Great Lakes Airlines Fills Fewer than 50% of Seats

Pop quiz: How can an airline fill less than half of its seats and still post a $19 million profit for the full year of 2007? Go ahead and take a bow. It's thanks to your tax dollars.

Great Lakes Airlines has become the reigning king of the Essential Air Service world. While everyone else crumbles, they somehow continue to persevere. Big Sky has shut down, Mesa wants to close down Air Midwest, and Midwest Airlines has effectively shut Skyway. Essential Air Service flying just isn't a great business anymore, yet Great Lakes continues to power through.

In 2007, the airline filled 49.3 percent of its seats on more than 180 flights a day to 44 destinations. For most airlines, that would be a death sentence, but for Great Lakes, it was good enough to post net income of just over $19 million. The unit revenues and costs don't look real. RASM was a whopping 30.8 cents while operating CASM was 27.5 cents. Yes, the average trip length was only 272 miles, but that's still looking at an average fare of over $125 per person per flight. In April, load factor dropped to a mere 43.6 percent, but it actually kept RASM up at 30.5 cents. It's may be surprising, but that's probably because there isn't really any competition.

See, Great Lakes specializes in flying Essential Air Service routes. I wrote a long piece on this over at Cranky Flier, but in short, the government subsidizes airlines to fly to small airports where no airline wants to fly on its own. Very few people take advantage of the flights, and that's why Great Lakes goes out with so many empty seats. Of course, it has to charge high fares when there aren't many passengers around, but those fares make many people opt to drive to the nearest airport with lower fares.

This is sort of how things were before deregulation in the US, but the difference in this case is that nobody else wants to fly to these towns, so it's not artificially preventing competition. It's just artificially keeping any service there at all. So, Great Lakes will continue to soldier on, squeezing out a profit flying half empty planes until the government finds a better way to promote air service to places that would actually use it.