Aviation company

Aviation company's financial woes worry Cortez airport officials

Sept 8, 2001

By Jim Mimiaga
Journal Staff Writer

Great Lakes Aviation, Ltd., the airline company providing the link between Cortez Municipal and Denver International Airport, is having financial trouble that has local officials concerned.

Second-quarter financial reports released in August show that the Wyoming-based company incurred a net loss of $5.1 million, compared to a net income of $1.8 million during the same quarter in 2000. Its revenues reportedly declined 20. 8 percent, to $26.9 million.

That and three months of unpaid landing fees owed by the airline to Cortez Municipal Airport have managers worried about the carrier’s financially viability and what could happen if it is forced to fold or pull out of the Cortez market.

"We are not rushing to judgment on them quitting operations, but we think that they have had some problems and believe they will get through it," said City Manager Hal Shepherd, who also acts as the airport manager.

Dick Fontaine, Great Lakes senior vice president for marketing, said Friday that the airline does not have any plans to pull out of Cortez. "We have pulled out of some communities, but that is not the case for Cortez."

Despite its financial woes, service by the airline has been good, Shepherd said, with few complaints about late or canceled flights that were a problem in 1999 and 2000. A strike then by United Airlines, with which Great Lakes operates under a code-sharing agreement, prompted a rash of cancellations.

And, despite a sluggish local economy, boardings at Cortez have increased over last year and are expected to hit between 9,300 and 9,400 total passengers boarded, up from 9,000 last year, Shepherd said.

"The increase is not because of the good summer economy, that is for sure, but business and government travel seems strong enough to move the numbers closer toward 10,000," he said. Ten thousand is the magic annual passenger amount that triggers federal funding of up to $1 million for airport upgrades. The Cortez airport has been straining to reach that number for years.

Fontaine said, nationwide, most airlines are posting losses. He blamed a downturn in the national economy and fixed costs in the face of cutbacks.

"We’ve pulled out of some cities, reduced some scheduling to cut our costs, and are seeking agreements with other airlines in addition to United. We’re riding out the bad economy, like everyone else," Fontaine said.

Airlines are all reducing fares to offset lagging leisure and business travel, he said, and that has caused lower revenues, but the problem is that the same operations costs continue.

Under a subsidy contract with the Department of Transportation, Great Lakes is required to provide three round-trip flights to Denver every day from Cortez. A $400,000 annual subsidy is made possible for carriers at Cortez Municipal because the rural area is considered an Essential Air Service region. The federal program ensures that isolated communities with unprofitable air-travel volume have reliable access to major airport hubs.

Great Lakes operates out of DIA, Chicago and Minneapolis. It holds 29 EAS contracts out of the 58 cities it serves in 16 states, "but they do not make us any money," Fontaine said.

Shepherd and Fontaine are working to renegotiate EAS subsidies with the Department of Transportation in order to better offset airline costs. Great Lakes’ EAS contract with Cortez is up for renewal in September 2002.

While Great Lakes is optimistic about a turnaround, the financial strain is affecting the Cortez airport’s operations.

"We’re stuck between a rock and a hard place," said assistant airport manager Russ Machen, explaining that if Great Lake’s planes are denied landing privileges because of their outstanding $12,000 landing-fee bill, the consequence would be no airline service for Cortez.

"We’re not going to go that far," Shepherd said.

Fontaine said the late payment was probably a result of the company’s financial woes.

Cortez officials worry that a weakening economy could end up pushing the few smaller airline companies that smaller towns rely on out of the market.

"We are watching the situation very closely," Shepherd said.