===========================================================================
                               UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549


                              ---------------


                                 FORM 10-Q


          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                      SECURITIES EXCHANGE ACT OF 1934
                FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998


                           ----------------------


                         Commission File No. 1-8461


                           ----------------------


                      GULFSTREAM AEROSPACE CORPORATION
                               P. O. Box 2206
                            500 Gulfstream Road
                        Savannah, Georgia 31402-2206
                         Telephone: (912) 965-3000
                      State of incorporation: Delaware
                   IRS identification number: 13-3554834


                             ------------------


     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 for 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. Yes X No __

     As of July 15,  1998,  there  were  73,852,224  shares  of  Gulfstream
Aerospace Corporation Common Stock outstanding.

===========================================================================


             GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES


                                   INDEX


                       PART I. FINANCIAL INFORMATION


                                                                   Page No.
                                                                   --------

Item 1.     Consolidated Financial Statements:


            Consolidated Balance Sheets
              June 30, 1998 and December 31,
              1997....................................................3

            Consolidated Statements of Income
              Three and six months ended June 30,
              1998 and 1997...........................................4

            Consolidated Statement of Stockholders'
              Equity Six months ended June 30, 1998...................5

            Consolidated Statements of Cash Flows
              Six months ended June 30, 1998 and 1997.................6

            Notes to Consolidated Financial Statements..............7-9


Item 2.     Management's Discussion and Analysis of
              Financial Condition and Results of
              Operations..........................................10-13


                         PART II. OTHER INFORMATION

Item 1.     Legal Proceedings........................................14

Item 2.     Changes in Securities....................................14

Item 3.     Defaults upon Senior Securities..........................14

Item 4.     Submission of Matters to a Vote of Security Holders......14

Item 5.     Other Information........................................15

Item 6.     Exhibits and Reports on Form 8-K.........................15

            Signature................................................16


             GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                        Consolidated Balance Sheets
                     (In thousands, except share data)
                                (Unaudited)
                                                                  June 30,     December 31,
                                                                    1998           1997
                                                                ------------   ------------
<S>                                                             <C>            <C>        
Assets

Cash and cash equivalents                                       $   255,515    $   306,451
Accounts receivable (less allowance for doubtful accounts:
   $1,191 and $1,144)                                               165,064        177,228
Inventories                                                         747,128        629,876
Deferred income taxes                                                47,306         33,795
Prepaids and other assets                                             7,552         11,318
                                                                ------------   ------------
    Total current assets                                          1,222,565      1,158,668

Property and equipment, net                                         135,764        134,611
Tooling, net of accumulated amortization:  $11,320 and $7,680        40,177         43,471
Goodwill, net of accumulated amortization:  $9,037 and $8,433        38,353         38,957
Other intangible assets, net                                         47,949         50,485
Deferred income taxes                                                30,400         32,950
Other assets and deferred charges                                    13,705         14,525
                                                                ------------   ------------

Total Assets                                                      1,528,913      1,473,667
                                                                ============   ============

Liabilities and Stockholders' Equity
Current portion of long-term debt                                    75,000         75,000
Accounts payable                                                    195,454        147,618
Accrued liabilities                                                 120,913         93,798
Customer deposits -- current portion                                535,303        546,441
                                                                ------------   ------------
    Total current liabilities                                       926,670        862,857
Long-term debt                                                      267,500        305,000
Accrued postretirement benefit cost                                 118,513        115,405
Customer deposits -- long-term                                       97,745         88,075
Other long-term liabilities                                           8,680          9,573
Commitments and contingencies
Stockholders' equity
  Common stock; $.01 par value; 300,000,000
  shares authorized; 89,789,671 shares issued in 1998
  and 86,522,089 shares issued in 1997                                  898            865
Additional paid-in capital                                          437,153        370,258
Accumulated deficit                                                (129,902)      (225,960)
Minimum pension liability                                              (762)          (762)
Unamortized stock plan expense                                         (332)        (1,155)
Less:  Treasury stock:  15,944,831 shares in 1998 and
  11,978,439 shares in 1997                                        (197,250)       (50,489)
                                                                ------------   ------------
    Total stockholders' equity                                      109,805         92,757
                                                                ------------   ------------

Total Liabilities and Stockholders' Equity                        1,528,913      1,473,667
                                                                ============   ============

See notes to consolidated financial statements

</TABLE>


             GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                     Consolidated Statements of Income
                   (In thousands, except per share data)
                                (Unaudited)

