SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1997

OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _______________

Commission File No. 0-23224

GREAT LAKES AVIATION, LTD.
------------------------------------------------------------
(Exact name of registrant as specified in its charter)

IOWA 42-1135319
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

1965 330th Street, Spencer, Iowa 51301
--------------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (712) 262-1000

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

YES X NO
----- -------

As of November 11, 1997 there were 7,589,121 shares of Common Stock, par value
$.01 per share, issued and outstanding.

GREAT LAKES AVIATION, LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)

September 30, December 31,
1997 1996
------------- -------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash.............................................. $ 1,819 $ 6,676
Accounts Receivable............................... 8,262 7,274
Inventories, net of accumulated allowance of
$4,032 in 1997 and $3,082 in 1996............. 13,284 12,668
Prepaid expenses and other current assets......... 1,635 2,254
--------- ----------
Total Current Assets........................ 25,000 28,872
--------- ----------
PROPERTY AND EQUIPMENT:
Flight Equipment.................................. 52,618 98,281
Other Property and Equipment...................... 4,152 3,863
Less - Accumulated Depreciation and Amortization.. (10,353) (14,901)
--------- ----------
Total Property and Equipment................ 46,417 87,243
OTHER ASSETS........................................... 2,299 2,494
--------- ----------
$ 73,716 $ 118,609
--------- ----------
--------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable.................................. $ 7,869 $ 13,089
Current Maturities of Long-term Debt.............. 6,123 6,668
Notes Payable..................................... 10,204 5,000
Deferred Leases................................... 4,798 -
Accrued Liabilities and Unearned Revenue.......... 3,815 3,512
--------- ----------
Total Current Liabilities................... 32,809 28,269
LONG-TERM DEBT, net of current maturities.............. 27,658 65,986
DEFERRED CREDITS....................................... 5,703 5,614
DEFERRED GAIN.......................................... 1,454 -
--------- ----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 50,000,000 shares
authorized, 7,589,121 shares issued and
outstanding at September 30, 1997, 7,586,326
shares issued and outstanding at
December 31, 1996............................. 76 76
Paid-in Capital................................... 28,927 28,920
Accumulated Deficit............................... (22,911) (10,256)
--------- ----------
Total Stockholders' Equity.................. 6,092 18,740
--------- ----------
$ 73,716 $ 118,609
--------- ----------
--------- ----------

Note: The Balance Sheet at December 31, 1996, has been derived from the
audited financial statements as of that date, but does not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. See condensed
notes to financial statements.

GREAT LAKES AVIATION, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30

(Unaudited)
(in thousands, except share and per share information)

For the Three Months For the Nine Months
Ended Ended
September 30 September 30
---------------------- -------------------
1997 1996 1997 1996
-------- ------ ------ -------

OPERATING REVENUES:
Passenger....................... $ 18,159 $ 29,482 $ 60,559 $ 78,917
Public Service.................. 1,623 1,053 3,820 2,283
Freight, charter and other...... 592 639 2,003 1,829
---------- --------- ---------- ---------
Total operating revenues..... $ 20,374 $ 31,174 66,382 $ 83,029
---------- --------- ---------- ---------
OPERATING EXPENSES:
Salaries, wages and benefits.... 4,539 6,947 16,333 20,157
Aircraft fuel................... 2,515 5,500 10,141 13,873
Aircraft parts and component
repair........................ 909 3,811 4,684 10,199
Commissions..................... 1,285 2,109 4,456 5,861
Depreciation and amortization... 940 1,375 3,489 4,199
Aircraft rental................. 1,850 3,083 7,489 8,169
Other rentals and landing fees.. 1,206 1,897 4,325 5,398
Other operating expenses........ 4,250 5,939 16,905 17,337
Shutdown and other nonrecurring
expenses...................... 2,638 - 6,855 -
---------- --------- ---------- ---------
Total operating expenses..... 20,132 30,661 74,677 85,193
---------- --------- ---------- ---------
Operating income (loss)...... 242 513 (8,295) (2,164)
INTEREST EXPENSE (Includes $556
and $1,132 of interest expense
related to grounded aircraft -
for the three months and nine
months ended September 30, 1997,
respectively - See Note 2)....... 1,287 1,439 4,360 4,388
---------- --------- ---------- ---------
Loss before income taxes.... (1,045) (926) (12,655) (6,552)
INCOME TAX EXPENSE (BENEFIT)..... - 82 - (1,616)
---------- --------- ---------- ---------
NET LOSS......................... $ (1,045) $ (1,008) $ (12,655) $ (4,936)
---------- --------- ---------- ---------
---------- --------- ---------- ---------

NET LOSS PER SHARE............... $ (0.14) $ (0.13) $ (1.67) $ (0.65)

