Tennenbaum Withdraws Offer for Great Lakes

 - May 9, 2008, 5:11 AM

Sagging operational and financial fortunes at Cheyenne, Wyo.-based Great Lakes Aviation have prompted Tennenbaum & Co. to withdraw its offer to buy the former United Express affiliate’s outstanding shares of common stock for $4 a share. In a letter to Great Lakes’ board, Tennenbaum suggested a merger of the Frontier Airlines code-share partner with another turboprop operation to increase its attractiveness to potential investors. “We continue to believe that a consolidation of businesses like yours, with appropriate arrangements with aircraft manufacturers, major airlines and government agencies, would be a business that is attractive to us,” said the letter. “We are prepared to initiate such a dialogue.”

Last month Great Lakes announced it generated revenues of $26.9 million in the second quarter of 2001, down 20.8 percent from the same period a year ago. As a result, the company absorbed a net loss of $5.1 million.

Great Lakes attributed the drop in revenues to a 14.8-percent reduction in available seat miles resulting from schedule adjustments “to more closely align capacity with current passenger demand and fare structures.” Although the load factor for the second quarter rose 2.7 points, to 52.5 percent from last year’s second quarter, average ticket prices fell from $104.87 to $91.39.

“The decline in ticket prices is primarily the result of the significant downturn in the economy and resulting decisions by companies to reduce costs by cutting back on business travel and using cheaper fares whenever possible,” said Great Lakes president and CEO Doug Voss. “In addition, the airline industry and its computerized yield management systems have expanded the availability of discounted seats.”