                                                              Three months ended                Six months ended
                                                                   June 30,                         June 30,
                                                        -----------------------------     -----------------------------
                                                            1998             1997             1998             1997
                                                        ------------     ------------     ------------     ------------
<S>                                                     <C>              <C>              <C>              <C>         
Net revenues                                            $    557,042     $    522,906     $  1,060,449     $    898,532
Cost and expenses
  Cost of sales                                              431,225          446,896          835,294          752,048
  Selling and administrative                                  29,575           22,982           55,517           45,597
  Stock option compensation expense                              494              463              823              985
  Research and development                                     2,259            5,294            4,204            3,774
  Amortization of intangibles and deferred charges             1,882            1,826            3,758            3,646
                                                        ------------     ------------     ------------     ------------
     Total costs and expenses                           $    465,435     $    477,461     $    899,596     $    806,050
                                                        ------------     ------------     ------------     ------------
Income from operations                                        91,607           45,445          160,853           92,482
Interest income                                                2,532            2,239            5,054            5,362
Interest expense                                              (6,435)          (7,680)         (13,434)         (15,810)
                                                        ------------     ------------     ------------     ------------
Income before income taxes                                    87,704           40,004          152,473           82,034
Income tax expense                                            32,127              500           56,415            2,500
                                                        ------------     ------------     ------------     ------------
Net income                                              $     55,577     $     39,504     $     96,058     $     79,534
                                                        ============     ============     ============     ============

Earnings per share:
  Net income per share - basic                          $        .75     $        .53     $       1.31     $       1.07
                                                        ============     ============     ============     ============
  Net income per share - diluted                        $        .73     $        .50     $       1.27     $       1.01
                                                        ============     ============     ============     ============


See notes to consolidated financial statements

</TABLE>


             GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
               Consolidated Statement of Stockholders' Equity
                               (In thousands)
                                (Unaudited)

                                                       Additional                 Minimum    Unamortized                  Total    
                                           Common       Paid-In    Accumulated    Pension    Stock Plan    Treasury    Stockholders'
                                           Stock        Capital      Deficit     Liability     Expense       Stock        Equity
                                         -----------  -----------  -----------  -----------  -----------  -----------  -----------
<S>                                      <C>          <C>          <C>          <C>          <C>          <C>          <C>        
BALANCE AS OF DECEMBER 31, 1997                 $865     $370,258    $(225,960)       $(762)     $(1,155)    $(50,489)     $92,757
Net income                                                              96,058                                              96,058
Amortization of stock plan expense                                                                                823          823
Exercise of common stock options with
    the Offering, net of expenses                 26       24,751                                               2,044       26,821
Tax benefit of exercised common stock
options                                                    40,033                                                           40,033
Exercise of common stock options                   7        2,111                                                            2,118
Purchase of treasury stock                                                                                   (148,805)    (148,805)
                                         -----------  -----------  -----------  -----------  -----------  -----------  -----------


BALANCE AS OF JUNE 30, 1998                     $898     $437,153    $(129,902)       $(762)       $(332)   $(197,250) $   109,805
                                         ===========  ===========  ===========  ===========  ===========  ===========  ===========

</TABLE>


See notes to consolidated financial statements


             GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES


                   Consolidated Statements of Cash Flows
                               (In thousands)
                                (Unaudited)

                                                          Six months ended
                                                              June 30,
                                                    ---------------------------
                                                        1998           1997
                                                    -----------     -----------
Cash Flows from Operating Activities
Net income                                          $    96,058     $    79,534
Adjustments to reconcile net income to net
  cash provided by operating activities:
  Depreciation and amortization                          16,354          15,901
  Postretirement benefit cost                             3,108           3,408
  Non-cash stock option compensation expense                823             985
  Deferred income tax benefit                            29,072
  Other, net                                                 46              21
  Change in assets and liabilities:
     Accounts receivable                                 11,993          31,842
     Inventories                                       (117,887)         45,402
     Prepaids, other assets, and deferred charges         3,968          (3,904)
     Accounts payable and accrued liabilities            74,951           2,039
     Customer deposits                                   (1,468)       (146,357)
     Other long-term liabilities                           (893)           (603)
                                                    -----------     -----------
Net Cash Provided by Operating Activities               116,125          28,268

Cash Flows from Investing Activities
Expenditures for property and equipment                 (10,184)         (4,734)
Expenditures for tooling                                   (346)         (1,378)
Proceeds from sales of assets                               835
                                                    -----------     -----------
Net Cash Used in Investing Activities                    (9,695)         (6,112)

