United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)

x                              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

OR

¨                                 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     1-12289

SEACOR Holdings Inc.
(Exact name of Registrant as Specified in Its Charter)

Registrant’s telephone number, including area code (954)-523-2200

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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x Yes o No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes  x No

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 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. x Yes  o 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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):  x  Large Accelerated Filer  o Accelerated Filer  o Non-Accelerated Filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes  x No

The aggregate market value of the voting stock of the registrant held by non-affiliates as of June 30, 2006 was approximately $1,941,802,000 based on the closing price on the New York Stock Exchange on such date. The total number of shares of Common Stock issued and outstanding as of February 22, 2007 was 24,531,005.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission (the “Commission”) pursuant to Regulation 14A within 120 days after the end of the Registrant’s last fiscal year is incorporated by reference into Part III of this Annual Report on Form 10-K.

SEACOR HOLDINGS INC.
FORM 10-K
TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

Certain statements discussed in Item 1 (Business), Item 1A (Risk Factors), Item 3 (Legal Proceedings), Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations), Item 7A (Quantitative and Qualitative Disclosures About Market Risk) and elsewhere in this Form 10-K as well as in other materials and oral statements that we release from time to time to the public constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concerning management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters involve significant known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of results to differ materially from any future results, performance or achievements discussed or implied by such forward-looking statements. Such risks, uncertainties and other important factors are discussed in Item 1A. Risk Factors. In addition, these statements constitute our cautionary statements under the Private Securities Litigation Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties. The words “anticipate,” “estimate,” “expect,” “project,” “intend,” “believe,” “plan,” “target,” “forecast” and similar expressions are intended to identify forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. You are advised, however, to consult any further disclosures we make on related subjects in our 10-Q and 8-K reports to the Securities and Exchange Commission.

PART I

ITEM 1. BUSINESS

General

Unless the context indicates otherwise, the terms “we,” “our,” “ours,” “us” and the “Company” refer to SEACOR Holdings Inc. and its consolidated subsidiaries. “SEACOR” refers to SEACOR Holdings Inc., incorporated in 1989 in Delaware. “Common Stock” refers to the common stock, par value $.01 per share, of SEACOR.

The Company is in the business of owning, operating, investing in and marketing equipment, primarily in the offshore oil and gas and marine transportation industries. We operate a diversified fleet of offshore support vessels and helicopters servicing oil and gas exploration, development and production facilities worldwide and we also operate a fleet of U.S. flag product tankers which transport petroleum, chemicals and crude products primarily in the U.S. domestic or “coastwise” trade. In addition, we operate a fleet of inland river barges transporting grain and other bulk commodities on the U.S. inland waterways. Our environmental services segment provides oil spill response, manages environmental remediation projects and offers related consulting services worldwide to those who store, transport, produce or handle petroleum products and environmentally hazardous materials.

SEACOR’s principal executive offices are located at 2200 Eller Drive, P.O. Box 13038, Fort Lauderdale, Florida 33316, and our telephone number is (954) 523-2200. Our Internet address is www.seacorholdings.com.

The Company’s Corporate Governance policies, including the Board of Directors’ Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee charters are made available, free of charge, on our website or in print for shareholders.

All of the Company’s periodic report filings with the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are made available,

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free of charge, through our website, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports. These reports and amendments are available through the Company’s website as soon as reasonably practicable after the Company electronically files such reports or amendments with the SEC. They are also available to be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information as to the operation of the SEC’s Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other information.

Segment and Geographic Information

The Company’s operations are divided into five business segments: “Offshore Marine Services,” “Marine Transportation Services,” “Inland River Services,” “Aviation Services,” and “Environmental Services.”  Our additional activities are described under “Other,” which primarily includes “Harbor and Offshore Towing Services,” various other investments in joint ventures and asset leasing activities. Marine Transportation Services and Harbor and Offshore Towing Services were acquired as a result of our acquisition of Seabulk International, Inc. (“Seabulk”) on July 1, 2005 through a merger with a wholly-owned subsidiary of SEACOR (the “Seabulk Merger”). Financial data for segment and geographic areas is reported in Part IV “Note 16. Major Customers and Segment Data” of this Annual Report on Form 10-K.

