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


                               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 SEPTEMBER 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 October 30, 1998,  there were  72,513,424  shares of  Gulfstream
Aerospace Corporation Common Stock outstanding.

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<PAGE>


             GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES

                                   INDEX


                       PART I. FINANCIAL INFORMATION


                                                                   PAGE NO.
                                                                   --------

ITEM 1.     CONSOLIDATED FINANCIAL STATEMENTS:

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

               Consolidated Statements of Income
                Three and nine months ended September 30, 1998
                and 1997..........................................    4

               Consolidated Statement of Stockholders' Equity
                Nine months ended September 30, 1998..............    5

               Consolidated Statements of Cash Flows
                Nine months ended September 30, 1998 and
                1997..............................................    6

               Notes to Consolidated Financial Statements......... 7-10


ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS                11-15


                         PART II. OTHER INFORMATION


ITEM 1.     LEGAL PROCEEDINGS.....................................   16

ITEM 2.     CHANGES IN
               SECURITIES.........................................   16

ITEM 3.     DEFAULTS UPON SENIOR
               SECURITIES.........................................   16

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY
               HOLDERS............................................   16

ITEM 5.     OTHER INFORMATION.....................................   16

ITEM 6.     EXHIBITS AND REPORTS ON FORM
               8-K................................................16-17

            SIGNATURE.............................................   18


<PAGE>


             GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES

                        CONSOLIDATED BALANCE SHEETS
                     (In thousands, except share data)
                                (Unaudited)


                                                   SEPTEMBER 30,  DECEMBER 31,
                                                       1998           1997
                                                   -------------  -------------
ASSETS

Cash and cash equivalents                          $      10,552  $     306,451
Accounts  receivable  (less  allowance
  for  doubtful accounts:
  $2,596 and $1,144)                                     227,809        177,228
Inventories                                              771,610        629,876
Deferred income taxe                                      28,983         33,795
Prepaids and other assets                                  7,360         11,318
                                                   -------------  -------------
    Total current assets                               1,046,314      1,158,668

Property and equipment, net                              161,145        134,611
Tooling,  net of  accumulated  amortization:
  $13,140 and $7,680                                      38,378         43,471
Goodwill,  net of  accumulated  amortization:
  $9,878 and $8,433                                      215,267         38,957
Other intangible assets, net                              47,235         50,485
Deferred income taxes                                     28,800         32,950
Other assets and deferred charges                         14,680         14,525
                                                   -------------  -------------

Total Assets                                       $   1,551,819  $   1,473,667
                                                   =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt                  $      75,000  $      75,000
Accounts payable                                         195,494        147,618
Accrued liabilities                                      145,958         93,798
Customer deposits -- current portion                     499,331        546,441
                                                   -------------  -------------
    Total current liabilities                            915,783        862,857
Long-term debt                                           298,750        305,000
Accrued postretirement benefit cost                      127,076        115,405
Customer deposits -- long-term                            77,825         88,075
Other long-term liabilities                                7,102          9,573
Commitments and contingencies
Stockholders' equity
  Common stock; $.01 par value; 300,000,000
  shares authorized; 89,797,155 shares issued
  in 1998 and  86,522,089 shares issued in 1997              898            865
Additional paid-in capital                               437,488        370,258
Accumulated deficit                                      (65,181)      (225,960)
Minimum pension liability                                   (762)          (762)
Unamortized stock plan expense                              (248)        (1,155)
Less:  Treasury stock:  17,283,731 shares in
  1998 and 11,978,439 shares in 1997                    (246,912)       (50,489)
                                                   -------------  -------------
    Total stockholders' equity                           125,283         92,757
                                                   -------------  -------------

Total Liabilities and Stockholders' Equity         $   1,551,819  $  1,473,667
                                                   =============  =============


See notes to consolidated financial statements


<PAGE>

<TABLE>
<CAPTION>

             GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF INCOME
                   (In thousands, except per share data)
                                (Unaudited)


