The end of GLA?

I-Pilot

I-Pilot

Well-Known Member
Great Lakes approaches turbulent future
By MJ Clark

September 19, 2011 -- CHEYENNE - The fate of the only airline based in Wyoming, Great Lakes Airlines, appears to be in jeopardy after a prospectus to sell more than 5 million shares of its stock was filed with the U.S. Securities and Exchange Commission Sept. 7.

Great Lakes Aviation Ltd., which operates Great Lakes Airlines, filed an amendment to its S-1 registration statement Sept. 7, registering 5,371,980 shares of common stock prior to offering them for sale.

According to the filing, Great Lakes will receive none of the proceeds from the sale, as the stock belongs to Great Lakes' largest creditor, Raytheon Aircraft Credit Corp. Raytheon received the shares in December 2002 in a debt-restructuring agreement. The debt was restructured again in 2007.

On Aug. 31, Raytheon extended the due date of a $31.8 million balloon payment in aircraft notes from Aug. 31 to Oct. 17. The notes are secured by 25 Beechcraft 1900D planes. In the statement filed with the SEC, Great Lakes wrote, "Our cash flows from operations are not expected to be sufficient to fund the balloon payment."

In addition, Great Lakes leases six more Beechcraft Model 1900D planes from Raytheon. Raytheon gave notice of lease termination on those six. The first requested aircraft return happened in August, and the last will occur in December of this year.

As of Aug. 31, Great Lakes provided air service at 42 airports in 11 states, according to the prospectus.

Great Lakes reported total operating revenue of $125.4 million in 2010, compared with $121.8 million in 2009. First-half 2011 revenue totaled $60.9 million, compared with $59.8 million for the same period a year ago. The company reported net income of $5 million in 2010, down from $5.7 million in 2009. First-half 2011 net income totaled $29,000, compared with $1.2 million a year ago, a decline attributed to higher fuel costs.

The prospectus outlines the difficulties that Great Lakes faces in making its balloon payment:
"In the event that we are unable to obtain new financing, Raytheon may exercise remedies available to it, including the foreclosure and taking of the 25 mortgaged aircraft," according to Great Lakes' statement. "Raytheon would also have the right to accelerate the Company's $6.6 million senior note to Raytheon and to declare a default on any or all of the six aircraft we lease from Raytheon if the debt due goes into default. This raises substantial doubt as to our ability to continue operating as a going concern as we have not generated sufficient cash from operations to be able to make an October 17, 2011 payment to Raytheon in the amount of $31.1 million. If these events occur, we would be unable to fly our scheduled service, our passenger and EAS revenues would cease, and we would be forced to file for protection from our creditors."

Further comment from Great Lakes was unavailable at press time.
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http://www.wyomingbusinessreport.com/article.asp?id=59929


First-half 2011 net income totaled $29,000, compared with $1.2 million a year ago
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Sad!
 
So much for flying into my hometown for Christmas! GLUX.OB currently trades at $0.78, so they're only about 10% toward paying their balloon payment with this filing.
 
Bernoulli Fan said:
So much for flying into my hometown for Christmas! GLUX.OB currently trades at $0.78, so they're only about 10% toward paying their balloon payment with this filing.
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OOOH cheap stock let me buy some! Oh darn, I can't purchase aviation stock(FAA rules), such a shame.
 
Wasn't there an article on the balloon payment 6 months ago or so, and how there was no way they'd have the cash? I think the writing has been on the wall for a good while now.
 
In 2010 two regional airlines lost money while the others made record profits. Both of those money losing airlines flew the Beech 1900's. It does not take a banker to figure out that regional airlines in the US can no longer make money with the Beech 1900's. The numbers just do not work.

Joe
 
JOEFRIDAY2 said:
In 2010 two regional airlines lost money while the others made record profits. Both of those money losing airlines flew the Beech 1900's. It does not take a banker to figure out that regional airlines in the US can no longer make money with the Beech 1900's. The numbers just do not work.

Joe
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Just so we are clear, this is the regionals in the lower 48.
 