WEIGHTED AVERAGE SHARES
OUTSTANDING.................... 7,589,121 7,586,326 7,588,680 7,585,099
---------- --------- ---------- ---------
---------- --------- ---------- ---------

GREAT LAKES AVIATION, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30
(Unaudited)
(in thousands)

OPERATING ACTIVITIES:
1997 1996
---------- ---------
Net Loss........................................ $ (12,655) $ (4,936)
Adjustments to reconcile net loss
to net cash used in operating
activities....................................
Depreciation and amortization.............. 4,125 4,199
Deferred income taxes...................... - (1,616)
Change in current operating items:
Accounts receivable, net.............. (988) (2,644)
Inventories, net...................... (616) (3,259)
Prepaid expenses and deposits......... 619 (557)
Deposits on flight equipment.......... - 353
Accounts payable and accrued
liabilities......................... (4,917) 4,478
Unpaid debt and lease installments.... 4,821 -
Deferred Gain......................... 1,454 -
--------- ---------
Net cash flows used in operating
activities........................ (8,157) (3,982)
--------- ---------
INVESTING ACTIVITIES:
Purchase of property and equipment.............. (234) (1,559)
Sale of property and equipment.................. - 20,789
Change in other assets.......................... 195 (674)
--------- ---------
Net cash flows provided by (used in)
investing activities.............. (39) 18,556
--------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of debt.................. 5,204 9,000
Repayment of debt............................... (1,865) (23,791)
Proceeds from sale of common stock.............. - 23
--------- ---------
Net cash flows provided by (used in) financing
activities.................................. 3,339 (14,768)
--------- ---------
NET CHANGE IN CASH................................ (4,857) (194)
CASH:
Beginning of Period............................. 6,676 6,785
--------- ---------
End of Period................................... $ 1,819 $ 6,591
--------- ---------
--------- ---------
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid during the year for -
Interest.................................... $ 203 $ 4,409
Noncash transactions -
Deferred manufacturer's incentives
received as:
Property and Equipment...................... (200) -
Inventory - 414
--------- ---------
$ (200) $ 414
--------- ---------
--------- ---------
Reclassification of deferred credit relating
to cancellation of Embraer Agreement.... - 1,156
--------- ---------
--------- ---------

The accompanying notes to consolidated financial statements are an integral part
of these statements

GREAT LAKES AVIATION, LTD.
CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS

1. GENERAL

The consolidated financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. The information furnished in the consolidated
financial statements includes normal recurring adjustments and reflects all
adjustments which are, in the opinion of management, necessary for a fair
presentation of such consolidated financial statements. The Company's business
is seasonal and, accordingly, interim results are not necessarily indicative of
results for a full year. In addition, financial results were significantly
affected by temporary suspension of service during the second quarter of 1997
and reduced operating levels during the second and third quarters of 1997, as
described below. Certain information and footnote disclosures normally included
in consolidated financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested that
these consolidated financial statements be read in conjunction with the
consolidated financial statements for the year ended December 31, 1996 and the
notes thereto included in the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission. The foregoing financial statements
contain an opinion by the Company's independent public accountants indicating
substantial doubt as to the Company's ability to continue as a going concern.

The consolidated financial statements include the accounts of Great Lakes
Aviation, Ltd. and its wholly-owned subsidiary "RDU Inc.", referred to
collectively as the Company. All significant inter-company transactions and
balances have been eliminated in consolidation.

During the period the Company operated scheduled passenger and air freight
service under three marketing identities. In the upper Midwest the Company
operates under a cooperative marketing agreement "United Express Agreement" with
United Airlines, Inc. (United). The Company also serves certain destinations in
this area as Great Lakes Airlines.

Revenues during the quarter ended September 30, 1997 were derived 94.9% from
United Express operations and 5.1% from Great Lakes Airlines operations.

2. TEMPORARY SUSPENSION OF FLIGHT OPERATIONS AND RELATED EXPENSES

Subsequent to the temporary suspension of flight operations on May 16, 1997, the
Company incurred continuing operating costs and extraordinary maintenance and
other expenditures during the shutdown period, which continued after the
resumption of reduced level of services on May 23, 1997. These non-revenue

generating expenses are shown on the statement of operations as shutdown
expenses. Shutdown expenses incurred after September 30, 1997 will be reflected
in the corresponding financial statements. Shutdown expenses consist of
aircraft lease rentals and depreciation for aircraft not used in scheduled
service, and costs of non-utilized personnel and similar costs. Such
operating costs for the third quarter of 1997 are summarized below:

Salaries, wages and benefits $1,048,550
Aircraft depreciation 313,232
Aircraft rental 1,276,520
----------
Total $2,638,302

In addition, the Company incurred interest cost of $555,920 during the third
quarter related to aircraft not used in scheduled service. The above costs
further contributed to the liquidity problems of the Company as discussed
below.

