Wednesday, May 09, 2012

No-frills air carrier is filling in gaps: Great Lakes Airlines is expanding service out of KMSP. By the end of 2012, the airline will have 14 destinations on its roster at Minneapolis-St Paul International, Minnesota

A little-known airline with a fleet of tiny planes is making its mark at the Minneapolis-St. Paul International Airport, snapping up routes to towns that legacy carriers have abandoned.

Meet Great Lakes, a no-frills newcomer that believes there's a lucrative opportunity in connecting rural America with bustling airports like MSP. The Wyoming-based airline is in the midst of adding more than a dozen new cities to its local roster, with the Twin Cities serving as its hub for 20 percent of its destinations.

The move comes as Delta Air Lines and other large carriers have deemed these rural routes unprofitable despite federal subsidies. Conversely, Great Lakes Airlines can profit handsomely from these destinations because its expenses are so much lower than the big carriers', analysts said.

And when it comes to cost-cutting, Great Lakes has gone extreme: CEO Chuck Howell said there's no soft drink service, and on some trips, there aren't any flight attendants -- or bathrooms.

"You spend a lot of time explaining," Howell said. Services on Great Lakes "aren't going to be the same."

The airline picked up 10 communities that Delta exited due to higher fuel costs and the retirement of smaller planes. With the addition of these cities and a few others, Great Lakes will fly to 14 destinations from the Twin Cities by the end of the year.

With hubs in the Twin Cities, Albuquerque, Denver, Los Angeles, Phoenix and Las Vegas, Great Lakes is the nation's largest carrier of Essential Air Service routes -- a program that guarantees flights to small towns. About 42 percent of its total revenue comes from government subsidies.

Great Lakes' strategy of cutting costs to the bone helped it generate nearly $10.7 million in profits last year, more than double its earnings in 2010. The airline reentered MSP last year following an eight-year hiatus, starting service to Devils Lake, N.D., shortly after Delta ended service there.

Its new relationship with Delta is key because Great Lakes' strategy is to take over and work out deals to sell their tickets on major airlines' websites. Customers can buy a single ticket on Delta's website that will take them from small towns in Iowa, North Dakota, South Dakota or Minnesota on a Great Lakes flight, and will transfer them at MSP to a Delta flight on their way to another destination, such as Orlando.

"Great Lakes sees an opportunity and is jumping on it," said Terry Trippler, owner of airline rules website "They are picking up the spoils."

Great Lakes exited MSP in 2003 because it didn't sell its tickets through dominant carrier Northwest Airlines, making it more challenging to advertise its flights out of the Twin Cities. Delta bought Northwest in 2008.

With Delta's use of Great Lakes as a connecting airline, Delta is able to remove unprofitable service to small towns "off their plate, but they still get the business," Trippler said.

Delta spokeswoman Kristin Baur agreed, saying it lets the airline continue serving customers even though it has retired its smallest aircraft and exited some smaller communities.

Great Lakes Airlines is controlled by Great Lakes Aviation, now based in Wyoming. The company was founded in Iowa in 1979, named after its expansion in northwest Iowa's Great Lakes region.

Although there has been talk about the federal government ending subsidized service to some towns, Howell said the cuts under review would spare almost all of Great Lakes' destinations. Rising fuel costs has also put some pressure on Great Lakes, but Howell said he doesn't have any short-term concerns.

Great Lakes said it plans to make government subsidies a lower percentage of its total sales. The airline expects to increase its presence at larger hubs to offer more connecting flights, which is exemplified in its expansion of routes at MSP.

Great Lakes' no-frill reputation hasn't thrilled some small communities. Discounters such as Frontier Airlines fly bigger 50-seat aircraft, whereas Great Lakes uses cramped planes with just 30 seats and many with just 19.

"We weren't joyous about losing Frontier and getting Great Lakes, but we were happy it was Great Lakes and not any other Essential Air Service carrier," said Duane DuRay, airport manager for Gogebic-Iron County Airport in Ironwood, Mich, which has a population of about 5,000 people.

DuRay added that Great Lakes doesn't carry the same recognition as Frontier, so some people are disappointed.

DuRay said the fares are reasonable, noting that it costs $60 one-way to fly from Ironwood to MSP. For all flights, average fares for Great Lakes were $136.62 last year, up 8 percent from the year before.

Other rural passengers count their blessings. John Nord, an airport manager at Devils Lake Regional Airport in North Dakota, said he doesn't mind the planes not having a restroom. Nonstop flights to MSP are short, at a little over an hour, he said.

"If you were driving to a different airport in North Dakota, it's a longer ride," Nord said.


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