Offshore Marine Services

Business

Offshore Marine Services operates a diversified fleet of support vessels primarily servicing offshore oil and gas exploration, development and production facilities worldwide. Vessels in this service are employed to deliver cargo and personnel to offshore installations, handle anchors for drilling rigs and other marine equipment, support offshore construction and maintenance work, provide standby safety support and oil spill response services. From time to time, Offshore Marine Services supports projects such as well stimulation, seismic data gathering and offshore accommodation. Offshore Marine Services also offers logistics services in support of offshore oil and gas exploration, development and production operations including shorebased, marine transport and other supply chain management services. This segment contributed 52%, 50% and 58% of consolidated revenues in 2006, 2005 and 2004, respectively.

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Equipment and Services

The following tables identify the types of vessels that comprise the Offshore Marine Services’ fleet as of December 31 in the indicated years. “Owned vessels” are those majority owned by the Company. “Joint ventured vessels” are those owned by entities in which the Company does not have a controlling interest. “Leased-in vessels” are generally those which have been sold to an institutional lessor and then leased back. “Pooled vessels” are owned by entities not affiliated with Offshore Marine Services with the revenues or results of operations of these vessels being shared with the revenues and results of operations of certain vessels owned by Offshore Marine Services based upon an agreed formula. “Managed vessels” are owned by entities not affiliated with the Company but are operated by Offshore Marine Services for a fee. See Glossary of Vessel Types below for an explanation of the services they perform.

(a)              Excludes 3 owned vessels removed from service in 2005.

The following table indicates the average age in years of our fleet as of December 31:

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Glossary of Vessel Types

Anchor handling towing supply (“AHTS”) vessels are used primarily for towing, positioning and mooring drilling rigs and other marine equipment by lifting and setting anchors on the sea bottom. AHTS vessels are also used to transport supplies and equipment from shore bases to offshore drillings rigs, platforms and other installations. The defining characteristics of AHTS vessels are horsepower (“bhp”) and size of winch in terms of “line pull” and wire storage capacity. Our fleet of AHTS vessels has varying capabilities and supports offshore mooring activities in water depths ranging from 300 to 8,000 feet. Most modern AHTS vessels are equipped with dynamic positioning (“DP”) systems that enable them to maintain a fixed position in close proximity to a rig without the use of tie-up lines.

Crew boats move personnel to and from offshore installations. Historically, crew boats transported people and were also used to deliver “light” cargo such as personal effects, small machinery and small quantities of fuel and water. These boats also served as field stand-by vessels, moving personnel between platforms and providing an emergency stand-by service under certain circumstances. Crew boats built prior to 1990 are generally 100 to 130 feet in length and are capable of 20 knots in light condition and calm seas. Vessels built since 1998, also referred to as Fast Support Vessels (“FSVs”), range from 130 to 200 feet in length and develop speeds of between 25 and 35 knots. Modern FSVs have enhanced cargo carrying capacities, including the capacity to support some phases of drilling operations. Vessels supporting deep water drilling are usually equipped with DP capabilities.

Mini-supply vessels are generally less than 165 feet in length and typically carry deck cargo, liquid mud, methanol, diesel fuel and water. These vessels are well suited for production support, construction projects, maintenance work and certain drilling support activities.

Standby safety vessels typically remain on location proximate to offshore rigs and production facilities to respond to emergencies. These vessels carry special equipment to rescue personnel and are equipped to provide first aid and shelter. In some cases, these vessels perform a dual role, functioning also as supply vessels.

Supply vessels and towing supply vessels are generally more than 165 feet in length and are used to deliver cargo to rigs and platforms where drilling and work-over activity is underway or to support construction work by delivering pipe to vessels performing underwater installations. Supply vessels are distinguished from other vessels by the total carrying capacity (expressed as deadweight: “dwt”), available area of clear deck space, below-deck capacity for storage of mud and cement used in the drilling process and tank storage for water and fuel oil. Speed is not generally a factor but the ability to hold station in open water and moderately rough seas is a key factor in differentiating supply vessels. To improve station keeping ability, certain supply vessels have DP capabilities. Towing supply vessels perform similar cargo delivery functions to those handled by supply vessels. They are, however, equipped with more powerful engines (4-8,000 bhp) and winches, giving them the added capability to perform general towing functions, buoy setting and limited anchor handling work.

Other includes geophysical, accommodation, anchor handling tugs, line handling and other vessels. These vessels generally have specialized features adapting them to specific applications. Special project activities include well stimulation, seismic data gathering, freight hauling services and accommodation services.