Cash Flows from Financing Activities
Proceeds from exercise of common stock options           28,939             649
Principal payment of long-term debt                     (37,500)         (6,667)
Purchase of treasury stock                             (148,805)
                                                    -----------     -----------
Net Cash Used in Financing Activities                  (157,366)         (6,018)
                                                    -----------     -----------
Decrease in cash and cash equivalents                   (50,936)         16,138
Cash and cash equivalents, beginning of period          306,451         233,172
                                                    ===========     ===========
Cash and cash equivalents, end of period            $   255,515     $   249,310
                                                    ===========     ===========



See notes to consolidated financial statements



             GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1. Basis of Presentation

     The accompanying unaudited consolidated financial statements have been
prepared  by the  Company  pursuant  to the  rules  of the  Securities  and
Exchange Commission ("SEC") and, in the opinion of the Company, include all
adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of financial  position,  results of operations and cash
flows.  Certain information and footnote  disclosures  normally included in
financial   statements  prepared  in  accordance  with  generally  accepted
accounting principles have been condensed or omitted pursuant to SEC rules.
The operating  results for the three and six months ended June 30, 1998 are
not  necessarily  indicative  of the results to be expected  for the entire
year ended December 31, 1998. These financial  statements should be read in
conjunction  with the consolidated  financial  statements and notes thereto
for the year ended  December 31, 1997 included in the Company's 1997 Annual
Report to Stockholders.

NOTE 2. Earnings per Share

     Basic  earnings per share were  computed by dividing net income by the
weighted average common shares  outstanding  during the periods  presented.
Diluted  earnings  per share were  computed by  dividing  net income by the
weighted average common shares and potential common shares outstanding. The
Company adopted Financial Accounting Standards Board SFAS No. 128, Earnings
per Share, effective December 15, 1997. As a result, all earnings per share
information  for  prior  periods  have  been  restated  to  conform  to the
requirements of SFAS No. 128.

     The following table sets forth the reconciliation of per share data as
of:

                                Three months ended     Six months ended
                                     June 30,              June 30,
                               --------------------  --------------------
                                  1998       1997       1998      1997
                               ---------  ---------  ---------  ---------


Net Income                     $ 55,577   $ 39,504   $ 96,058   $ 79,534
                               =========  =========  =========  =========

Basic EPS
Weighted average common
shares outstanding               73,821     74,068     73,177     73,994
                               ---------  ---------  ---------  ---------

Diluted EPS
Incremental shares from stock
options                           2,106      4,651      2,462      4,644
                               ---------  ---------  ---------  ---------

Weighted average common and
common equivalent shares
outstanding                      75,927     78,719     75,639     78,638
                               =========  =========  =========  =========

Earnings Per Share:
  Net income per share -
   basic                       $    .75   $   .53    $   1.31   $   1.07
                               =========  =========  =========  =========
  Net income per share -
   diluted                     $   .73    $   .50    $   1.27   $   1.01
                               =========  =========  =========  =========



             GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     On a pro forma basis,  assuming an effective tax rate of 37.5% for the
1997  periods,  the  Company's  basic and diluted  earnings per share is as
follows:


                                Three months ended     Six months ended
                                     June 30,              June 30,
                               --------------------  --------------------
                                  1998       1997       1998      1997
                               ---------  ---------  ---------  ---------

Pro forma Earnings Per Share:
  Net income per share -
   basic                       $    .75   $    .34   $   1.31   $    .69
                               =========  =========  =========  =========
  Net income per share -
   diluted                     $    .73   $    .32   $   1.27   $    .65
                               =========  =========  =========  =========



NOTE 3. Inventories

     Inventories consisted of the following at:

                               June 30,           December 31,
                                 1998                 1997
                            ---------------     ---------------
                                       (In thousands)
Work in process             $   376,712         $    330,155
Raw materials                   154,140              134,973
Vendor progress payments         74,949               60,606
Pre-owned aircraft              141,327              104,142
                            ---------------     ---------------
                            $   747,128         $    629,876
                            ===============     ===============



NOTE 4. Income Taxes

     In the quarter and six month period  ended June 30, 1998,  the Company
recorded  income  tax  provisions  of  $32.1  million  and  $56.4  million,
respectively, based on an estimated annual effective tax rate of 37.0% and,
in the  quarter  and six month  period  ended  June 30,  1997,  recorded  a
provision for alternative  minimum taxes of approximately  $0.5 million and
$2.5  million,  respectively.  Prior to  September  30,  1997,  the Company
recorded no provision  for income  taxes,  other than  alternative  minimum
taxes,  principally  as a  result  of  utilization  of net  operating  loss
carryforwards.

