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 competition, business, budgeting, fuel supply, weather or economic conditions;

changes in our relationships with employees; code share partners or key vendors;

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 or alleged inappropriate actions;

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

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 markets that utilize turboprop aircraft. As a result, we continue to seek opportunities to grow in the expanding number of smaller underserved or unserved markets that are suitable for our fleet of small-capacity aircraft.

Our most significant challenges relate to:

volatility in the price of aircraft fuel;

a weakened economic environment; and

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

Current Developments

Consolidated net income for the three and six-month periods ended June 30, 2009 was $2,233,000 and $2,963,000 respectively compared to net losses of $3,544,000 and $4,831,000 for the comparable periods in 2008. Operating income for the three and six-month periods ended June 30, 2009 was $984,000 and $2,804,000 respectively compared to operating losses of $5,508,000 and $7,440,000, respectively, for the comparable periods in 2008. The year-over-year improvement in operating income for both the three and six-month periods was primarily attributable to lower fuel prices, as well as revenue initiatives, capacity reductions and cost controls compared to last year. Additionally for both 2008 periods the Company incurred an impairment charge of $4,467,000 related to the sale of its fleet of eight Embraer aircraft.

Operating profit for both the three and six-month periods ended June 30, 2009 represents a significant year-over-year performance turnaround that relates directly to the aggressive business plan adopted in 2008 to 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 three and six-month periods of 2009 compared with our results for the comparable 2008 periods, and are likely to continue to impact 2009 results:

The price of jet fuel declined dramatically after peaking in July 2008. The average price of jet fuel for the first half of 2009 was $1.79 compared to $3.33 for the comparable period 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 a 19% reduction in the maintenance costs for the six months ended June 30, 2009 compared to the same period in 2008;

We reduced lift capacity (ASMs, or available seat miles) 41.7% for the six months ended June 30, 2009 to enable us to better balance our capacity to the lower demand resulting from a weakened economy;

We increased our average ticket prices by 8.2%, 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 weakened economic environment;

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

Travel restrictions on Cuban Americans were relaxed early in 2009, which has substantially increased demand and improved profitability for our Cuba charter operation.

During the six months ended June 2009, our year-over-year improvement in operating profitability reflected the fundamental improvements that were implemented during 2008. However, we have experienced somewhat lower revenue and higher fuel costs than projected at the beginning of the year. We also reduced our debt and restructured creditor obligations by over $4.1 million since October 2008. We are presently seeking to increase our equity capital base, so as to support our near-term liquidity requirements. This is a necessary course of action in response to our current liquidity position and various additional factors, including the seasonal business slowdown in September and October, the ongoing risk posed by a weakened economy, the potential for continued volatility in the price of jet fuel, a negotiated settlement of the civil penalty proposed by the Federal Aviation Administration , and the impact on our liquidity from scheduled repayments of debt and restructured creditor obligations over the next two years. However, we can make no assurance that an equity financing will be completed successfully, or that alternative sources of capital will be available under terms acceptable to us, or at all. If the anticipated financing is not completed in the near-term, we would experience an immediate and significant liquidity shortfall, and would be unable to fund operations or meet our financial obligations.

Results of Operations

Comparative Results for the Three and Six-Month Periods Ended June 30, 2008 and
2009

The following table sets forth our financial results (unaudited) for the three
and six-month periods ended June 30, 2008 and 2009.

                              Three Months Ended June 30,         Percent          Six Months Ended June 30,         Percent
    (In thousands)             2008                 2009           Change          2008                2009           Change
                                    (In thousands)                                      (In thousands)
Revenue
Airline passenger
revenue                   $       27,614       $       18,318        -33.7 %   $      55,352       $      37,872        -31.6 %
Academy, charter and
other revenue                      3,438                5,381         56.5 %           6,955               9,403         35.2 %
Total Revenue                     31,052               23,699        -23.7 %          62,307              47,275        -24.1 %

Operating Expenses
Flight operations                  3,498                3,762          9.8 %           7,251               6,827         -5.8 %
Aircraft fuel                     10,063                3,321        -67.0 %          18,249               6,782        -62.8 %
Aircraft rent                      1,615                1,577         -6.5 %           3,371               3,223         -4.4 %
Maintenance                        5,976                5,505         -7.9 %          13,553              10,975        -19.0 %
Passenger service                  6,045                5,033        -16.7 %          12,698               9,860        -22.3 %
Promotion & sales                  1,971                1,293        -34.4 %           4,124               2,596        -37.1 %
General and
administrative                     1,809                1,931          6.7 %           3,843               3,628         -5.6 %
Depreciation and
amortization                       1,116                  293        -73.7 %           2,191                 580        -73.5 %
Impairment charge on
assets held for sale               4,467                   --           NM             4,467                  --           NM
Operating Expenses                36,560               22,715        -37.9 %          69,747              44,471        -36.2 %

Income (loss) from
operations                        (5,508 )                984           NM            (7,440 )             2,804           NM

Non-Operating Income
and (Expense)
Interest (expense)                  (148 )               (561 )      279.1 %            (302 )            (1,145 )      279.1 %
Interest income                        5                   --       -100.0 %              20                   7        -65.0 %
Other income (expense)               (13 )                (49 )      276.9 %             (12 )              (114 )      850.0 %
Non-Operating Income
and (Expense)                       (156 )               (610 )      291.0 %            (294 )            (1,252 )      325.9 %
Income (loss) before
taxes                             (5,664 )                374       -106.6 %          (7,734 )             1,552       -120.1 %
Provision (benefit) for
income taxes                      (2,119 )             (1,859 )      -12.3 %          (2,903 )            (1,411 )      -51.4 %
Net income (loss)         $       (3,545 )     $        2,233       -163.0 %   $      (4,831 )     $       2,963       -161.3 %

Operating Statistics.

The following table sets forth our major operational statistics and
the percentage-of-change for the three and six-month periods ended June 30, 2008
and 2009.

                             Three Months Ended June 30,         Percent        Six Months Ended June 30,        Percent
                              2008                 2009           Change          2008               2009         Change
Operating Statistics :
Available seat miles
(000's) (1)                      71,615               41,421        -42.2 %         143,800           83,888        -41.7 %
Revenue passenger
miles
(000's) (2)                      39,275               24,079        -38.7 %          80,606           49,411        -38.7 %
Revenue passengers
carried                         196,797              112,387        -42.9 %         404,299          227,929        -43.6 %
Departures flown                 17,753               10,769        -39.3 %          34,805           21,652        -37.8 %
Passenger load factor
(3)                                54.8 %               58.1 %        6.0 %            56.1 %           58.9 %        5.1 %
Average yield per
revenue passenger mile
(4)                      $         0.70       $         0.67         -4.1 %   $        0.69       $     0.68         -0.5 %
Revenue per available
seat
miles (5)                $         0.39       $         0.39          1.6 %   $        0.38       $     0.40          4.6 %
Operating costs per
available
seat mile (6)            $         0.50       $         0.54          7.1 %   $        0.47       $     0.52          9.5 %
Fuel cost per
available seat
mile (9)                 $         0.14       $         0.08        -42.9 %   $        0.13       $     0.08        -36.3 %
Average passenger fare
(7)                      $       140.32       $       144.46          2.9 %   $      136.91       $   148.15          8.2 %
Average passenger trip
length
(miles) (8)                         200                  214          7.4 %             199              217          8.7 %
Aircraft in service
(end of period)                      35                   23        -34.3 %              35               23        -34.3 %
Fuel cost per gallon
(incl taxes
& fees)                  $         3.70       $         1.83          -51 %   $        3.36       $     1.79        -46.7 %


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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 and six-month periods ended June 30, 2009 was $2,233,000 and $2,963,000, respectively, compared to net losses of $3,544,000 and $4,831,000 for the comparable periods last year. Consolidated operating income for the three and six-month periods ended June 30, 2009 was $984,000 and $2,804,000 compared to operating losses of $5,508,000 and $7,440,000 for the comparable periods last year. The three and six-month periods ended June 30, 2008 included an asset impairment charge of $4,467,000 related to the sale of the fleet of eight Embraer aircraft. The year-over-year improvement in operating income for the three and six-month periods ended June 30, 2009 was primarily attributable to lower fuel prices, as well as revenue initiatives, capacity reductions, and cost controls. The following table identifies the operating profit contributions from each of our respective operating components.