Boeing Cancels KC-135 Teaming Agreement Following Amended RFP Release

Pemco Aviation Group (NASDAQ: PAGI) announced today that
The Boeing Company has notified its Birmingham, Alabama subsidiary,
Pemco Aeroplex, Inc., that Boeing is terminating a Memorandum of
Agreement ("MOA") among Boeing, L3/IS Integrated Systems ("L3") and
Pemco which provided a teaming arrangement to compete for the FY08
KC-135 contract to perform Programmed Depot Maintenance (PDM) for the
United States Air Force.
   In its termination notice, Boeing asserts that it received notice
of an amendment to the request for proposal for the KC-135 program
reducing the quantities of aircraft to such an extent that it was
unfavorable to Boeing and further participation in the program
pursuant to the MOA was no longer practical or financially viable.
Pemco and Boeing are currently teamed on the KC-135 Bridge Contract,
which remains unaffected by the termination.
   Ron Aramini, President and Chief Executive Officer, stated, "We
are currently evaluating several alternatives with respect to future
KC-135 work. Additionally, it is our belief that Boeing would
reinstate the MOA if the number of aircraft were reset at the original
number."

   Pemco Aviation Group, Inc., with executive offices in Birmingham,
Alabama, and facilities in Alabama and California, performs
maintenance and modification of aircraft for the U.S. Government and
for foreign and domestic commercial customers. The Company also
provides aircraft parts and support and engineering services, in
addition to developing and manufacturing aircraft cargo systems,
rocket vehicles and control systems, and precision components.

   For more information: www.pemcoaviationgroup.com

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