NOTE 5. Commitments and Contingencies

     In the normal  course of business,  lawsuits,  claims and  proceedings
have been or may be instituted or asserted  against the Company relating to
various  matters,  including  products  liability.  Although the outcome of
litigation cannot be predicted with certainty and some lawsuits,  claims or
proceedings  may be disposed of unfavorably to the Company,  management has
made provision for all known probable losses related to lawsuits and claims
and  believes  that the  disposition  of all  matters  which are pending or
asserted  will  not  have  a  material  adverse  effect  on  the  financial
statements of the Company.



             GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     The Company is involved in tax audits by the Internal  Revenue Service
covering the years 1990 through 1994. The revenue  agent's  reports include
several  proposed  adjustments   involving  the  deductibility  of  certain
compensation expense,  items relating to the initial  capitalization of the
Company,  the allocation of the original purchase price for the acquisition
by the Company of the  Gulfstream  business,  including  the  treatment  of
advance  payments  with  respect to and the cost of  aircraft  that were in
backlog at the time of the  acquisition,  and the  amortization  of amounts
allocated to  intangible  assets.  The Company  believes  that the ultimate
resolution of these issues will not have a material  adverse  effect on its
financial  statements because the financial statements already reflect what
the Company currently believes is the expected loss of benefit arising from
the resolution of these issues.

     The  Company is  currently  engaged in the  monitoring  and cleanup of
certain  ground water at its Savannah  facility  under the oversight of the
Georgia Department of Natural Resources. Expenses incurred for cleanup have
not  been   significant.   Liabilities  are  recorded  when   environmental
assessments  and/or  remedial  efforts  are  probable  and the costs can be
reasonably  estimated.  The Company  believes the remainder of the Savannah
facility,  as well as other  Gulfstream  properties,  are  being  carefully
monitored and are in substantial compliance with current federal, state and
local environmental regulations.  The Company believes the liabilities,  if
any, that will result from the above environmental  matters will not have a
material adverse effect on its financial statements.

NOTE 6. Common Stock Repurchases

     During January 1998, the Company  announced a program to repurchase up
to $200 million of its common stock.  The repurchase has, and will continue
to be funded from the Company's  available  cash. As of June 30, 1998,  the
Company had repurchased  approximately  4.2 million  shares,  at an average
price of $35.41 per share, for an aggregate  amount of  approximately  $150
million.

NOTE 7. Change in Accounting Principles

     Effective  January 1, 1998, the Company adopted Statement of Financial
Accounting  Standards  No.  130,  Reporting   Comprehensive   Income.  This
Statement  requires  disclosure of total nonowner  changes in stockholders'
equity,  which is defined as net income plus certain direct  adjustments to
stockholders' equity such as pension liability  adjustments.  For the three
and  six  month  periods  of  1998  and  1997,  the  Company  had  no  such
adjustments.

NOTE 8. New Accounting Standard

     In June 1997, the Financial Accounting Standards Board issued SFAS No.
131,  Disclosures about Segments of an Enterprise and Related  Information,
which is effective no later than for the  Company's  1998 fiscal  year-end.
Management  believes  that the adoption of this  statement  will not have a
material effect on the Company's consolidated financial statements.

NOTE 9. Subsequent Event

     On July 23, 1998, the Company  entered into a definitive  agreement to
acquire  K-C  Aviation,  Inc.,  a leading  provider  of  business  aviation
services,  from  Kimberly-Clark  Corporation  for a purchase  price of $250
million in cash. The acquisition is subject to regulatory  approvals and is
expected to be completed in the third quarter of 1998. The Company plans to
finance the transaction with available cash on hand. The bank group for the
Company's  credit  facility  has  approved an  amendment  that  permits the
Company to consummate the acquisition.



                    MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


     The following  discussion should be read in conjunction with the Notes
to  Consolidated   Financial  Statements  beginning  on  page  7  and  with
Management's  Discussion and Analysis of Financial Condition and Results of
Operations  (MD&A) and the audited  consolidated  financial  statements and
notes to consolidated  financial statements appearing in the Company's 1997
Annual Report to Stockholders.