                                        THREE MONTHS ENDED       NINE MONTHS ENDED
                                           SEPTEMBER 30,            SEPTEMBER 30,
                                      ----------------------  ----------------------
                                         1998        1997        1998        1997
                                      ----------  ----------  ----------  ----------
<S>                                   <C>         <C>         <C>         <C>       
Net revenues                          $  626,177  $  464,036  $1,686,626  $1,362,568
Cost and expenses
  Cost of sales                          487,361     372,983   1,322,655   1,125,031
  Selling and administrative              29,882      23,920      85,399      69,517
  Stock option compensation expense           84         329         907       1,314
  Research and development                 2,746       4,305       6,950       8,079                                      
  Amortization of intangibles and
  deferred charges                         2,428       1,831       6,186       5,477
                                      ----------  ----------  ----------  ----------
   Total costs and expenses           $  522,501  $  403,368  $1,422,097  $1,209,418
                                      ----------  ----------  ----------  ----------
Income from operations                   103,676      60,668     264,529     153,150
Interest income                            2,033       2,839       7,087       8,201
Interest expense                          (6,965)     (7,495)    (20,399)    (23,305)
                                      ----------  ----------  ----------  ----------
Income before income taxes                98,744      56,012     251,217     138,046
Income tax expense (benefit)              34,023     (63,076)     90,438     (60,576)
                                      ----------  ----------  ----------  ----------
Net income                            $   64,721  $  119,088  $  160,779  $  198,622
                                      ==========  ==========  ==========  ==========

Earnings per share:
  Net income per share - basic        $      .88  $     1.61  $     2.19  $     2.68
                                      ==========  ==========  ==========  ==========

  Net income per share - diluted      $      .86  $     1.54  $     2.13  $     2.54
                                      ==========  ==========  ==========  ==========

See notes to consolidated financial statements

</TABLE>


<PAGE>


<TABLE>
<CAPTION>

             GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES

               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                                                    160,779                                         160,779
Amortization of stock plan
  expense                                                                                 907                     907
Exercise of common stock
options with the Offering,
  net of expenses                          26      25,051                                           2,044      27,121
Tax benefit of exercised
 common stock options                              40,033                                                      40,033
Exercise of common stock options            7       2,146                                                       2,153
Purchase of treasury stock                                                                       (198,467)   (198,467)
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------

BALANCE AS OF SEPTEMBER 30, 1998   $      898  $  437,488  $  (65,181) $     (762) $     (248) $ (246,912) $  125,283
                                   ==========  ==========  ==========  ==========  ==========  ==========  ==========


     See notes to consolidated financial statements


</TABLE>


<PAGE>


             GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In thousands)
                                (Unaudited)


                                                         NINE MONTHS ENDED
                                                           SEPTEMBER 30,
                                                   ----------------------------
                                                        1998           1997
                                                   -------------  -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                         $    160,779   $    198,622
Adjustments to reconcile net income to net
  cash provided by operating activities:
  Depreciation and amortization                          25,176         24,342
  Postretirement benefit cost                             5,060          5,140
  Provision for loss on pre-owned aircraft                              (1,100)
  Non-cash stock option compensation expense                907          1,314
  Other acquisition related non-cash items                3,880
  Deferred income taxes                                  48,995        (64,801)
  Other, net                                                677            712
  Change in assets and liabilities,  excluding
     effect of acquisition:
   Accounts receivable                                  (10,985)         7,986
   Inventories                                          (93,791)         2,151
   Prepaids, other assets, and deferred charges           4,822         (2,640)
   Accounts payable and accrued liabilities              83,021         (3,942)
   Customer deposits                                    (78,448)      (134,753)
   Other long-term liabilities                           (2,471)           615
                                                   -------------  -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES               147,622         33,646

CASH FLOWS FROM INVESTING ACTIVITIES
Payment for business acquired                          (251,087)
Investment in unconsolidated affiliate                   (1,260)
Expenditures for property and equipment                 (16,089)        (9,619)
Expenditures for tooling                                   (477)        (2,613)
Proceeds from sales of assets                               835
                                                   -------------  -------------
NET CASH USED IN INVESTING ACTIVITIES                  (268,078)       (12,232)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of common stock options           29,274            888
Net borrowings under revolving credit loans              50,000
Principal payments on long-term debt                    (56,250)       (13,333)
Purchase of treasury stock                             (198,467)
                                                   -------------  -------------
NET CASH USED IN FINANCING ACTIVITIES                  (175,443)       (12,445)
                                                   -------------  -------------
(Decrease) increase in cash and cash equivalents       (295,899)         8,969
Cash and cash equivalents, beginning of period          306,451        233,172
                                                   =============  =============
Cash and cash equivalents, end of period           $     10,552   $    242,141
                                                   =============  =============


     See notes to consolidated financial statements


<PAGE>


             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 nine months ended  September  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.