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Markets

The demand for vessels is affected by the level of offshore exploration and drilling activities, which in turn is influenced by a number of factors including:

·       expectations as to future oil and gas commodity prices

·       customer assessments of offshore drilling prospects compared to land-based opportunities

·       customer assessments of cost, geological opportunity and political stability in host countries

·       worldwide demand for oil and natural gas

·       the ability of The Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and pricing

·       the level of production of non-OPEC countries

·       the relative exchange rates for the U.S. dollar

·       various government policies regarding exploration and development of their oil and gas reserves

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for discussion of current market conditions.

We operate vessels in six principal geographic regions. From time to time, vessels are relocated between these regions to meet customer demand for equipment. The table below sets forth vessel types by geographic market as of December 31. We sometimes participate in joint venture arrangements in certain geographical locations in order to enhance our marketing capabilities and facilitate operations in certain foreign markets. This allows for expansion of both our fleet and operations while diversifying risks and reducing capital outlays associated with such expansion.

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United States.   At December 31, 2006, 107 vessels were operating in the U.S., including 67 owned, 38 leased-in, one joint ventured and one pooled. Offshore Marine Services’ expertise in this market is deepwater anchor handling with our fleet of AHTS vessels and exploration and production support with our fleet of crew and mini-supply vessels. This is a highly volatile market because the activities we support tend to be of short-term duration and influenced by the near term price of natural gas. In addition, a large number of offshore marine service companies are active in this market and they compete largely on price alone.

Africa, primarily West Africa.   At December 31, 2006, 48 vessels were operating in West Africa, including 43 owned and five bareboat chartered-in. Our largest market in this area is Nigeria, which is dominated by the major oil companies and is characterized by large scale, multi-year projects. Angola is an increasingly significant market for our business. At the end of the year, we had eleven vessels operating within Angolan waters. The remainder of the Company’s vessels in this region operate from ports in the Republic of the Congo, Cameroon, Gabon, Equatorial Guinea and South Africa.

United Kingdom, primarily North Sea.   At December 31, 2006, 27 vessels were operating in the North Sea, including 21 owned, one joint ventured and five managed-in. The North Sea fleet provides standby safety and supply services. Demand in the North Sea market for standby services developed in 1991 after the United Kingdom promulgated legislation requiring offshore operations to maintain higher specification standby safety vessels. The legislation requires a vessel to “stand by” to provide a means of evacuation and rescue for platform and rig personnel in the event of an emergency at an offshore installation.

Asia.   At December 31, 2006, 15 vessels were operating in Asia, including eleven owned, two leased-in and two joint ventured. Offshore Marine Services’ vessels operating in this area generally support exploration programs and therefore follow drilling rigs to their locations in the region. To date, our largest markets in this area have been Vietnam and Indonesia. We compete against a large number of local and international companies in this region.

Middle East.   At December 31, 2006, 26 vessels were operating in the Middle East region, including 18 owned and eight joint ventured. Offshore Marine Services’ vessels operating in this area generally support activities in countries along the Arabian Gulf and Arabian Sea, including the United Arab Emirates, Qatar, Pakistan and India. We compete against a large number of local and international companies in this region.

Mexico, Central and South America.   At December 31, 2006, 11 vessels were operating in Mexico, Central and South America, including six owned and five joint ventured. Offshore Marine Services’ primary markets in this region are Mexico and Brazil. In both areas, Offshore Marine Services operates through local companies registered to do business in the country and benefits from certain national flag preferences.

Customers and Contractual Arrangements

Offshore Marine Services’ principal customers are major integrated oil companies, large independent oil and gas exploration and production companies and emerging independent companies. Consolidation of oil and gas companies through mergers and acquisitions over the past several years has had a limiting effect on Offshore Marine Services’ customer base. In 2006 there was no single customer responsible for 10% or more of consolidated operating revenues. The ten largest customers of Offshore Marine Services accounted for approximately 46% of Offshore Marine Services’ operating revenues. The loss of one or a few of our customers could have a material adverse effect on Offshore Marine Services’ results of operations.

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The Offshore Marine Services segment earns and recognizes revenues primarily from the time charter and bareboat charter of vessels to customers based upon daily rates of hire. A time charter is a lease arrangement under which the Company provides a vessel to a customer and is responsible for all operating expenses, typically excluding fuel. Under bareboat charter agreements, the Company provides the vessel to the customer and the customer assumes responsibility for all operating expenses and assumes all risk of operation. Vessel charters may range from several days to several years. Revenues from time charters and bareboat charters are recorded and recognized as service is provided.