Comparison  of Results of  Operations  for the Quarter and Six Months Ended
June 30, 1998 and 1997

     Net Revenues.  Total net revenues increased by $34.1 million, or 6.5%,
to $557.0  million in the second quarter of 1998 from $522.9 million in the
second quarter of 1997. The increase resulted primarily from an increase in
revenues from green  aircraft of $79.3 million as the Company  delivered 15
aircraft, seven Gulfstream Vs and eight Gulfstream IV-SPs, as compared with
12 aircraft,  seven Gulfstream Vs and five Gulfstream IV-SPs, in the second
quarter  of 1997.  In  addition,  completion  revenues  increased  by $21.1
million  reflecting nine  completions  delivered  during the second quarter
compared with only five delivered in the comparable 1997 period.  Partially
offsetting  this  increase was a decrease in revenues  associated  with the
sale of  pre-owned  aircraft  of $69.9  million  as five  fewer  units were
delivered  in the second  quarter of 1998 as compared to the same period in
1997.  During  the six  months  ended  June 30,  1998,  total net  revenues
increased  by $161.9  million,  or 18.0%,  to $1,060.4  million from $898.5
million for the six months  ended June 30,  1997.  For the six months ended
June 30, 1998,  Gulfstream delivered 28 new aircraft,  14 Gulfstream Vs and
14 Gulfstream  IV-SPs,  up from 23 new  aircraft,  13 Gulfstream Vs and ten
Gulfstream  IV-SPs in the same  period of 1997.  Also  contributing  to the
increase  in  revenues  was an  increase  in  completion  revenues of $35.0
million, resulting from six additional completion deliveries in 1998.

     Cost of Sales.  Total cost of sales decreased to $431.2 million in the
second  quarter of 1998 from $446.9  million in the second quarter of 1997,
and increased $83.2 million to $835.3 million for the six months ended June
30,  1998 from  $752.0  million  for the six months  ended  June 30,  1997.
Excluding  pre-owned  aircraft,  which  generally  are  sold at  break-even
levels,  the gross  profit  percentage  for the second  quarter of 1998 was
24.0%  compared  to 18.2% for the second  quarter of 1997,  and for the six
months ended June 30, 1998, the gross profit  percentage was 23.1% compared
to 19.0% for the comparable  period in 1997.  This increase in gross profit
percentages  is  primarily  attributable  to  reductions  in  Gulfstream  V
aircraft production costs.

     Selling and Administrative Expense. Selling and administrative expense
increased by $6.6 million,  or 28.7% to $29.6 million in the second quarter
of 1998  from  $23.0  million  in the  second  quarter  of  1997,  and as a
percentage of net revenues, increased to 5.3% in the second quarter of 1998
from 4.4% in the second  quarter of 1997. For the six months ended June 30,
1998, selling and  administrative  expense was $55.5 million as compared to
$45.6 million for the six months ended June 30, 1997. The principal drivers
for the  increase  for both the  quarter  and the six months is  additional
sales and marketing  expenses  associated with the increased sales activity
and the business  systems which are being  implemented  in 1998 and 1999 to
support the production increases described elsewhere herein.

     Research and Development Expense. Research and development expense was
$2.3 million in the second  quarter of 1998, as compared to $5.3 million in
the second  quarter of 1997.  For the six month period ended June 30, 1998,
research and development  expense was $4.2 million compared to $3.8 million
for the corresponding  period in 1997. Research and development expense for
the six months  ended June 30,  1997 is net of a $10.0  million  credit for
launch  assistance  funds  received  from  vendors   participating  in  the
development of the Gulfstream V. Research and  development  expenditures in
1998 and the near-term future are expected to stem principally from product
improvements and enhancements, rather than new aircraft development.

     Interest Income and Expense. Interest income increased by $0.3 million
to $2.5  million  in the second  quarter  of 1998 from $2.2  million in the
second  quarter of 1997 as a result of higher  average  cash  balances  the
Company  had  invested  during  1998  compared  to the same period of 1997.
Interest  expense  decreased by $1.2 million to $6.4 million for the second
quarter  of 1998 and by $2.4  million to $13.4  million  for the six months
ended June 30, 1998,  respectively,  over the  comparable  periods in 1997.
This decrease is attributable to both a decrease in average  borrowings and
lower weighted average interest rates.

     Income  Taxes.  The Company  recorded an income tax provision of $32.1
million  in the  second  quarter  of  1998  based  on an  estimated  annual
effective  tax rate of 37.0%  compared  with a provision of income taxes of
$0.5 million, representing alternative minimum taxes, in the second quarter
1997.  Prior to September 30, 1997,  the Company  recorded no provision for
income taxes, other than alternative minimum taxes, principally as a result
of  utilization  of net  operating  loss  carryforwards.  The Company's net
operating  loss  carryforward  for regular  federal income tax purposes was
fully utilized during the second quarter 1998.

     Earnings Per Share. The Company reported diluted earnings per share of
$0.73 for the second  quarter of 1998, up from $0.50 for the second quarter
of 1997. On a pro forma fully - taxed basis,  and assuming an effective tax
rate of 37.5% for the 1997 periods,  comparable  diluted earnings per share
would have been $0.32 for the second quarter of 1997.