<TABLE>
<CAPTION>

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

                                        THREE MONTHS ENDED      NINE MONTHS ENDED
                                           SEPTEMBER 30,           SEPTEMBER 30,
                                      ----------------------  ----------------------
                                         1998        1997        1998        1997
                                      ----------  ----------  ----------  ----------
<S>                                   <C>         <C>         <C>         <C>       
Net Income                            $   64,721  $  119,088  $  160,779  $  198,622
                                      ==========  ==========  ==========  ==========
BASIC EPS
Weighted average common shares
  shares outstanding                      73,454      74,119      73,269      74,036
                                      ----------  ----------  ----------  ----------
DILUTED EPS
Incremental shares from stock
  options                                  1,392       2,986       2,106       4,091
                                      ----------  ----------  ----------  ----------
Weighted average common and
  common equivalent shares
  outstanding                             74,846      77,105      75,375      78,127
                                      ==========  ==========  ==========  ==========
EARNINGS PER SHARE:
  Net income per share - basic        $      .88  $     1.61  $     2.19  $     2.68
                                      ==========  ==========  ==========  ==========
  Net income per share - diluted      $      .86  $     1.54  $     2.13  $     2.54
                                      ==========  ==========  ==========  ==========

</TABLE>


<PAGE>


             GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>

     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      NINE MONTHS ENDED
                                            SEPTEMBER 30,           SEPTEMBER 30,
                                      ----------------------  ----------------------
                                         1998        1997        1998        1997
                                      ----------  ----------  ----------  ----------
<S>                                   <C>         <C>         <C>         <C>       
PRO FORMA EARNINGS PER SHARE:
  Net income per share - basic        $      .88  $      .47  $     2.19  $     1.17
                                      ==========  ==========  ==========  ==========
  Net income per share - diluted      $      .86  $      .45  $     2.13  $     1.10
                                      ==========  ==========  ==========  ==========

</TABLE>


NOTE 3. INVENTORIES

    Inventories consisted of the following at:
                                                    SEPTEMBER 30,   DECEMBER 31,
                                                        1998           1997
                                                   -------------  -------------
                                                          (In thousands)

Work in process                                    $     415,584  $     330,155
Raw materials                                            177,807        134,973
Vendor progress payments                                  76,747         60,606
Pre-owned aircraft                                       101,472        104,142
                                                   -------------  -------------
                                                   $     771,610  $     629,876
                                                   =============  =============

NOTE 4. INCOME TAXES

     In the quarter and nine month period  ended  September  30, 1998,  the
Company recorded income tax provisions of $ 34.0 million and $90.4 million,
respectively,  based on an estimated annual effective tax rate of 36.0%. In
the  comparable  periods of 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. As a result of numerous
factors, including, but not limited to the Company's recent earnings trends
and the size of its contractual  backlog,  the Company  determined that its
net deferred tax asset was more likely than not to be realized, and, in the
quarter  ending  September  30, 1997,  released its deferred tax  valuation
allowance, totaling $94.2 million. Of this amount, $29.4 million related to
the  exercise of stock  options  and was  credited  to  additional  paid-in
capital and $64.8 million was recorded as a one-time,  non-cash  income tax
benefit.

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.

     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 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.  As of September 30, 1998, the Company
had repurchased  approximately  5.5 million shares,  at an average price of
$35.81 per share, for an aggregate amount of approximately  $198.5 million.
The repurchase was funded from the Company's available cash.

NOTE 7. BUSINESS ACQUISITION

     On August 19,  1998,  the Company  acquired  K-C  Aviation,  Inc.  for
approximately $250 million,  including acquisition costs. K-C Aviation is a
leading provider of business aviation services and the largest  independent
completion  center for business  aircraft in North America.  In addition to
custom  aircraft  interiors,  K-C  Aviation  is the second  largest  engine
service center in the United States and also offers  maintenance  services,
spares,  auxiliary power unit service,  avionics retrofit,  non-destructive
testing and component overhaul.

     The purchase of K-C Aviation,  Inc. was funded primarily from existing
cash  balances,  and due to the timing of the  closing of the  transaction,
also from the revolving credit facility.

