Summary of GULFSTREAM INTERNATIONAL GROUP INC

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

Special Note Regarding Forward-Looking Statements

This Form 10-Q, including the sections entitled "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements. These statements relate to, among other things:

our business strategy;

our value proposition;

the market opportunity for our services, including expected demand for our services;

information regarding the replacement, deployment, acquisition and financing of certain numbers and types of aircraft, and projected expenses associated therewith;

costs of compliance with FAA regulations, Department of Homeland Security regulations and other rules and acts of Congress;

the ability to pass taxes, fuel costs, inflation, and various expense to our customers;

certain projected financial obligations;

our estimates regarding our capital requirements; and

any of our other plans, objectives, expectations and intentions contained in this prospectus that are not historical facts.

These statements, in addition to statements made in conjunction with the words "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate" and similar expressions, are forward-looking statements. These statements relate to future events or our future financial performance and only reflect management's expectations and estimates. You should read this Form 10-Q completely and with the understanding that our results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. We undertake no duty to update these forward-looking statements after the date of this Form 10-Q, even though our situation may change in the future. The following is a list of factors, among others, that could cause actual results to differ materially from the forward-looking statements:

changing external competitive, business, budgeting, fuel supply, weather or economic conditions;

changes in our relationships with employees or code share partners;

availability and cost of funds for financing new aircraft and our ability to profitably manage our existing fleet;

adverse reaction and publicity that might result from any accidents;

the impact of current or future laws and government investigations and regulations affecting the airline industry and our operations;

additional terrorist attacks; and

consumer unwillingness to incur greater costs for flights.

Overview

We operate a scheduled airline, scheduled and on-demand charter services, and a flight training academy for commercial pilots.

Our most significant market opportunity relates to the fact that we currently operate in and have targeted future expansion in unserved and underserved short haul markets, which is a growing opportunity for two principal reasons. Many smaller markets are being abandoned by major carriers, as they shift their focus increasingly to international markets and away from domestic markets and hubs. In addition, many smaller markets are also being abandoned by regional airlines, as they continue to gravitate toward larger jet aircraft in the 70-100 seat range, and away from smaller turboprop aircraft. As a result, we will continue to seek opportunities to grow in the expanding number of smaller underserved or unserved markets that are suitable for its fleet of small-capacity aircraft.

Our most significant challenges relate to:

volatility in the price of aircraft fuel;

a weakening economic environment; and

securing cost-effective maintenance resources, as the average age of our aircraft fleet increases.

Each of our business components is briefly described below.

Airline

We began providing air charter service in 1988, and have provided scheduled passenger service in Florida and the Bahamas since 1990. We signed our first major code share agreement with United Airlines in 1994. In 1997, Gulfstream entered into a cooperative alliance and code share agreement with Continental Airlines and has since operated as a Continental Connection carrier. We also have code share agreements with United Airlines, Northwest Airlines, and Copa Airlines. We estimate that over 60% of our revenue is derived from local "point to point" traffic within Florida and the Bahamas, with connecting traffic from our code-share partners and other carriers destined primarily for the Bahamas making up the balance. Continental is our largest connecting partner, with passengers connecting to and from Continental flights providing approximately 20% of our revenue. Revenue generated by the airline is classified in our statement of operations as Airline Passenger Revenue.

During September and October 2008, Gulfstream inaugurated service to five communities from Continental Airline's hub in Cleveland, Ohio under the Department of Transportation's Essential Air Service Program, including service to Bradford, Franklin and Dubois in Pennsylvania, as well as Jamestown, New York and Lewisburg, West Virginia. In addition, Gulfstream has taken the opportunity to provide service to routes abandoned by other airlines by utilizing our more efficient turboprop airplanes to replace jet carriers. As such, Gulfstream reallocated capacity within its core Florida and Bahamas route system to proven markets where competitors have reduced or eliminated service.