Liquidity and Capital Resources

     The Company's liquidity needs arise from working capital requirements,
capital expenditures, principal and interest payments on long-term debt and
the Company's share repurchase  program  described  herein.  During the six
months  ended June 30,  1998,  the  Company  relied on its  available  cash
balances to fund these needs.

     The Company had cash and cash  equivalents  totaling $255.5 million at
June 30, 1998 down from $306.5  million at December  31,  1997.  In January
1998, the Company established a program to repurchase up to $200 million of
its common stock.  The purchases will be made from time to time in the open
market or through negotiated transactions as market conditions warrant. The
Company has, and expects to continue to fund the stock  purchases from cash
on hand.  As of June 30,  1998,  approximately  4.2 million  shares,  at an
average price of $35.41 per share, had been repurchased under this plan for
an aggregate amount of approximately $150 million.

     During  the six months  ended  June 30,  1998,  net cash  provided  by
operating  activities was $116.1 million compared with the six months ended
June 30,  1997  when the  Company  generated  $28.3  million  in cash  from
operations. This increase is attributable to the higher inflows of deposits
and progress  payments  associated  with aircraft in the backlog during the
1998 period,  offset somewhat by increased inventory levels associated with
the  Company's  ongoing plans to increase its new aircraft  production  and
completion levels.

     During the six months ended 1998,  additions to property and equipment
amounted to $10.5 million.  At June 30, 1998, the Company was not committed
to the purchase of any significant  amount of property and equipment.  As a
result  of the  Company's  strategic  initiative  to  increase  its  annual
production  rate to  approximately  64  aircraft  by  1999,  in  1997,  the
Company's planned capital expenditures  increased $15 million, and in 1998,
are  expected  to  increase by  approximately  another  $20  million  above
previously planned annual levels of approximately $15 million.  The Company
continually  monitors  its  capital  spending  in  relation  to current and
anticipated business needs. As circumstances dictate, facilities are added,
consolidated or modernized.

     In May 1998,  the Company  completed the sale of 18,000,000  shares of
common stock in a secondary offering (the "Offering").  The Company did not
receive any of the  proceeds  from the sale of shares in the  Offering.  In
connection  with the  Offering,  certain  current and former  directors and
employees  of, and  advisors  to, the Company  exercised  stock  options to
purchase,  in the  aggregate,  approximately  2.9 million  shares of common
stock from the Company for an  aggregate  exercise  price of  approximately
$26.8  million,  after  deducting  issuance  costs.  The  Company  used the
proceeds from these exercises for working capital purposes.

     At June 30, 1998,  borrowings  under the Company's  credit  facilities
were $342.5  million,  with available  borrowings of $173.3 million under a
revolving credit facility.  Scheduled  repayments  remaining under the term
facility are $37.5  million in 1998 and $75.0  million in each of the years
1999 through 2001, and $80.0 million in 2002. The Credit Agreement contains
customary affirmative and negative covenants including  restrictions on the
ability of the Company and its subsidiaries to pay cash dividends,  as well
as financial covenants under which the Company must operate. As of June 30,
1998,  the Company was in  compliance  with the  covenants  of its existing
credit agreement.

     The Company's  principal  source of liquidity both on a short-term and
long-term  basis is cash flow provided by  operations,  including  customer
progress  payments  and  deposits  on new  aircraft  orders.  Occasionally,
however,  the Company may borrow against the credit agreement to supplement
cash flow  from  operations.  The  Company  believes  that  based  upon its
analysis of its consolidated  financial position,  its cash flow during the
past 12 months  and the  expected  results  of  operations  in the  future,
operating  cash flow and available  borrowings  under the credit  agreement
will be adequate to fund operations, capital expenditures, debt service and
the transaction  described below under Recent Developments for at least the
next 12 months.  The Company  intends to repay its  remaining  indebtedness
primarily  with  cash  flow from  operations.  There  can be no  assurance,
however,  that future industry  specific  developments or general  economic
trends will not adversely affect the Company's operations or its ability to
meet its cash requirements.

     As of June 30, 1998,  in  connection  with orders for 23  Gulfstream V
aircraft in the backlog, the Company has offered customers trade-in options
(which may or may not be exercised by the customer) under which the Company
will accept trade-in  aircraft  (primarily  Gulfstream IVs and IV-SPs) at a
guaranteed  minimum  trade-in  price.  Additionally,   in  connection  with
recorded sales of new aircraft,  the Company has agreed to accept pre-owned
aircraft with trade-in  values totaling $202.0 million as of June 30, 1998.
Of this  amount,  $8.6  million is under  contract  for resale to pre-owned
aircraft  customers.  Management believes that the fair market value of all
such aircraft exceeds the specified trade-in value.