     The acquisition has been accounted for as a purchase, and accordingly,
the  operating  results of K-C Aviation have been included in the Company's
consolidated  financial  statements  since  the  date of  acquisition.  The
purchase  price  exceeded  the  fair  value  of  net  assets   acquired  by
approximately  $178 million,  which is being  amortized on a  straight-line
basis over 40 years. Allocations of the purchase price have been determined
based upon preliminary  estimates of value,  and therefore,  are subject to
change as asset appraisals are finalized. As refinements are made, goodwill
and any other appropriate accounts will be adjusted accordingly.

     The  following  unaudited  pro forma  summary  presents  the  combined
results  of  operations  of  the  Company  and  K-C  Aviation,  as  if  the
acquisition  had occurred at the beginning of fiscal 1998 and 1997. The pro
forma   amounts  give  effect  to  certain   adjustments,   including   the
amortization  of goodwill,  reduced  interest  income from cash utilized to
complete the acquisition and the related income tax effects.  The pro forma
consolidated  results do not purport to be indicative of results that would
have occurred had the acquisitions been in effect for the period presented,
nor do they purport to be  indicative  of the results that will be obtained
in the future.

<TABLE>
<CAPTION>

                                        THREE MONTHS ENDED       NINE MONTHS ENDED
                                           SEPTEMBER 30,           SEPTEMBER 30,
                                      ----------------------  ----------------------
                                         1998        1997        1998        1997
                                      ----------  ----------  ----------  ----------
<S>                                   <C>         <C>         <C>         <C>       
Pro forma Net Revenues                $    650.3  $    516.2  $  1,809.8  $  1,504.9
                                      ==========  ==========  ==========  ==========
Pro forma Income Before Income
   Taxes                                    99.5        56.3       251.1       129.9
                                      ==========  ==========  ==========  ==========
Pro forma Net Income                        66.3       120.6       163.1       193.4
                                      ==========  ==========  ==========  ==========
Pro forma Earnings Per Share -
   Basic                                     .90        1.63        2.23        2.61
                                      ==========  ==========  ==========  ==========
Pro forma Earnings Per Share -
   Diluted                            $      .88  $     1.56  $     2.17  $     2.47
                                      ==========  ==========  ==========  ==========

</TABLE>

NOTE 8. 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  nine  month  periods  of  1998  and  1997,  the  Company  had no  such
adjustments.

NOTE 9. 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.


<PAGE>


                     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 NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997

     Net  Revenues.  Total net  revenues  increased by $162.2  million,  or
35.0%,  to $626.2  million in the third quarter of 1998 from $464.0 million
in the third quarter of 1997.  The third quarter 1998 results of operations
include net revenues of K-C Aviation,  Inc.  from the date of  acquisition,
which were $35.2 million,  resulting  principally from the delivery of five
non-Gulfstream completions. Excluding the net revenues of K-C Aviation, the
Company's  net  revenues  were up $127.0  million,  or 27.4%.  The increase
resulted from several factors;  an increase in revenues from green aircraft
of $44.5 million as the Company delivered 16 aircraft,  seven Gulfstream Vs
and nine Gulfstream IV-SPs, as compared with 14 aircraft,  eight Gulfstream
Vs and six Gulfstream IV-SPs, in the third quarter of 1997; and an increase
in Gulfstream completion revenues of $30.7 million reflecting 11 Gulfstream
completions  delivered  during the third  quarter  compared  with only five
Gulfstream   completions  delivered  in  the  comparable  1997  period.  In
addition, revenues associated with the sale of pre-owned aircraft increased
$29.2  million to $45.0 million in the third quarter of 1998 as compared to
$15.8 million in the same period in 1997.

     During the nine months ended  September  30, 1998,  total net revenues
increased by $324.0 million (including the effects of the acquisition),  or
23.8%, to $1,686.6  million from $1,362.6 million for the nine months ended
September  30,  1997.  For  the  nine  months  ended  September  30,  1998,
Gulfstream  delivered 44 new  aircraft;  21 Gulfstream Vs and 23 Gulfstream
IV-SPs, up from 37 new aircraft;  21 Gulfstream Vs and 16 Gulfstream IV-SPs
in the same period of 1997.  Also  contributing to the increase in revenues
was an increase in completion revenues of $82.5 million,  resulting from 12
additional   Gulfstream   completion  deliveries  and  five  non-Gulfstream
completion deliveries in 1998.