Cuba and Other Charter Revenue

Gulfstream Air Charter, Inc. ("GAC"), a related company which is owned by Thomas L. Cooper, operates charter flights between Miami and Havana. GAC is licensed by the Office of Foreign Assets Control of the U.S. Department of the Treasury as a carrier and travel service provider for charter air transportation between designated U.S. and Cuban airports.

Pursuant to a services agreement between Gulfstream and GAC dated August 8, 2003 and amended on March 14, 2006, Gulfstream may provide use of its aircraft, flight crews, the Gulfstream name, insurance, and service personnel, including passenger, ground handling, security, and administrative. Gulfstream also maintains the financial records for GAC. Pursuant to the March 14, 2006 amended agreement, Gulfstream receives 75% of the income generated by GAC's Cuban charter operation. We have consolidated the results of the Cuba charter business as a variable interest entity since January 1, 2008 pursuant to the requirements of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities.

In addition to the Cuba revenue described above, our charter revenues are principally derived from on-demand charter services, sub-service flying for other scheduled airlines and a 15-year agreement with a government subcontractor, subject to two-year renewals, to operate daily flights between West Palm Beach and Andros Town, Bahamas. Revenue and related expenses associated with Gulfstream's charter activity are reported as charter revenue and within the appropriate expense categories of our statement of income.

Academy

The Academy offers training programs for pilots holding commercial multi-engine instrument certifications and at least 190 hours of flying time. Pilots with these ratings are qualified to fly commercial airplanes, but are often unable to find positions with airlines without additional training and flying time. The Academy enhances its students' career prospects by providing them with the training and experience necessary to obtain pilot positions with commercial airlines. The Academy enrolled 14 and 12 students in the March 2008 and 2009 quarters, respectively. Virtually all previous students of the Academy were hired by airlines after graduation, including those hired by Gulfstream. The Academy's revenues are included as Academy, Charter and Other Revenue in our statement of income, and its expenses are included as general and administrative expenses.

Current Developments

Consolidated net income for the three months ended March 31, 2009 was $730,000 compared to a net loss of $1.3 million for the comparable period last year. Operating income for the three months ended March 31, 2009 was $1.8 million compared to an operating loss of $1.9 million for the comparable period last year. The year-over-year improvement in operating income was primarily attributable to lower fuel prices, as well as revenue initiatives, capacity reductions and cost controls compared to last year. Our $1.8 million operating profit for the first quarter of 2009 represents a significant year-over-year performance turnaround that relates directly to the aggressive business plan adopted early in 2008 to strengthen liquidity and improve profitability at a time when jet fuel prices were at record highs and the economy was showing clear signs of weakening.

The following factors had a significant influence on the improvement in our operating results for the first quarter of 2009 compared with our results for the March 2008 quarter, and are likely to continue to impact 2009 results for the remainder of the year.

The price of jet fuel declined dramatically after peaking in July 2008. The average price of jet fuel for the first quarter of 2009 was $1.76 compared to $2.98 for the comparable quarter last year.

The sale of our Embraer fleet of eight aircraft during 2008 has reduced the complexity and cost associated with flying two different aircraft types, and has resulted in lower engine maintenance costs in the March quarter of 2009.

We reduced lift capacity (ASMs, or available seat miles) by 35-40% effective October 2008 to enable us to better balance our capacity to lower demand resulting from a declining economy.

We increased our average ticket prices by 13.5%, and we initiated charges for excess baggage fees, consistent with practices adopted throughout the airline industry.

We redeployed assets to profitable routes by initiating service in September 2008 between Continental Airline's Cleveland hub and five smaller cities in Pennsylvania, New York and West Virginia in conjunction with Essential Air Service routes awarded by the Department of Transportation. This revenue source, which is subsidized by the Department of Transportation, is relatively stable especially in a declining economic environment.

We implemented substantial capacity-related and structural cost reductions during 2008.

Results of Operations

Comparative Results for the Three Months Ended March 31, 2008 and 2009

The following table sets forth our financial results (unaudited) for the three
months ended March 31, 2008 and 2009.