     On December 24, 1997, the Company  executed  final  documents with the
Pension Benefit Guaranty Corporation (the "PBGC") concerning funding of the
Company's  defined  benefit pension plans.  The terms were  essentially the
same as those set out in the  agreement  in principle  reached  between the
PBGC and the Company during October 1996.  Pursuant to this agreement,  the
Company  contributed  $12.5 million for the six months ended June 30, 1998,
and has agreed to contribute a total of $25.0 million  annually (to be paid
quarterly  in equal  installments)  from 1999  through  2000 to its pension
plans  which  payments  are  expected  to result in such plans  being fully
funded.  The payments to be made under this  agreement were already part of
the Company's overall financial planning,  and therefore,  are not expected
to have a material  adverse effect on the Company's  financial  statements.
The funding  required  under this agreement will not result in any increase
in the Company's annual pension expense.

Contractual Backlog

     At  June  30,  1998,   Gulfstream  had  a  firm  contract  backlog  of
approximately  $2.9  billion  of  revenues,  representing  a  total  of  90
aircraft.  The Company includes an order in backlog only if the Company has
entered into a purchase contract (with no contingencies)  with the customer
and has received a significant (generally  non-refundable) deposit from the
customer.

     During the quarter  ended March 31,  1998,  the Company  also signed a
contract  for  12  Gulfstream   IV-SPs  to  expand  its  highly  successful
Gulfstream Shares  fractional  ownership program to the Middle East region.
This contract is valued at  approximately  $335 million and is not included
in the Company's backlog.  In 1993, the Company  established very stringent
deposit  requirements for recording aircraft into its backlog. The contract
for the Middle East Shares expansion  includes  modestly  different deposit
requirements early in the program.  The Company has decided for the initial
phase  of the  program  to  record  these  orders  when  the  aircraft  are
delivered.  Including the Middle East contract,  the Company has a total of
102  aircraft,  valued at  approximately  $3.2 billion of potential  future
revenues, under contract at June 30, 1998.

     The Company  continually  monitors  the  condition  of its backlog and
believes,  based  on  the  nature  of  its  customers  and  its  historical
experience,  that there will not be a significant  number of cancellations.
However,  to the extent  that there is a lengthy  period of time  between a
customer's  aircraft  order and its delivery  date,  there may be increased
uncertainty  as to changes in business  and economic  conditions  which may
affect customer cancellations.

Outlook

     The Company  plans to deliver 58 green  aircraft in fiscal 1998 and 64
in fiscal  1999,  and  completions  are  expected to nearly  double in 1998
compared to 1997.  The gross  margins are  expected to improve  from 20% in
1997 to the mid-20s by the end of 1998.  Based on projections of increasing
aircraft production and improving margins,  Gulfstream expects 1998 diluted
earnings per share of approximately $2.85. The Company also expects diluted
earnings per share to increase 15% per year in 1999 and 2000.

Recent Development

     On July 23, 1998, the Company  entered into a definitive  agreement to
acquire  K-C  Aviation,  Inc.,  a leading  provider  of  business  aviation
services,  from  Kimberly-Clark  Corporation  for a purchase  price of $250
million in cash. The acquisition is subject to regulatory  approvals and is
expected to be completed in the third quarter of 1998. The Company plans to
finance the transaction with available cash on hand. The bank group for the
Company's  credit  facility  has  approved an  amendment  that  permits the
Company to consummate the acquisition.

Forward-Looking Information Is Subject to Risk and Uncertainty

     Certain  statements  contained in this  "Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations",  including the
statements  under  the  heading  "Outlook",  as  well as  other  statements
elsewhere in this Form 10-Q,  contain  forward-looking  information.  These
forward-looking  statements are subject to risks and uncertainties.  Actual
results might differ materially from those projected in the forward-looking
statements.  Additional  information  concerning  factors  that could cause
actual  results to  materially  differ  from  those in the  forward-looking
statements is contained in Exhibit 99.1 to this Form 10-Q.



                         PART II. OTHER INFORMATION


Item 1.   Legal Proceedings

          Not Applicable.

Item 2.   Changes in Securities

          Not Applicable.

Item 3.   Defaults Upon Senior Securities

          Not Applicable.