     Cost of Sales.  Total cost of sales increased to $487.4 million in the
third quarter of 1998 from $373.0 million in the third quarter of 1997, and
increased  $197.7  million to $1,322.7  million  for the nine months  ended
September  30,  1998  from  $1,125.0  million  for the  nine  months  ended
September  30,  1997.  Cost of sales of the  acquired  business  includes a
non-cash  acquisition  related  charge of $3.9  million  for the fair value
step-up related to the sale of inventories.  Excluding  pre-owned aircraft,
which generally are sold at break-even  levels,  and the non-cash inventory
step-up of $3.9 million,  the gross profit percentage for the third quarter
of 1998 was 24.1%  compared to 19.3% for the third quarter of 1997, and for
the nine months ended  September 30, 1998, the gross profit  percentage was
23.5% compared to 19.1% 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 $6.0 million,  or 25.1%, to $29.9 million in the third quarter
of  1998  from  $23.9  million  in the  third  quarter  of  1997,  but as a
percentage of net revenues,  decreased to 4.8% in the third quarter of 1998
from 5.2% in the third quarter of 1997. For the nine months ended September
30, 1998, selling and administrative  expense was $85.4 million as compared
to  $69.5  million  for the nine  months  ended  September  30,  1997.  The
principal drivers for the increase for both the quarter and the nine months
are additional sales and marketing  expenses  associated with the increased
sales activity,  the acquisition of K-C Aviation,  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
$2.7 million in the third  quarter of 1998,  as compared to $4.3 million in
the third  quarter of 1997.  For the nine month period ended  September 30,
1998,  research and development  expense was $7.0 million  compared to $8.1
million for the  corresponding  period in 1997.  Research  and  development
expense  for the nine  months  ended  September  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 decreased by $0.8 million
to $2.0 million in the third quarter of 1998 from $2.8 million in the third
quarter of 1997 as a result of lower  average cash balances the Company had
invested during 1998 compared to the same period of 1997.  Interest expense
decreased by $0.5 million to $7.0 million for the third quarter of 1998 and
by $2.9 million to $20.4  million for the nine months ended  September  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. In the quarter and nine month period ended September 30,
1998, the Company recorded income tax provisions of $34.0 million and $90.4
million,  respectively,  based on an estimated effective tax rate of 36.0%.
In the comparable  periods of 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. As a result of numerous
factors, including, but not limited to the Company's recent earnings trends
and the size of its contractual  backlog,  the Company  determined that its
net deferred tax asset was more likely than not to be realized, and, in the
quarter  ending  September  30, 1997,  released its deferred tax  valuation
allowance, totaling $94.2 million. Of this amount, $29.4 million related to
the  exercise of stock  options  and was  credited  to  additional  paid-in
capital and $64.8 million was recorded as a one-time,  non-cash  income tax
benefit.  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
$0.86 for the third  quarter 1998 as compared to the third  quarter of 1997
of $1.54 (or $0.70 per share,  excluding the one-time tax benefit discussed
above).  For the nine months ended  September 30, 1998,  earnings per share
was $2.13, compared to $2.54 (or $1.71 per share excluding the one-time tax
benefit  discussed  above) for the  corresponding  period in 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
$.45 for the third quarter and $1.10 for the nine month period.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's  liquidity needs arise  principally from working capital
requirements,  capital expenditures, and principal and interest payments on
long-term debt (including the revolving credit facility).  During 1998, the
Company  also  implemented  a share  repurchase  program and  acquired  K-C
Aviation.  During the nine months ended  September  30,  1998,  the Company
relied on both cash  balances  and its  revolving  credit  facility to fund
these needs.

     The Company had cash and cash  equivalents  totaling  $10.6 million at
September  30, 1998 down from $306.5  million at December  31,  1997.  This
decrease is  primarily  attributable  to the  acquisition  of K-C  Aviation
during the third quarter 1998 and the Company's share repurchase program.