Competitive Conditions

Each of the markets in which Offshore Marine Services operates is highly competitive. The most important competitive factors are pricing and the availability of equipment to fit customer requirements at the time the equipment is needed. Other important factors include service and reputation, flag preference, local marine operating conditions, the ability to provide and maintain logistical support given the complexity of a project and the cost of moving equipment from one geographical location to another.

Offshore Marine Services has numerous competitors in each of its geographical regions ranging from international companies that operate vessels in many of the same regions to smaller local companies that typically concentrate their activities in one specific region.

Risks of Foreign Operations

For the years ended December 31, 2006, 2005 and 2004 approximately 46%, 50%, and 56%, respectively, of Offshore Marine Services’ operating revenues were derived from foreign operations. Foreign operations are subject to inherent risks. These risks include, among others, political instability, asset seizures, nationalization of assets, terrorist attacks, piracy, kidnapping, fluctuating currency values, hard currency shortages, controls on currency exchange, the repatriation of income or capital, import-export quotas and other forms of public and governmental regulation, all of which are beyond the control of the Company. It is not possible to predict whether any of these conditions or events might develop in the future. The occurrence of any one or more of such conditions or events could have a material adverse effect on the Company’s financial condition and results of operations.

Marine Transportation Services

Business

As of December 31, 2006, Marine Transportation Services operated a fleet of ten U.S. flag tankers, including nine owned and one leased-in, providing marine transportation services for petroleum products and chemicals moving in the U.S. domestic or “coastwise” trade. Additionally, Marine Transportation Services managed one vessel on behalf of a third party. This segment contributed 11% and 7% of consolidated revenues in 2006 and 2005, respectively.

Equipment and Services

The Oil Pollution Act of 1990 (“OPA 90”) prohibits vessels without double-hulls from transporting crude oil and petroleum products in U.S. coastwise transportation after certain dates based on the age and size of the vessel. In addition, single-hulled vessels will be prohibited from transporting petroleum products in most international markets under a phase-out schedule established by the International Maritime Organization (“IMO”).

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The table below sets forth our Marine Transportation Services fleet as of December 31, 2006.

(1)                 Dead weight tons or “dwt”.

(2)                   During 2006 Marine Transportation Services committed to retrofit the Seabulk Trader and the Seabulk Challenge with double-hulls, thereby enabling these vessels to continue to transport crude oil and petroleum products beyond their presently mandated OPA 90 retirement dates in 2011. Work on the Seabulk Trader is expected to be completed during March 2007. Work on the Seabulk Challenge is expected to begin during March 2007 and be completed by the end of June 2007.

(3)                 In 2006 Marine Transportation Services exercised an option to purchase the Seabulk Magnachem at the expiration of the current lease term in February 2007.

Markets

Petroleum Product Transportation.   In the domestic energy trade, oceangoing vessels transport fuel and other petroleum products primarily from refineries and storage facilities along the coast of the U.S. Gulf of Mexico to utilities, waterfront industrial facilities and distribution facilities along the U.S. Gulf of Mexico, the Atlantic and Pacific coasts, as well as transport crude and product between Alaska and the West Coast and Hawaii. The number of U.S. flag oceangoing vessels eligible to participate in the U.S. domestic trade and capable of transporting fuel or petroleum products has steadily decreased since 1980 as vessels have reached the end of their useful lives or are being retired due to OPA 90 requirements. In addition, the cost of new vessel construction in the United States (a requirement to operate in the U.S. domestic coastwise trade) has substantially increased.

Chemical Transportation.   In the U.S. domestic coastwise chemical transportation trade, vessels carry chemicals, primarily from chemical manufacturing plants and storage facilities along the coast of the U.S. Gulf of Mexico to industrial users in and around U.S. Atlantic and Pacific coast ports. The chemicals transported consist primarily of caustic soda, paraxylene, alkylates, toluene and lubricating oils. Some of the chemicals must be carried in vessels with specially coated or stainless steel cargo tanks and many of them are sensitive to contamination and require special cargo-handling equipment.