                                                  Three Months Ended March 31,
                                                                                          Percent
                                                   2008                 2009               Change
                                              (In thousands, except per share data)
Revenue
Airline passenger revenue                     $       27,737      $          17,532           -36.8%
Academy, charter and other  revenue                    3,518                  6,044            71.8%
Total Revenue                                         31,255                 23,576           -24.6%

Operating Expenses
Flight operations                                      3,824                  3,074           -19.6%
Aircraft fuel                                          8,186                  3,460           -57.7%
Aircraft rent                                          1,684                  1,646            -2.3%
Maintenance                                            7,577                  5,470           -27.8%
Passenger service                                      6,653                  4,818           -27.6%
Promotion & sales                                      2,154                  1,304           -39.5%
General and administrative                             2,034                  1,697           -16.6%
Depreciation and amortization                          1,075                    287           -73.3%
Operating Expenses                                    33,187                 21,756           -34.4%
Income (loss) from operations                         (1,932 )                1,820

Non-Operating Income and
(Expense)
Interest (expense)                                      (154 )                 (584 )
Interest income                                           15                      7
Other income (expense)                                     1                    (65 )
Non-Operating Income and (Expense)                      (138 )                 (642 )
Income (loss) before taxes                            (2,070 )                1,178
Provision (benefit) for income taxes                    (784 )                  448
Net income (loss)                             $       (1,286 )    $             730

Operating Statistics.

The following table sets forth our major operational statistics and
the percentage-of-change for the three months ended March 31, 2008 and 2009.

                                                 Three Months Ended March 31,
                                                                                      Percent
                                                    2008               2009            Change
Operating Statistics :
Available seat miles (000's) (1)                        72,185           42,467           -41.2%
Revenue passenger miles (000's) (2)                     41,331           25,332           -38.7%
Revenue passengers carried                             207,502          115,542           -44.3%
Departures flown                                        17,502           10,883           -37.8%
Passenger load factor (3)                                57.3%            59.7%             4.2%
Average yield per revenue passenger mile
(4)                                            $         0.671     $      0.692             3.1%
Revenue per available seat miles (5)           $         0.384     $      0.413             7.4%
Operating costs per available seat mile
(6)                                            $         0.445     $      0.499            12.1%
Average passenger fare (7)                     $        133.67     $     151.74            13.5%
Average passenger trip length (miles) (8)                  199              219            10.1%
Aircraft in service (end of period)                         35               23           -34.3%
Fuel cost per gallon (incl taxes)              $          2.98     $       1.76           -40.9%


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"Available seat miles" or "ASMs" represent the number of seats available for passengers in scheduled flights multiplied by the number of scheduled miles those seats are flown.

"Revenue passenger miles" or "RPMs" represent the number of miles flown by revenue passengers.

"Passenger load factor" represents the percentage of seats filled by revenue passengers and is calculated by dividing revenue passenger miles by available seat miles.

"Average yield per revenue passenger mile" represents the average passenger revenue received for each mile a revenue passenger is carried.

"Revenue per available seat mile" or "RASM" represents the average total operating revenue received for each available seat mile.

"Operating cost per available seat mile" represents operating expenses divided by available seat miles.

"Average passenger fare" represents passenger revenue divided by the number of revenue passengers carried.

"Average passenger trip length" represents revenue passenger miles divided by the number of revenue passengers carried.

Net Income and Operating Income

Our consolidated net income for the three months ended March 31, 2009 was $730,000 compared to a net loss of $1.3 million for the comparable period last year. Consolidated operating income for the three months ended March 31, 2009 was $1.8 million compared to an operating loss of $1.9 million for the comparable period last year. The year-over-year improvement in operating income was primarily attributable to lower fuel prices, as well as revenue initiatives, capacity reductions and cost controls compared to last year. The following table identifies the operating profit contributions from each of our respective operating components.