     On August 19,  1998,  the Company  acquired  K-C  Aviation,  Inc.  for
approximately $250 million,  including acquisition costs. K-C Aviation is a
leading provider of business aviation services and the largest  independent
completion  center for business  aircraft in North America.  In addition to
custom  aircraft  interiors,  K-C  Aviation  is the second  largest  engine
service center in the United States and also offers  maintenance  services,
spares,  auxiliary power unit service,  avionics retrofit,  non-destructive
testing  and  component  overhaul.  The  acquisition  allows the Company to
obtain a skilled workforce as well as the additional capacity to accelerate
the  completions  ramp-up,  while at the same  time grow  service  revenues
through three new strategic locations.

     In January 1998, the Company established a program to repurchase up to
$200 million of its common stock.  As of September 30, 1998,  approximately
5.5  million  shares,  at an average  price of $35.81  per share,  had been
repurchased under this plan for an aggregate amount of approximately $198.5
million.

     During the nine months ended  September 30, 1998, net cash provided by
operating activities was $147.6 million compared with the nine months ended
September  30, 1997 when the Company  generated  $33.6 million in cash from
operations.  This  increase  is  primarily  attributable  to an increase in
pre-tax earnings.

     During  the third  quarter of 1998,  the  Company  together  with GATX
Capital  Corporation,   a  diversified   international  financial  services
company,  formed  Gulfstream  GATX Leasing  Company to provide an operating
lease program to customers in the large cabin, long range business aircraft
market.  Gulfstream  GATX Leasing  Company is owned 85% by GATX Capital and
15% by Gulfstream.

     During the nine months ended September 30, 1998, additions to property
and equipment amounted to $16.1 million. At September 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  65  aircraft  by 1999,  the
Company's planned capital  expenditures  increased $15 million in 1997, 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, certain shareholders of 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  $27.1 million,  after deducting  issuance costs. The Company
used the proceeds from these exercises for working capital purposes.

     At September 30, 1998, borrowings under the Company's revolving credit
facilities were $50 million,  with available  borrowings of $134.7 million.
Scheduled repayments remaining under the term facility are $18.8 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 September 30, 1998, the Company
was in compliance with the covenants of its 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 and
other  available  financing  sources  will be adequate to fund  operations,
capital expenditures, and debt service 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 September 30, 1998, in connection  with orders for 21 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 $281.9 million as of September 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  $18.8 million for the nine months ended September 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  September  30, 1998,  Gulfstream  had a firm  contract  backlog of
approximately  $2.9  billion  of  revenues,  representing  a  total  of  91
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 third  quarter of 1998,  Gulfstream  GATX  Leasing  Company
executed  agreements  to purchase  five  Gulfstream  Vs and one  Gulfstream
IV-SP,  valued at  approximately  $210 million,  with  deliveries from 1999
through 2001. It also executed  options to purchase three Gulfstream Vs and
three  Gulfstream  IV-SPs,  valued  at  approximately  $200  million,  with
potential deliveries from 2001 through 2004.

     During the quarter  ended March 31,  1998,  the Company  signed a $335
million contract for 12 Gulfstream  IV-SPs to expand its highly  successful
Gulfstream Shares  fractional  ownership program to the Middle East region.
The first  green  aircraft  delivery  for the Middle  East  Shares  Program
occurred  during the third quarter of 1998.  The  remaining 11  undelivered
aircraft are 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 11 undelivered  aircraft in
the Middle East contract,  the Company had a total of 102 aircraft,  valued
at approximately $3.2 billion of potential future revenues,  under contract
at September 30, 1998.

     As part of the Company's ongoing Gulfstream Shares program, on October
16, 1998,  the Company  signed  agreements in principle  with Executive Jet
International (EJI) which significantly expands the successful relationship
between the two companies.  The agreements include plans for a Gulfstream V
Shares fractional  ownership program,  with the purchase of 10 Gulfstream V
aircraft  and options  for an  additional  12  Gulfstream  V aircraft,  the
purchase  of  14  Gulfstream  IV-SP  aircraft  to  supplement  the  current
Gulfstream  Shares  program  and  a  long-term  maintenance  agreement  for
Executive  Jet's fleet of Falcons and Hawkers in addition to the Gulfstream
jets.  The value of the purchase and service  agreements is estimated to be
nearly $1.3 billion and is excluded from the  Company's  September 30, 1998
contractual backlog.

     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 approximately 60 green aircraft in fiscal
1998 and 65 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
diluted  earnings  per  share of  approximately  $2.95 in 1998 and $3.75 in
1999. The Company is also targeting  diluted  earnings per share in 2000 to
increase 15% over 1999.

YEAR 2000 READINESS

     As part of the  Company's  initiatives,  begun  in 1996,  to  increase
production  rates and co-produce the Gulfstream IV-SP and Gulfstream V, the
Company has, and continues  to,  upgrade and replace  business  systems and
facility  infrastructure.  These  initiatives  help to reduce the potential
impact of the Year 2000 issue on the Company's operations.

     In addition,  the Company has  implemented a Year 2000 Compliance Plan
designed to ensure that all other hardware, software, systems, and products
with  microprocessors  relevant to the Company's business are not adversely
affected by the Year 2000  issue.  The  Company  has  established  a formal
program office under the leadership of a senior level executive,  to manage
the assessment and  implementation  of the Plan objectives.  The program is
reviewed regularly with executive management.

     Gulfstream has reviewed all current production  components and systems
installed in the  Gulfstream  IV-SP and Gulfstream V aircraft and has found
no issues. Older aircraft which are no longer under warranty have also been
reviewed  and  some  required  minor  component   modifications  have  been
identified and communicated to the relevant  customers.  Gulfstream intends
to substantially  complete Year 2000 compliance  remediation and testing by
the  first  quarter  1999,  with some  activities  continuing  through  the
remainder of 1999. Confirmations of Year 2000 plans for all high and medium
risk  suppliers  has  also  been  completed  and  low  risk  suppliers  are
approximately 90% complete.  Supplier Year 2000 compliance  monitoring will
continue through year-end 1999 and into the Year 2000.

     The  Company  currently  estimates  the total  costs of these  efforts
incurred  during  the years  1997  through  1999 to be  approximately  $3.5
million. In addition,  some non-compliant systems will be eliminated as the
Company  installs  Year 2000  compliant  software  in  connection  with its
ongoing integrated  resource planning project.  The cost of this effort has
been included in the Company's  capital  projections  discussed above under
the caption "Liquidity and Capital Resources".

     The Company does not believe that the implementation of this Year 2000
Compliance  Plan will have a  material  effect  on the  Company's  business
operations, financial condition, liquidity or capital resources. Management
of the Company believes it has an effective program in place to address the
Year  2000  issue in a  timely  manner.  As a  component  of the Year  2000
Compliance  Plan, the Company is developing  contingency  plans to mitigate
the effects of potential  problems  experienced by it or its key vendors or
suppliers in the timely  implementation  of its Year 2000 Compliance  Plan.
Nevertheless,  since it is not possible to anticipate all future  outcomes,
especially when third parties are involved, there could be circumstances in
which the Company's operations would be adversely affected.

     The  statements  in this  section  constitute  a "Year 2000  Readiness
Disclosure" under the Year 2000 Information and Readiness Disclosure Act to
the extent provided therein.

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.


<PAGE>


                         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

          Not Applicable.

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,  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 10.33       Amendment  dated  October  6,  1998 to Credit
                              Agreement    among    Gulfstream     Delaware
                              Corporation,  The Chase  Manhattan  Bank, and
                              the banks and  other  financial  institutions
                              parties thereto.

          Exhibit 10.34       Lease  Agreement,  dated  January 1, 1998, by
                              and between  Immuebles  El Vigia,  S.A.,  and
                              Interiores Aeroes, S.A. De C.V.

          Exhibit 10.35       Amendment No. 3 to Sublease Agreement,  dated
                              February  23,   1998,   by  and  between  the
                              Brunswick   and  Glynn   County   Development
                              Authority    and     Gulfstream     Aerospace
                              Corporation.

          Exhibit 10.36       Amendment No. 4 to Sublease Agreement,  dated
                              March 23, 1998,  by and between the Brunswick
                              and Glynn County  Development  Authority  and
                              Gulfstream Aerospace Corporation

          Exhibit 10.37       Lease  Agreement,  dated January 25, 1968, by
                              and between Outagamie  County,  Wisconsin and
                              K-C Aviation  Incorporated which was assigned
                              to  K-C  Aviation  on  October  9,  1980;  as
                              amended by Addendum No. 1, dated December 24,
                              1980, Addendum No. 2, dated February 9, 1988,
                              Addendum  No.  3  dated   January  26,  1989,
                              Addendum No. 4 dated  October 22,  1996,  and
                              Addendum  No.  5 to  Lease  Agreement,  dated
                              March 11, 1997.

          Exhibit 10.38       Lease  Agreement,  dated February 1, 1978, by
                              and between City of Dallas and K-C  Aviation,
                              Incorporated  for lease of land and  facility
                              at Dallas Love Field; as amended by Agreement
                              Amending Lease dated October 28, 1981, Second
                              Amendment   dated  June  1,  1989,  and  that
                              certain letter from the City of Dallas to K-C
                              Aviation dated December 9, 1997.

          Exhibit 10.39       Sublease  Agreement,  dated January 17, 1989,
                              by and between Dalfort Aviation  Services,  a
                              division  of  Dalfort   Corporation  and  K-C
                              Aviation,  Incorporated,  as  amended by that
                              certain First Additional  Agreement effective
                              January 17, 1989.

          Exhibit 10.40       Sublease  Agreement,  dated December 1, 1996,
                              by and between Dallas Airmotive, Incorporated
                              and K-C Aviation, Incorporated.

          Exhibit 10.41       Lease  Agreement,  dated May 1, 1997,  by and
                              between Carpenter Freeway  Properties and K-C
                              Aviation, Incorporated.

          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.

     (b)  Report on Form 8-K

          On  August  27,  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 August 19, 1998  pertaining to the Company's
          acquisition of K-C Aviation.


<PAGE>


                                 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: November 12, 1998


                                           GULFSTREAM AEROSPACE CORPORATION



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


<PAGE>


                               EXHIBIT INDEX


EXHIBITS

          Exhibit 10.33       Amendment  dated  October  6,  1998 to Credit
                              Agreement    among    Gulfstream     Delaware
                              Corporation,  The Chase  Manhattan  Bank, and
                              the banks and  other  financial  institutions
                              parties thereto.

          Exhibit 10.34       Lease  Agreement,  dated  January 1, 1998, by
                              and between  Immuebles  El Vigia,  S.A.,  and
                              Interiores Aeroes, S.A. De C.V.

          Exhibit 10.35       Amendment No. 3 to Sublease Agreement,  dated
                              February  23,   1998,   by  and  between  the
                              Brunswick   and  Glynn   County   Development
                              Authority    and     Gulfstream     Aerospace
                              Corporation.

          Exhibit 10.36       Amendment No. 4 to Sublease Agreement,  dated
                              March 23, 1998,  by and between the Brunswick
                              and Glynn County  Development  Authority  and
                              Gulfstream Aerospace Corporation

          Exhibit 10.37       Lease  Agreement,  dated January 25, 1968, by
                              and between Outagamie  County,  Wisconsin and
                              K-C Aviation  Incorporated which was assigned
                              to  K-C  Aviation  on  October  9,  1980;  as
                              amended by Addendum No. 1, dated December 24,
                              1980, Addendum No. 2, dated February 9, 1988,
                              Addendum  No.  3  dated   January  26,  1989,
                              Addendum No. 4 dated  October 22,  1996,  and
                              Addendum  No.  5 to  Lease  Agreement,  dated
                              March 11, 1997.

          Exhibit 10.38       Lease  Agreement,  dated February 1, 1978, by
                              and between City of Dallas and K-C  Aviation,
                              Incorporated  for lease of land and  facility
                              at Dallas Love Field; as amended by Agreement
                              Amending Lease dated October 28, 1981, Second
                              Amendment   dated  June  1,  1989,  and  that
                              certain letter from the City of Dallas to K-C
                              Aviation dated December 9, 1997.

          Exhibit 10.39       Sublease  Agreement,  dated January 17, 1989,
                              by and between Dalfort Aviation  Services,  a
                              division  of  Dalfort   Corporation  and  K-C
                              Aviation,  Incorporated,  as  amended by that
                              certain First Additional  Agreement effective
                              January 17, 1989.

          Exhibit 10.40       Sublease  Agreement,  dated December 1, 1996,
                              by and between Dallas Airmotive, Incorporated
                              and K-C Aviation, Incorporated.

          Exhibit 10.41       Lease  Agreement,  dated May 1, 1997,  by and
                              between Carpenter Freeway  Properties and K-C
                              Aviation, Incorporated.

          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.