' he stated. "We once more incurred significant redundancy costs when our airport restaurants lease was prematurely terminated to make way for the new restaurant outlets at the Airport. The fact that Bermuda has experienced very little, if any, growth in aviation and tourism in the last few years has also had a profound effect on the company's results. In addition to the declining visitor arrivals, we have seen a significant decline in the number of aircraft movements.'' He said BAS is looking for opportunities to grow in other areas that complement or use the company's resources. BAS acquired a majority interest in Crow Lane Bakery Ltd. in January and is about to start building a lounge facility catering to private jet travellers at its airport office building.

The company is also in the process of forming a joint venture with Serco Aviation, known as BAS-Serco Ltd. The new company will carry out a variety of services including maintaining commercial and private buildings as well as providing the staff and administration for businesses.

"These projects will require significant capital outlay, however we are confident of a reasonable return on our investments,'' Mr. Conyers said. The company will also undertake to upgrade its information and security systems and replace some of its ground equipment during the year.

The company is still in the process of buying back nine percent of its issued stock. BAS provides aircraft handling, passenger handling and catering services at the Bermuda airport.

BAS shares last traded at $3.63 on March 6. The company has an annual dividend return of about eight percent. Mr. Conyers expressed disappointment that the company's shares traded below book value of $5.61.