3. LIQUIDITY AND GOING-CONCERN MATTERS

The Company has recently suffered from losses, negative operating cash flows,
and has negative working capital. These matters have raised substantial doubt
about its ability to continue as a going concern and, as a result, the Report of
Independent Public Accountants on the financial statements for the year ended
December 31, 1996, contains a statement to this effect. The Company's ability
to continue as a going concern depends upon returning to sustained
profitability.

Raytheon Aircraft Company and its financing affiliates (collectively,
"Raytheon") is the company's primary aircraft supplier and largest creditor.
The Company has financed all of its Beechcraft 1900 aircraft and one of its
Brasilia aircraft under related lease and debt agreements with Raytheon, and
Raytheon has also extended the Company a $5 million loan secured by accounts
receivable (collectively, the "Raytheon Agreements"). The Raytheon Agreements
went into default in 1997 due to the Company's non-payment of scheduled amounts
due. Effective August 31, 1997, the Company refinanced its Raytheon aircraft
agreements. The refinancing resulted in a total of 31 Beech 1900 aircraft under
operating leases of various terms with monthly lease payments ranging from
$18,000 to $40,000 per aircraft and six (6) Beech 1900C airliners remaining as
owned aircraft. The refinancing also cured all of the defaults with Raytheon.
The refinancing resulted in a net gain of $1.5 million which will be recognized
over the life of the lease agreements.

On July 16, 1997 the Company reached an agreement with Raytheon pursuant to
which Raytheon provided a short term loan of $4 million. This loan, which was
originally due on July 29, 1997, has been extended until November 30, 1997 and
may, at the sole option of Raytheon, be extended on a month-to-month basis until
July 31, 1998. This loan, as well as existing Raytheon indebtedness, has been
collateralized with all previously unpledged Beech aircraft spare parts and
equipment. In addition, Raytheon was granted warrants for a period of ten

years, exercisable commencing July 16, 1998, to purchase one million shares of
Great Lakes common stock at a price of $.75 per share. As long as the Company
is in compliance with the July 16, 1997 agreement, all defaults under any other
financing agreements with Raytheon have been waived.

In addition to the Raytheon financing, the Company has financed 11 Brasilia
aircraft through lease and debt agreements with four unrelated entities
(collectively, the "Brasilia Agreements"). During 1997, all of the Brasilia
Agreements went into default due to non-payment of scheduled amounts due.
During the third quarter of 1997 the Company reached agreement with three of the
Brasilia debt and lease providers to cure delinquent payment defaults.

The fourth agreement under which the Company leased two used Embraers for
periods ending December 31, 1998, and September 30, 1999, was terminated by the
lessor by the exercise of its rights as a result of the default. These two
aircraft have been returned to the lessor.

During the third quarter of 1997, the Company continued to relieve its burden
of excess aircraft caused by the decision made in the second quarter of 1997
to significantly reduce its scope of operation. The Company currently serves
51 cities in 11 states versus 73 cities served in 21 states on May 16, 1997.
One Beechcraft 1900C airliner has been converted to a freight configuration,
and has been leased to a freight operator. Four 1900C airliners have been
sold, and seven 1900C airliners have been leased to other passenger
operators. The Company continues to actively pursue the sale or lease of four
remaining excess Beech 1900s in its possession and two excess Brasilias which
have been returned to the Lessor.

Aircraft in Operation on May 16, 1997 53
Aircraft Leased or Sold since May 16, 1997 (12)

Aircraft required for Scheduled Operations -
as of November 11, 1997 35
Remaining Surplus Aircraft 6

The Company continues to have past due trade accounts. Notes totaling
approximately $1.8 million have been issued to certain of the creditors which,
in general, require payment over a one year period. The balance of these notes
was $1.2 million as of September 30, 1997. The Company believes that it has
reached an appropriate accommodation with its key suppliers and that it will be
able to obtain necessary goods and services on acceptable terms as long as
timely payment is made for current purchases.

On April 25, 1997, the Company's United Express Agreement with United
Airlines expired. Subsequently, the term of the Agreement was extended
through December 31, 1997 while a new agreement is being negotiated. The
Company is in default of various covenants in the United Express Agreement as
a result of its non-payment of bills when due and not maintaining certain
financial ratios. Both of these defaults were waived by United through
December 31, 1997. The Company has historically earned the majority of its

revenues under the United Express Agreement. In exchange for certain per
passenger fees, the Company receives certain benefits from its relationship
with United including the listing of its flights under United's computer
reservation system code. While management believes that discussions on a
new agreement have been favorable, there can be no assurance that such
negotiations will be successful or that the existing United Express Agreement
can be renewed.

