Mercury Air Group, Inc. Reports Net Loss for Its Fiscal 2004 Third Quarter, Reduces Debt by $41.1 Million in April With Proceeds

Mercury Air Group, Inc. Reports Net Loss for Its Fiscal 2004
Third Quarter, Reduces Debt by $41.1 Million in April With Proceeds From Sale
of FBOs 


LOS ANGELES, May 13  /PRNewswire-FirstCall/ -- Mercury Air Group, Inc. 
reported a net loss for the three-month period ended March 31, 2004 of
$1,819,000, or $0.63 per basic and diluted share, as compared to a net loss for
the three-month period ended March 31, 2003 of $1,098,000, or $0.33 per basic
and diluted share.

"The reported net loss for the third quarter of fiscal 2004 reflects the effect
of our high debt service costs in addition to lower margin contributions from
the Air Centers and Air Cargo segments.  With the proceeds from the sale of
Mercury Air Centers, Inc. on April 12, we reduced the principal amount of
outstanding long-term debt by $41.1 million, to approximately $18.0 million,
which will significantly reduce our debt service costs going forward," said
Joseph A. Czyzyk, President and CEO of Mercury Air Group, Inc. adding, "after
satisfying all of the obligations associated with retiring debt, paying
transaction related expenses and establishing escrow accounts, we netted $9.3
million in surplus cash from the sale which improved our financial position. 
The improved financial position and lower debt service costs provide us with
additional options to enhance shareholder value in the future, including the
growth of our remaining three business lines."

Mercury Air Group's revenue for the third quarter of fiscal 2004 was
$125,536,000, an increase of 13.1% over the revenue for the third quarter of
fiscal 2003 of $111,027,000. The Company's gross margin for the third quarter
of fiscal 2004 was $4,836,000 as compared to the gross margin of $6,119,000 in
the third quarter of fiscal 2003.

MercFuel, Inc. ("MercFuel"), the Company's aviation fuel reseller subsidiary,
had revenue of $88,305,000 on sales volume of 72,393,000 gallons, or 795,500
gallons per day, in the third quarter of fiscal 2004 as compared to sales
revenue of $72,497,000 on sales volume of 63,286,000 gallons, or 703,200
gallons per day, for the comparable period last year.  MercFuel's average
aviation fuel sales price per gallon sold in the third quarter of fiscal 2004
was $1.220 as compared to last year's third quarter per gallon average aviation
fuel sales price per gallon sold of $1.146.  MercFuel's gross margin in the
third quarter of fiscal 2004 decreased to $1,506,000, equating to an average
sales margin of $0.021 per gallon, as compared to last year's third quarter
sales margin of $1,670,000, or $0.026 per gallon.  MercFuel's aviation fuel
sales volume within the corporate and fractional aviation segment increased to
11,750,000 gallons, or 16.2% of MercFuel's total sales volume in the third
quarter of fiscal 2004, as compared to 7,111,000 gallons, or 11.2% of
MercFuel's total sales volume for the same period last year.

The Company's Mercury Air Cargo, Inc. ("Air Cargo") subsidiary had revenue of
$9,729,000 in the third quarter of fiscal 2004, an increase of $1,333,000 or
15.9% from last year's third quarter revenue of $8,396,000.  Air Cargo's gross
margin was $60,000 in the third quarter of fiscal 2004 versus a gross margin of
$368,000 in the third quarter of fiscal 2003 as both the cargo marketing
services and warehouse divisions' margins declined.

Maytag Aircraft, Inc. ("Maytag Aircraft"), the Company's wholly-owned
subsidiary engaged in U.S. government contract services, had revenue of
$5,747,000 in the third quarter of fiscal 2004 as compared to $5,990,000 for
the same period last year.  The revenue decline is primarily due to the loss of
Maytag Aircraft's Air Terminal contract at Eielson Air Force Base in Alaska
that generated revenue of $134,000 in the third quarter of fiscal 2003. Maytag
Aircraft's gross margin for the third quarter of fiscal 2004 was $1,166,000, a
decrease of $45,000 from Maytag Aircraft's gross margin of $1,211,000 for the
same period last year.

