Did Great Lakes get 135 approval?

[FloridaLarry]

hook dupin said, in part:

...I don't know why GL hasn't gone back to DOT to renegotiate that cheaper equipment (PC-12s, 'Vans, and the like) be allowed. The next round of EAS contracts will be interesting...

Certainly could happen, and probably would be accepted. Cape Air has certainly showed that single-pilot is acceptable in the right aircraft (C-402s for them) and a number of operators (some sort of dubious on other grounds) have demonstrated that two engines are not essential. In the lower 48, at least one-third of the EAS destinations would be amply served by 9 PAX aircraft. Traffic picks up (as it often has when Cape Air takes over a route), just add another daily departure or two. Fill it, make money.

Unfortunately, GLA had worked very hard to disappoint its customers and provide unreliable schedules. City after city has looked for alternatives, some clearly suffering from SJS despite boarding too few PAX. But GLA is generally the only game in town. For the same reason, most PAX who need to fly would be happy to climb into a shiny new Pilatus, despite having only one, very reliable, engine.

GLA would need to find some pretty nimble financing to afford new aircraft. The old Beeches would end up in third-world countries or flying night freight. Plenty available, including (soon) Silver's 1900-Ds. Sturdy and reliable workhorses, but a l-o-n-g way from SJS!

 

[hook_dupin]

GLA would need to find some pretty nimble financing to afford new aircraft.

This is why the aircraft lease market exists... to give aircraft access to those who can't afford it. GL has to seriously restructure their operation to face the new reality of the pilot labor market. If I were management, I'd hold all the profitable non-EAS routes, negotiate for single pilot 135 ops in cheaper aircraft for the EAS routes to spread the pilot staff around, sell a good chunk of the fleet, and work lease deals for cheaper equipment. The end state would be for GL to be mostly a single-engine operator with a few 1900s kept on the profitable routes that support a 19 seat airplane.

Stupid MBA program. I should just stick to enjoying my $23/hr CFI job on the weekends.

 

[elmetal]

This is why the aircraft lease market exists... to give aircraft access to those who can't afford it. GL has to seriously restructure their operation to face the new reality of the pilot labor market. If I were management, I'd hold all the profitable non-EAS routes, negotiate for single pilot 135 ops in cheaper aircraft for the EAS routes to spread the pilot staff around, sell a good chunk of the fleet, and work lease deals for cheaper equipment. The end state would be for GL to be mostly a single-engine operator with a few 1900s kept on the profitable routes that support a 19 seat airplane.

Stupid MBA program. I should just stick to enjoying my $23/hr CFI job on the weekends.

Why they don't negotiate for smaller EAS airframes and lease PC12s for the thin routes is beyond me. Or even caravans......

 

[hook_dupin]

Why they don't negotiate for smaller EAS airframes and lease PC12s for the thin routes is beyond me. Or even caravans......

GL seems tied to the 1900 like a mob snitch is tied to his concrete chair. Both are going to sink pretty fast.

 

[jgheggie]

GL seems tied to the 1900 like a mob snitch is tied to his concrete chair. Both are going to sink pretty fast.

I doubt it. I'm not rooting for them, but I don't see them completely going away anytime soon.

These EAS routes are so stubborn. There is a market for the services. The local city counsels beg and plea for service. So as long as lakes can get 135 approval then they will survive "the great pilot shortage of 2014". And despite the pay...if they get 135 approval then they will have a ton of applicants. If they have to take 250hr pilots then they will.

 

[elmetal]

I doubt it. I'm not rooting for them, but I don't see them completely going away anytime soon.

These EAS routes are so stubborn. There is a market for the services. The local city counsels beg and plea for service. So as long as lakes can get 135 approval then they will survive "the great pilot shortage of 2014". And despite the pay...if they get 135 approval then they will have a ton of applicants. If they have to take 250hr pilots then they will.

If only they made a rule that the EAS requires scheduled 121 service......... bye bye GLA!

 

[FloridaLarry]

Hook and others are suggesting that GLA simply lease some single-engine 9 PAX aircraft for the lower end of their route structure.

As of the last financial statement available (9/31/13, SEC form 10-Q, read it on the GLA website) GLA was making a small amount of money and was current on their debt. They owed $21.2M (notes on planes & revolving line of credit), secured by the entire fleet of 6 EMB-120 Brasilias and 28 B-1900-Ds. Their loan documents have typical restrictions, including approval required before taking on more debt. Their interest rate is Prime plus 11% on the planes, Prime plus 11.5% on the line of credit, with a minimum of 15.5% on both. Selling aircraft, presuming they could find a quick buyer, would simply pay off the loan on those assets

So, lots of free cash and easy credit aren't on their menu. Never say never - these guys have been down and nearly out before, and proved to be somewhat nimble. More fun to watch from afar!

 

[KSCessnaDriver]

If only they made a rule that the EAS requires scheduled 121 service......... bye bye GLA!

And also kill some much more reputable operators at the same time

 

[elmetal]

And also kill some much more reputable operators at the same time

That is true....

 

[exneophyte]

Not to mention that November 16, 2015, they have to pay off a revolving credit loan that is expected to be $7.8M at that time. Their Q3 2013 reports are fascinating and show a company that's circling the drain.

The other interesting fact I learned was that 47% of their revenues for that quarter came from EAS.

 

[Ajax]

I'm at DEN right now and see a dozen or so GLA planes parked off in the distance.