Customers and Contractual Arrangements

The primary purchasers of petroleum product transportation services are multi-national oil and gas companies, oil trading companies and large industrial consumers of fuel with waterfront facilities. The primary purchasers of chemical transportation services are chemical and oil companies. Both services are generally contracted for on the basis of short-term or long-term time charters, voyage charters, contracts of affreightment or other transportation agreements tailored to the shipper’s requirements. In 2006, no single customer responsible for 10% or more of consolidated operating revenues. The ten largest customers of Marine Transportation Services accounted for approximately 94% of Marine Transportation Services’

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operating revenues. The loss of one or a few of our customers could have a material adverse effect on Marine Transportation Services’ results of operations.

As with other vessels we operate, tankers operated by Marine Transportation Services under time charter are operated for a daily rate of hire whereby the customer pays for fuel and we are responsible for the actual operation of the vessel and all other vessel operating expenses. Contracts of affreightment are contracts for cargos that are committed on a multi-voyage basis over a period of weeks or months, with minimum and maximum cargo tonnages specified over the period at a fixed or escalating rate per ton. Revenues for voyage charters and contracts of affreightment are recognized based on the percentage of voyage completion computed on the basis of the number of voyage days worked at the relevant reporting date divided by the total number of days expected to complete the entire voyage.

Competitive Conditions

The markets in which our fleet operate are highly competitive. Our primary direct competitors are other operators of U.S. flag ocean-going tank vessels and chemical carriers. The most important competitive factors are pricing and availability to fit customer requirements as well as the requirement in certain areas to operate double-hull or double-bottom vessels.

Inland River Services

Business

Inland River Services provides dry and liquid bulk cargo transportation on the U.S. inland waterways, primarily the Mississippi River, Illinois River, Tennessee River, Ohio River and their tributaries and the U.S. Gulf Intracoastal waterways.

We control one of the industry’s newest fleets of dry cargo and tank barges transporting agricultural and industrial products on the inland waterways. We also own towboats used for moving barges, a fleeting operation and deck barges for specialized projects. Inland River Services contributed 11%, 13% and 14% of consolidated operating revenues in 2006, 2005 and 2004, respectively.

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Equipment and Services

The following table sets forth the number of dry cargo barges, chemical tank barges, deck barges and towboats owned and/or operated by Inland River Services.

The Inland River Services dry cargo fleet consists of open and covered hopper barges. Open hopper barges are used to transport commodities that are not sensitive to water such as coal, aggregate and scrap. Covered hopper barges are more versatile because they can also carry water sensitive products, such as grain, ores, alloys, cements and fertilizer. Each dry cargo barge in our fleet is capable of transporting approximately 1,500 to 2,000 tons (1,350 to 1,800 metric tons) of cargo. The carrying capacity of a barge at any particular time is determined by water depth in the river channels and hull size of the barge. Adverse river conditions such as high water resulting from excessive rainfall, or low water caused by drought, can also impact operations by limiting the speed at which tows travel the U.S. inland waterways, the number of barges included in tows and the quantity of cargo that is loaded in the barges.

Inland barges are unmanned and are moved on the U.S. inland waterways by vessels known in the trade as “towboats.”  The combination of a towboat and barges is commonly referred to as a “tow.”  We generally charge a price per ton for point to point transportation of dry bulk commodities. Customers are permitted a specified number of days to load and discharge the cargo, and thereafter pay a per diem rate for extra time. From time to time, a small number of our dry cargo barges will be used for storage for a period prior to delivery. Inland River Services contracts with third parties to provide towing services to move its dry cargo barges on a spot basis with rates charged being market driven. Towing prices fluctuate with demand, rising with higher volumes and higher fuel costs.

Typical dry cargo voyage activity requires shifting a clean, empty barge from a fleeting location to a loading facility. The barge is then moved from the loading location and assembled into a tow before proceeding to its next destination. After unloading it is shifted to a fleeting area for cleaning and repair, if

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needed, before being moved again into a load position. Generally we try to match-up northbound and southbound movements of cargo to minimize repositioning costs. Typically, grain cargos move southbound and non-grain cargos move northbound.

The Inland River Services fleet of chemical and product tank barges transports liquid bulk cargos such as lube oils, solvents and glycols. The operation and chartering arrangements for these barges are similar to those of the dry cargo barges described above.

Inland River Services also owns a “fleeting operation” which is a staging area for grouping barges in preparation for movements up and down the river and a holding area for barges waiting to load and unload cargo. Our fleeting operation is managed by a third party.

During the fourth quarter of 2006, we entered into a 50-50 joint venture with a financial investor to own a fleet of inland marine transportation assets with a view toward generating cash returns which may be enhanced by entering strategic positions in marketable securities and commodity futures.