Revenue from the Company's Mercury Air Centers, Inc ("Air Centers") subsidiary
in the third quarter of fiscal 2004 was $23,704,000 on sales volume of
7,545,000 gallons, or 82,900 gallons per day, as compared to last year's third
quarter revenue of $24,479,000 on sales volume of 8,029,000 gallons, or 89,200
gallons per day.  Air Centers' gross margin was $2,104,000 and $2,870,000 for
the third quarters of fiscal 2004 and 2003, respectively.  On April 12, 2004,
after receiving shareholder approval, the Company completed the sale of Air
Centers to Allied Capital Corporation for $76,349,000, subject to adjustment
upon the determination of Air Centers' closing net working capital.  The
Company used the proceeds, among other things, primarily to repay $41,070,000
of outstanding principal of its long term debt.

For the nine-month period ended March 31, 2004, the Company reported a net loss
of $3,638,000, or $1.18 per basic and diluted share, as compared to a net loss
of $2,283,000, or $0.70 per basic and diluted share, for the comparable fiscal
2003 period.  The fiscal 2004 loss includes an after-tax settlement expense of
$1,799,000 associated with the J O Hambro Settlement and an accrual for debt
premiums on the Senior Subordinated Note of $702,000, net of income taxes. 
Revenue in fiscal 2004 was $340,436,000, an increase of $7,552,000, or 2.3%,
from revenue of $332,884,000 for the same period in fiscal 2003.  Gross margin
for the first nine months of fiscal 2004 was $18,463,000, a decrease of
$494,000, or 2.6%, from $18,957,000 last year.

MercFuel's revenue for the nine-month period ended March 31, 2004 was
$228,195,000 on sales volume of 207,507,000 gallons, or 754,600 thousand
gallons per day, as compared to revenue of $218,111,000 on sales volume of
221,486,000 gallons, or 808,300 gallons per day, for the same period last year.
Despite the lower sales volume, revenue increased primarily due to higher
worldwide petroleum product prices and an increase in the sales volume in the
corporate and fractional aviation segment, where MercFuel realizes a higher
average sales price and margin per gallon sold than in the commercial airlines
segment.  The lower sales volume is primarily due to the cessation of business
by National Airlines in November 2002.  Despite the lower sales volume,
MercFuel's gross margin for fiscal 2004 increased slightly to $4,806,000 from
$4,741,000 in fiscal 2003.  The average per gallon fuel sales margin in fiscal
2004 was $0.0401 as compared to $0.0383 in fiscal 2003. MercFuel's aviation
fuel sales volume within the corporate and fractional aviation segment
increased to 28,536,000 gallons, or 13.8% of MercFuel's total sales volume in
fiscal 2004, as compared to 20,765,000 gallons, or 9.4% of MercFuel's total
sales volume last year.

Air Cargo's revenue for the first nine months of fiscal 2004 was $29,306,000 as
compared to $24,840,000 for fiscal 2003, an increase of 18%. Air Cargo's gross
margin in fiscal 2004 was $1,356,000 as compared to $2,072,000 in fiscal 2003,
a decrease of 34.6% primarily due to the lower contributions from the cargo
marketing services and the warehouse divisions and the establishment of a
reserve for executive severance partially offset by improved results from
Mercury World Cargo.

Maytag Aircraft's revenue for the first nine months of fiscal 2004 was
$17,489,000, a decrease of $1,021,000, or 5.5% from last year's revenue of
$18,510,000.  Maytag Aircraft's gross margin increased to $3,909,000,
representing an increase of 16.3% from last year's gross margin of $3,360,000.

Air Centers' revenue for the first nine months of fiscal 2004 was $69,687,000
resulting in a gross margin of $8,392,000.  This compares to revenue for the
first nine months of fiscal 2003 of $72,187,000 resulting in a gross margin of
$8,784,000.  Aviation fuels sales volume in fiscal 2004 was 23,285,000 gallons,
or 84,700 gallons per day, a decrease of 1,881,000 gallons from last year's
sales volume of 25,166,000 gallons, or 91,800 gallons per day.

About Mercury Air Group

Los Angeles-based Mercury Air Group (AMEX:MAX) provides aviation petroleum
products, air cargo services and transportation, and support services for
international and domestic commercial airlines, general and government aircraft
and specialized contract services for the United States government.  Mercury
Air Group operates four business segments worldwide: Mercury Air Centers, Inc.,
MercFuel, Inc., Maytag Aircraft Corporation and Mercury Air Cargo, Inc.  On
April 12, 2004, Mercury Air Group sold its entire ownership interest in Mercury
Air Centers, Inc. to Allied Capital Corporation. For more information, please
visit http://www.mercuryairgroup.com/.

Statements contained in this news release which are not historical facts are
forward looking statements as that item is defined in the Private Securities
Litigation Reform Act of 1995.  Such forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ materially
from estimated results.  Such risks and uncertainties are detailed in the
Company's filings with the Securities and Exchange Commission.

For further information, please contact: Joseph Czyzyk of Mercury Air Group,
Inc., [phone]; or investor relations, David Herbst or Larry Barrios,
both of The MWW Group, [phone], ext. 317, for Mercury Air Group, Inc.

                   MERCURY AIR GROUP, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)
       (all amounts in thousands of dollars, except per share amounts)

                                    Nine Months Ended    Three Months Ended
                                         March 31,            March 31,
                                       (unaudited)          (unaudited)
                                     2004      2003       2004       2003
   Sales and revenues:
    Sales                          $269,640   $263,487   $101,775   $88,151
    Service revenues                 70,796     69,397     23,761    22,876
                                    340,436    332,884    125,536   111,027
   Costs and expenses:
    Cost of sales                   241,307    234,647     93,722    78,400
    Operating expenses               80,666     79,280     26,978    26,508
                                    321,973    313,927    120,700   104,908
    Gross margin (excluding
     depreciation and amortization)  18,463     18,957      4,836     6,119

   Expenses (income):
    Selling, general and
     administrative                   7,838      7,889      2,798     2,648
    Provision for bad debts             421      1,201        361       442
    Depreciation and amortization     6,405      6,121      2,126     2,072
    Interest expense                  6,240      5,536      1,715     2,621
    Hambro settlement costs           1,799
    Debt extinguishment costs                    1,773                   40
    Other income                       (286)       (77)       (41)      (27)
    Total expenses                   22,417     22,443      6,959     7,796

   Loss before income tax benefit    (3,954)    (3,486)    (2,123)   (1,677)
    Income tax benefit                 (316)    (1,203)      (304)     (579)

   Net loss                          (3,638)    (2,283)    (1,819)   (1,098)
   Accrued preferred stock dividends     28                     9
   Net loss applicable to
    common stockholders             ($3,666)   ($2,283)   ($1,828)  ($1,098)

   Net loss per common share:
    Basic:                           ($1.18)    ($0.70)    ($0.63)   ($0.33)
    Diluted:                         ($1.18)    ($0.70)    ($0.63)   ($0.33)


                           MERCURY AIR GROUP, INC.
                        SELECTED BUSINESS SEGMENT DATA
      For the Nine and Three Month Periods Ended March 31, 2004 and 2003
                                 (Unaudited)
                          (all amounts in thousands)

                                    Nine Months Ended  Three Months Ended
                                         March 31,          March 31,
                                     2004      2003      2004      2003
   Revenue
    MercFuel                     $228,195  $218,111   $88,305   $72,497
    Mercury Air Centers            69,687    72,187    23,704    24,479
    Mercury Air Cargo              29,306    24,840     9,729     8,396
    Maytag Aircraft                17,489    18,510     5,747     5,990
    Intersegment elimination       (4,241)     (764)   (1,949)     (335)
      Total Revenue              $340,436  $332,884  $125,536  $111,027

   Gross Margin
    MercFuel                       $4,806    $4,741    $1,506    $1,670
    Mercury Air Centers             8,392     8,784     2,104     2,870
    Mercury Air Cargo               1,356     2,072        60       368
    Maytag Aircraft                 3,909     3,360     1,166     1,211
      Total Gross Margin          $18,463   $18,957    $4,836    $6,119

   Depreciation and Amortization
    MercFuel                         $352      $213      $118      $105
    Mercury Air Centers             4,004     3,963     1,306     1,382
    Mercury Air Cargo               1,401     1,545       484       453
    Maytag Aircraft                   249       265        89        84
    Other                             399       135       129        48
      Total Depreciation &
       Amortization                $6,405    $6,121    $2,126    $2,072

   Sales Volume (thousands of
    gallons)
    MercFuel                      207,507   221,486    72,393    63,286
    Mercury Air Centers            23,285    25,166     7,545     8,029


                   MERCURY AIR GROUP, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)
                    (all amounts in thousands of dollars)

                 ASSETS                           March 31,      June 30,
                                                     2004          2003
   CURRENT ASSETS:
    Cash and cash equivalents                       $1,822         $2,802
    Trade accounts receivable                       58,954         46,753
    Inventories, principally aviation fuel           3,867          4,422
    Prepaid expenses and other current assets        9,017          5,241
    Deferred taxes, current                            901            901
      TOTAL CURRENT ASSETS                          74,561         60,119

   PROPERTY, EQUIPMENT AND LEASEHOLDS, net          57,789         58,844
   NOTES RECEIVABLE                                  1,034          1,815
   DEFERRED INCOME TAXES, LONG TERM                  1,961          2,284
   GOODWILL                                          4,389          4,389
   OTHER INTANGIBLE ASSETS                             808          1,033
   OTHER ASSETS                                      3,869          4,471
      TOTAL ASSETS                                $144,411       $132,955

       LIABILITIES AND STOCKHOLDERS' EQUITY

   CURRENT LIABILITIES:
    Accounts payable                               $38,358        $34,677
    Accrued expenses and other current liabilities  15,672          9,554
    Current portion of long-term debt                3,145          4,194
      TOTAL CURRENT LIABILITIES                     57,175         48,425

   LONG-TERM DEBT                                   29,286         25,501
   SENIOR SUBORDINATED NOTE                         23,697         23,445
   SUBORDINATED NOTE                                 3,586
   OTHER NONCURRENT LIABILITIES                      1,057            608
   DEFERRED RENT                                     1,414          1,885
   MINORITY INTEREST                                   182            180
      TOTAL LIABILITIES                            116,397        100,044

   MANDATORILY REDEEMABLE PREFERRED STOCK              509            481

   STOCKHOLDERS' EQUITY:
    Common Stock -- $ .01 par value;
     authorized 18,000,000 shares;                      30             33
    Additional paid-in capital                      20,752         22,496
    Retained earnings                               10,353         14,018
    Accumulated other comprehensive loss                 6            (86)
    Notes receivable from officers                  (3,636)        (4,031)
      TOTAL STOCKHOLDERS' EQUITY                    27,505         32,430
      TOTAL LIABILITIES, PREFERRED STOCK, AND
       STOCKHOLDERS' EQUITY                       $144,411       $132,955


DATASOURCE: Mercury Air Group, Inc.



CONTACT:  Joseph Czyzyk of Mercury Air Group, Inc., [phone]; or

investor relations, David Herbst or Larry Barrios, both of The MWW Group,

[phone], ext. 317, for Mercury Air Group, Inc.



Web site:  http://www.mercuryairgroup.com/ 

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