Item 4.   Submission of Matters to a Vote of Security Holders

          The Company held its Annual  Meeting of  Stockholders  on May 14,
          1998. The following matters were voted upon:

          Proposal 1:  Election of Directors.  The following  nominees were
          elected to serve as Class II Directors  of the Company,  to serve
          until the annual meeting of  stockholders in 2001 and until their
          successors are elected and qualified, by the following vote:

             Nominee              Votes For            Votes Withheld
             -------              ---------            --------------

          W. W. Boisture, Jr.     65,420,007             1,359,432
          Sandra J. Horbach       66,295,630               483,809
          Henry A. Kissinger      66,070,566               708,873
          Michael S. Ovitz        66,391,854               387,585
          Allen E. Paulson        66,281,912               497,527
          Colin L. Powell         66,293,800               485,639
          George P. Shultz        58,646,876             8,132,563

          The  following  directors  have terms that extend beyond the 1998
          Annual Meeting of Stockholders:

          Terms Expiring 1999:           Terms Expiring 2000:
          --------------------           --------------------

            Robert Anderson               Charlotte L. Beers
            Lynn Forester                 Thomas D. Bell, Jr.
            Theodore J. Forstmann         Chris A. Davis
            James T. Johnson              Nicholas C. Forstmann
            Drew Lewis                    Bryan T. Moss
            Mark H. McCarmack             Roger S. Penske
            Gerard R. Roche               Donald H. Rumsfeld
            Robert S. Strauss



          Proposal  2:   Ratification  of  Appointment  of  Auditors.   The
          appointment  of Deloitte & Touche LLP to serve as auditors of the
          Company for 1998 was ratified by the following vote:

            Votes For           Votes Against          Abstentions
            ---------           -------------          -----------
           66,760,683               6,757                 11,999



Item 5.   Other Information

          Certain  statements  contained in or incorporated by reference in
          this  Form  10-Q  contain  forward-looking   information.   These
          forward-looking    statements    are   subject   to   risks   and
          uncertainties.  Actual results might differ materially from those
          projected   in   the   forward-looking   statements.   Additional
          information concerning factors that could cause actual results to
          materially  differ from those  contained  in the  forward-looking
          statements is contained in Exhibit 99.1, Cautionary Statement for
          Purposes  of  the  "Safe   Harbor"   Provisions  of  the  Private
          Securities Litigation Reform Act of 1995.

Item 6.   Exhibits and Reports on Form 8-K

     (a)  Exhibits

          Exhibit 2.1        Agreement  of Purchase  and Sale,  dated as of
                             July 23,  1998 by and  between  Kimberly-Clark
                             Corporation    and    Gulfstream     Aerospace
                             Corporation.

          Exhibit 10.32      Amendment   dated  July  15,  1998  to  Credit
                             Agreement    among     Gulfstream     Delaware
                             Corporation, The Chase Manhattan Bank, and the
                             banks and other financial institutions parties
                             thereto.

          Exhibit 27.1       Financial Data Schedule.

          Exhibit 99.1       Cautionary  Statement  for  Purposes  of
                             the  "Safe  Harbor"  Provisions  of  The
                             Private  Securities   Litigation  Reform
                             Act of 1995.

          Exhibit 99.2       Press Release dated July 24, 1998.

     (b)  Report on Form 8-K

          On  April  16,  1998 the  Company  filed a  report  on Form  8-K,
          reporting   under  Items  5  and  7,   disclosing  the  Company's
          Cautionary Statement for Purposes of the "Safe Harbor" Provisions
          of the Private Securities  Litigation Reform Act of 1995, and the
          Press Release  issued April 16, 1998  pertaining to the Company's
          first quarter 1998 financial results.



                                 SIGNATURE

Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.


Dated: July 24, 1998



                                    GULFSTREAM AEROSPACE CORPORATION


                                         /s/ Chris A. Davis
                                     -----------------------------
                                            Chris A. Davis
                                       Executive Vice President,
                                      Chief Financial Officer and
                                               Secretary
                                       (Principal Financial and
                                          Accounting Officer)



                               EXHIBIT INDEX


Exhibits

           Exhibit 2.1        Agreement of Purchase and Sale,  dated as
                              of   July   23,    1998   by   and    between
                              Kimberly-Clark   Corporation  and  Gulfstream
                              Aerospace Corporation.

           Exhibit 10.32      Amendment dated July 15, 1998 to Credit
                              Agreement    among    Gulfstream     Delaware
                              Corporation,  The Chase  Manhattan  Bank, and
                              the banks and  other  financial  institutions
                              parties thereto.

           Exhibit 27.1       Financial Data Schedule.

           Exhibit 99.1       Cautionary  Statement  for  Purposes  of
                              the  "Safe  Harbor"  Provisions  of  The
                              Private  Securities   Litigation  Reform
                              Act of 1995.

           Exhibit 99.2       Press Release dated July 24, 1998.