ASpilot2be said:
Just so we are clear, this is the regionals in the lower 48.
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Of course. Many 1900C operators in AK are the only way out of town sometimes in very remote area's with rugged terrain and only seasonal roads. In that case, I'm sure a company can charge what they like to make a profit with the operation and the passengers will keep coming. Last time I was in MCE, I asked the employees how MCE-LAS was doing since I think it would be kinda fun to fly in a 1900 and they said "It usually goes out with less than 10, don't bother ever calling for loads". Out of curiosity, how are the California routes(MCE, LAX, VIS) doing in general for Lakes? It's interesting that they dropped all the ONT routes for LAX, wonder if the flights fill up anymore.
 
I never understood how they made money. They used to fly into my hometown 4 times a day. Then dropped it to 3 and their planes still aren't even close to full.
 
Stomp16 said:
I never understood how they made money. They used to fly into my hometown 4 times a day. Then dropped it to 3 and their planes still aren't even close to full.
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The flying is subsidized by the government. They get paid a set rate regardless of the actual paying passengers on board. The reason it is difficult to make money on EAS flying now is because fuel is such a volatile variable, not because no one buys tickets. We, the taxpayers, buy the tickets- so to speak.

I wish for the best for all GLA-ers.
 
Stomp16 said:
I never understood how they made money. They used to fly into my hometown 4 times a day. Then dropped it to 3 and their planes still aren't even close to full.
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The only way to make money on EAS is to lock in the subsidy when the fuel prices are high, and then over the course of the next 2 years the fuel prices go down.. (That happen lately?)

Since you are locked in for 2 years, when fuel prices go up, you are forced to either take the loss, or announce you are leaving the market and rebid the subsidy (along with the chance you might lose the city altogether to another operator) although there aren't that many players in EAS these days.
 
SmitteyB said:
The flying is subsidized by the government. They get paid a set rate regardless of the actual paying passengers on board. The reason it is difficult to make money on EAS flying now is because fuel is such a volatile variable, not because no one buys tickets. We, the taxpayers, buy the tickets- so to speak.

I wish for the best for all GLA-ers.
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woodreau said:
The only way to make money on EAS is to lock in the subsidy when the fuel prices are high, and then over the course of the next 2 years the fuel prices go down.. (That happen lately?)

Since you are locked in for 2 years, when fuel prices go up, you are forced to either take the loss, or announce you are leaving the market and rebid the subsidy (along with the chance you might lose the city altogether to another operator) although there aren't that many players in EAS these days.
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I hadn't looked into their setup. Thanks for the explanations.
 
I sure hope not. I have too many good friends over there. The article says 2010 income was 5 million. Is that not profit I guess?
 
upup89 said:
I sure hope not. I have too many good friends over there. The article says 2010 income was 5 million. Is that not profit I guess?
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Income may just mean revenue. In fact I believe that is all they are saying. Accounting tricks still exist to put money away, for instance if you run on a %5 debt and keep a 3% cash reserve, you could dump all your money onto debt for a few years to look like you aren't making any money, need to look at company value traditionally.
 
jynxyjoe said:
Income may just mean revenue. In fact I believe that is all they are saying. Accounting tricks still exist to put money away, for instance if you run on a %5 debt and keep a 3% cash reserve, you could dump all your money onto debt for a few years to look like you aren't making any money, need to look at company value traditionally.
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Very true. I was sort of figuring as much when there is not a single number in the article that says profit next to it.
 
upup89 said:
Very true. I was sort of figuring as much when there is not a single number in the article that says profit next to it.
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"Profit" is also called "net income."

"Great Lakes reported total operating revenue of $125.4 million in 2010, compared with $121.8 million in 2009. First-half 2011 revenue totaled $60.9 million, compared with $59.8 million for the same period a year ago. The company reported net income of $5 million in 2010, down from $5.7 million in 2009. First-half 2011 net income totaled $29,000, compared with $1.2 million a year ago, a decline attributed to higher fuel costs."

$5 mil in net income from $125.4 mil isn't great, but it's not horrible (we are talking airlines, after all). However, $29,000 in net income from $60.9 mil in revenue for the first half of 2011 is ABYSMAL.

Woodreau hit the nail on the head with respect to fuel costs for EAS players.
 
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