During the fourth quarter of 2006, we purchased a 50% interest in a joint venture that operates a grain and liquid fertilizer storage and handling facility in McLeansboro, Illinois.

Markets

The market for our services, prices achieved and utilization are driven by supply and demand economics. The relationship between supply and demand reflects many factors, including:

·                    the level of domestic and international production of the basic agricultural products to be transported (in particular the yields from grain harvests)

·                    the level of domestic and international consumption of agricultural products and the effect of these levels on the volumes of products that are physically moved into the export markets

·                    domestic and worldwide demand for iron ore, steel, steel by-products, coal, petroleum and other bulk commodities

·                    strength or weakness of the U.S. Dollar

·                    the cost of ocean freight and the cost of fuel

Within the U.S. other local factors also have an effect on pricing, including:

·                    the supply of barges available to move the products

·                    the ability to position the barges to maximize efficiencies and utility in moving cargos both northbound and southbound

·                    the cost of alternative forms of transportation (primarily rail)

·                    general operating logistics on the river network including size and operating status of locks and dams

·                    the effect of river levels on the loading capacities of the barges in terms of draft restrictions

Most of Inland River Services business is booked in the short-term and spot markets, and therefore, its earnings are subject to fluctuations in market rates. We occasionally seek to enter into long-term contracts to provide a level of stable cash flows and moderate the effect of market fluctuations.

Seasonality

During harsh winters the upper Mississippi River usually closes to barge traffic from mid-December to mid-March. Ice often hinders the navigation of barge traffic on the mid-Mississippi River, the

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Illinois River and the upper Ohio River during the same period. The volume of grain transported from the Midwest to the Gulf of Mexico, which is primarily for export, is greatest during the harvest season from mid-August through late November. The harvest season is particularly significant because pricing tends to peak during these months in response to higher demand for equipment.

Customers and Contractual Arrangements

The principal customers for Inland River Services are major agricultural and industrial companies. In 2006 there was no single customer responsible for 10% or more of consolidated operating revenues. The ten largest customers of Inland River Services accounted for approximately 60% of Inland River Services’ revenues in 2006. The loss of one or a few of our customers would not have a material adverse effect on Inland River Services’ results of operations.

Most of the barges in the fleet are employed under contracts of affreightment that can vary in duration, ranging from one voyage to several years. For longer term contracts base rates may be adjusted in response to changes in fuel prices and operating expenses. Some longer term contracts provide for the transport of a minimum number of tons of cargo or specific transportation requirements for a particular customer. Some barges are bareboat chartered-out to third parties for a fixed payment of hire per day for the duration of the charter. These contracts tend to be longer, ranging in term from one to five years.

Competitive Conditions

Generally, we believe the primary barriers to effective competitive entry into the U.S. inland waterways markets are the complexity of operations, the consolidation of the inland river towing industry and the difficulty in assembling a large enough fleet and an experienced staff to operate efficiently in the execution of voyages and to re-position barges effectively to optimize their use. The primary competitive factors among established operators are price and availability of barges. In addition to reliability, barge operators must have equipment of a suitable type and condition for a specific cargo.

We believe that there are four major domestic companies that operate over 2,000 barges each, with one of those operating over 3,000 barges. There are also four mid-sized barge companies that operate more than 500 but less than 1,000 barges. While our main competitors are other barge lines, railroads also compete for traffic that might otherwise move on the U.S. inland waterways.

Aviation Services

Business

Aviation Services’ helicopter fleet principally provides transportation services to the offshore oil and gas exploration, development and production industry that operates in the U.S. Gulf of Mexico and Alaska. Aviation Services also provides flightseeing tours in Alaska and leases helicopters to third parties. It also owns a fixed base operation (“FBO”) at Ted Stevens Anchorage International Airport. The FBO sells fuel and provides services to corporate aircraft and a regional airline. Aviation Services contributed 12%, 14% and 6% of consolidated operating revenues in 2006, 2005 and 2004, respectively.

Equipment and Services

At December 31, 2006, Aviation Services owned 109 helicopters and leased 14 others under operating leases. Of these, 108 were located in the United States and 15 were located in foreign jurisdictions. Aviation Services operates a Federal Aviation Administration (“FAA”) approved maintenance repair station in Lake Charles, Louisiana and is a factory approved service facility for Bell Helicopter, American Eurocopter and Turbomeca.

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The composition of Aviation Services’ fleet as of December 31 was as follows: