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Bryan T. Moss,
Vice Chairman and Chief Executive Officer, Gulfstream Aircraft, Inc.

"The business aircraft industry
stands on the threshold of
potentially great growth"

Yet, even though business is good, now is the time to take a broader look at our industry in order to understand the opportunities and challenges that are facing us.

The business aircraft industry, worldwide, stands on the threshold of potentially great growth. There are a number of factors contributing to the trend:

• The airlines, for all their hard work and effort, are not meeting the needs and expectations of the business traveler. If we look at new product development programs at Boeing, and Airbus and McDonnell Douglas, those efforts continue to be focused on the larger aircraft that cater to leisure or discretionary income travelers. I don't think this trend is going to change.
• For the businessman who is forced today to compete on a worldwide basis, instead of a local or regional basis as he did in the past, the need to travel is increasing.
  This combination of less-than-satisfactory airline service coupled with broadening business interests which are fueled by competition is helping to generate an extremely attractive and healthy environment for our industry. The opportunity is there to attract more business travelers to use business aircraft.
• The issue of security is an increasing and real concern to the traveling businessman, one that has generated many stories in the press recently.
  
• Another factor that fuels the optimism that I talk about is the realization among sensible businessmen that the business aircraft is an honest-to-goodness tool. There is financial data now available to substantiate that a business aircraft can help to boost a company's productivity and shareholder return. The business aircraft is a means of leveraging or multiplying the value of top management's time.
  More and more companies are seeing the merit of having their executives use business aircraft rather than deal with the increasing uncertainties of airline travel.
• And, finally, I think there is a trend by companies worldwide to focus on meeting their overall transportation needs by utilizing a mix of airline service and business aircraft. This provides the most efficient, cost effective means of solving their transportation problems.
  As we look ahead, I expect there will continue to be pressures on acquisition price and operating costs, and on reliability and customer service. For anybody in our industry to succeed, we have to get high marks in all of those categories.
  Additionally, customers and potential customers are beginning to realize the extremely attractive residual value of business jets. People are going beyond asking "what does it cost" and asking "what can I get for it when I am finished with it". There is a very compelling case for the value of these assets. In the Gulfstream family, companies that hold our product for ten years, for example, are realizing approximately 80 to 90 percent of the original value of the aircraft on resale.

• Airport and air space access is a key issue. In order for our airplanes to deliver the productivity that they have the capability of providing, they need free access on a 24 hour a day basis to airports around the world.
• Regulatory issues are a threat today, such as ETOPS, RVSM, noise limitations, arbitrary curfews, proposed taxes on the flights of business aircraft and cost allocation for FAA services.
• Lack of understanding and awareness of the value and contribution of business aviation to the overall economic welfare of this country.

From Gulfstream's point of view, we will continue to look for ways to reduce costs and cycle times while increasing reliability and quality in manufacturing. We will look at flexibility in our manufacturing capacity to allow for possible swings in the marketplace. And, we will continue to look for effective ways to penetrate new markets such as Russia, the CIS and Asia.

In summary, we are looking at a very positive, growing market environment, in which we must do a better job of walking in the customer's shoes to make sure we understand his needs and exceed his expectations.

At Gulfstream, we have great respect for our customers, and we continually try to do a better job of listening. We know they have choices, and that it is up to us to convince them we want and deserve their business.