Lol

Good good

 

[hook_dupin]

Not to mention that November 16, 2015, they have to pay off a revolving credit loan that is expected to be $7.8M at that time. Their Q3 2013 reports are fascinating and show a company that's circling the drain.

The other interesting fact I learned was that 47% of their revenues for that quarter came from EAS.

I was surprised that GL is giving revenue in terms of ASM (Available Seat Mile). I see GL as slowly unloading debt (likely to stay afloat). Also surprising.... the current market cap is about $9.2M. I see GL being bought out soon to restructure the operation.


Separately, I've been meaning to make a "Pilot's Guide to Financial Statements" product soon. It seems understanding the financial health in the airline industry is much more important than other industries. Is that something there's interest in?

 

[FloridaLarry]

A buy-out is certainly possible for GLA. Management would need to present a radically new plan for making the company a long-term winner. The place really needs a new business plan rather than just tweaking the status quo. Or, a new owner needs to clean house and put people in who are attuned to their operational philosophy leading to their financial expectations.

Remember, they had a buy-out in 2011, when they dumped debt to Raytheon Credit for the B-1900-D fleet for about $.62 on the dollar. Raytheon certainly didn't want the planes back! Essentially no management changes at that point - present CEO management owns enough stock to control the company. GLA has been limping along, making payments on the new debt at a pretty high interest rate and adding additional debt re-payment when they could afford to (contractually required additional payments which limited their ability to stockpile cash).

The long-term issue here is can they realistically afford to re-finance the balloon payments when the note expires in November of 2015. When and how will they finance a fleet replacement plan? Until the recent 'pilot shortage' => service melt-down, the answer to the first question was "probably." The second depends on the first. No cautions from the auditors about the company's inability to continue operations as of the last annual audit. They've been shrinking. This year's audit will be interesting.

How to fix it? Mix the fleet with some smaller aircraft for the 135 side, dump some of the 1900-Ds and create a realistic pilotage program to flow low-timers into the mid-size (if you can consider 1900s a mid-size!) aircraft, pay better to attract & retain pilots (as all Regionals must do) and fix the atrocious service reputation. If Cape Air can do it, so can GLA-II.

Disclaimer: I own no stock in GLA, am not a pilot, but was a frequent (and happy) PAX when I lived in their service area. As an airport board member, had on-going interaction with GLA. I wish them well filling a tough place in the aviation landscape.

 

[hook_dupin]

How to fix it? Mix the fleet with some smaller aircraft for the 135 side, dump some of the 1900-Ds and create a realistic pilotage program to flow low-timers into the mid-size (if you can consider 1900s a mid-size!) aircraft, pay better to attract & retain pilots (as all Regionals must do) and fix the atrocious service reputation. If Cape Air can do it, so can GLA-II.

Sounds like we're thinking on the same page. Got a spare $10M to buy out the company and turn it around?

 

[chrisreedrules]

If I had $10mil I wouldn't buy GLA. I'd buy a ton of real estate in low income areas and overnight become a slum lord.

 

[FloridaLarry]

hook dupin said, in part:

...Got a spare $10M to buy out the company and turn it around?

Wasn't it Warren Buffet who said; 'If you want to have a million dollars, buy an airline for $10 million.' ?

 

[Bernoulli Fan]

I was a frequent (and happy) PAX when I lived in their service area.

You were in scarce company.

 

[FloridaLarry]

Bernoulli Fan said:

You were in scarce company.

re: being a happy GLA PAX.

Maybe I'm just more tolerant, but I never had problems that were clearly the airline's fault (and not Wx, acts of God, etc.) in literally dozens of flights with them, . Yes, sometimes delays - I never missed a connection because of one. I'd come charging up to the gate from an incoming late connection right at departure, and they'd get me on. Outstation staff once held a flight for my wife while they sorted out a connection booked with frequent flyer miles and not showing on the computer. Bouncing around in a severe thunderstorm, watching CA and FO each flying with one hand and hanging onto the ceiling grab handle with the other. While others were diverting to Pueblo, we plowed on to a safe landing in Denver.

I also learned not to check a bag to Denver, when the sign at the carousel said " If your luggage hasn't arrived in three and a half hours, please see us at the Great Lakes ticket counter."

Perhaps my expectations were tempered with more knowledge of the situation, and the realization that they were the only game in town. And sometimes I'd drive 5 1/2 hours to Denver instead of 1:10 jouncing around.

Actually, when my airport was served by both GLA and Mesa 1900-Ds (as US Airways Express), Mesa was the worse performer, by a country mile. And I was a Mesa stockholder at the time!

Obviously, YMMV and today is a different time.

 

[hook_dupin]

hook dupin said, in part:


Wasn't it Warren Buffet who said; 'If you want to have a million dollars, buy an airline for $10 million.' ?

He's had quite a few strong thoughts:

-"Investors have poured their money into airlines and airline manufacturers for 100 years with terrible results"

-"It’s been a death trap for investors"

And my favorite...

-“If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright. He would have saved his progeny money"


That said, I think there's room for good management in the airplane business. This is all coming from a guy who may transform into an industry analyst/consultant in a few years.

 

[N48302P]

Do you think the 135 operation could potentially help low-time pilots or pilots fresh out of flight school build time? According to their website, they are CONSIDERING pilots with 300 TT and 25 multi. That could potentially appeal to a pilot instead of going the CFI route. Would that hurt them to get turbine time instead of CFI or would CFI be a better route? Just a few questions running around my brain lately.