The Company has made substantial revisions to its flight schedules and may
make further revisions in an effort to continue to improve operating results.
Service in the Southeastern United States as Midway Connection and in the
Southwestern United States as Great Lakes Airlines has been eliminated. The
Company is also analyzing opportunities to rationalize its capacity levels,
optimize its aircraft fleet and mix, and improve the deployment of its
capacity. Further, the Company has negotiated improved terms and subsidy
rates on certain of its routes subsidized by the U.S. Department of
Transportation under the Essential Air Service program. As of November 11,
1997, new annual rates total $11,932,798.

There can be no assurance that the Company's operational improvement initiatives
will result in improved operating performance or sustained profitability. Such
initiatives will require the Company to reach an agreement with United on terms
acceptable to the Company, which is not assured. If the Company is unsuccessful
in its efforts, it may continue to be unable to meet its current and future
obligations, making it necessary to undertake such other actions as may be
appropriate to preserve asset values, potentially including seeking protection
from its creditors under applicable bankruptcy laws. The financial statements
do not include any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.

4. NEW ACCOUNTING PRONOUNCEMENT

In March 1997, the Financial Accounting Standards board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share", (SFAS 128), which
changes the way companies calculate their earnings per share (EPS). SFAS 128
replaces primary EPS with basic EPS. Basic EPS is computed by dividing reported
earnings by weighted average shares outstanding, excluding potentially dilutive
securities. Fully diluted EPS, termed diluted EPS under SFAS 128, is also to
be disclosed. The Company is required to adopt SFAS 128 in the first quarter of
fiscal 1999, at which time all prior year EPS are to be restated in accordance
with SFAS 128.

ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

1. OVERVIEW

The discussion and analysis in this section and in the notes to the financial
statements contain certain forward-looking terminology such as "believes,"
"anticipates," "will," and "intends," or comparable terminology. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected. Potential purchasers
of the Company's securities are cautioned not to place undue reliance on such
forward-looking statements which are qualified in their entirety by the cautions
and risks described herein and in other reports filed by the Company with the
Securities and Exchange Commission.

The Company began providing air charter service in 1979, and has provided
scheduled passenger service in the Upper Midwest since 1981, along the East
Coast from October 1995 to May 1997, and in the Southwest and Mexico from August
1995 to May 1997. In April 1992, the Company began operating as a United
Express carrier under a cooperative marketing agreement with United that expired
April 25, 1997, but was extended through December 31, 1997. As of September 30,
1997, the Company served 51 destinations in 11 states with 318 scheduled
departures each weekday.

The Company has suffered significant recent losses and negative operating cash
flows, has negative working-capital, and has defaulted on certain financial and
operating agreements. These matters raise substantial doubt about its ability
to continue as a going concern. The Company's ability to continue as a going
concern depends upon negotiating extended or improved terms under its major
operating agreement, and ultimately, returning to sustained profitability.

2. TEMPORARY SUSPENSION OF FLIGHT OPERATIONS
AND REVISED MARKETING FOCUS

On May 16, 1997 following inspections of the Company's operations by the FAA,
the Company and the FAA entered into an agreement whereby the Company
voluntarily suspended flight operations pending a thorough review of the
Company's maintenance and recordkeeping procedures. On May 23, 1997, the
Company resumed limited operations at five cities after entering into a Consent
Order (the "Order") with the FAA. This Order imposed a civil penalty of
$1,000,000 of which $300,000 is being paid in installments through September 1,
1998 and $700,000 which will be forgiven if the Company complies with all the
terms and conditions of the Order. The Order also required the Company to,
among other things, inspect each of the Company's aircraft and demonstrate to

the FAA's satisfaction that the Company has sufficient equipment, qualified
personnel, manuals, systems, procedures and financial resources to safely
conduct operations. The Company has returned to its historical core route
structure with the primary focus being that of the United Express Marketing
Relationship. Within that relationship the Company is maximizing its
operating advantage at Chicago's O'Hare Airport where the Company possesses
74 operating slots and revenue passenger yields are highest. A reduced level
of service has been reinstated at United's Denver hub and at the Company's
Minneapolis/St. Paul hub, where revenue passenger yields are lower and the
majority of its operations receive federal subsidies.

The Company's operations are fully restored consistent with the refocused
marketing strategy with scheduled aircraft departures and available seat miles
having been reduced by 33% and 37%, respectively, from the levels produced prior
to the May 16, 1997 shutdown. Revenues have declined by a lesser amount since
the refocused strategy has resulted in increased load factors.

At the current reduced level of service, the Company has four Beechcraft Model
1900C aircraft and two Embraer Brasilia surplus to its schedule service
requirements. The Company is currently negotiating with aircraft operators to
lease the surplus aircraft. Losses, if any, to be incurred as a result of such
dispositions are indeterminable at this time.

3. ESSENTIAL AIR SERVICE

Under the Essential Air Service program, which is administered by the U.S.
Department of Transportation "DOT", certain communities receive specified
levels of "essential air service" "EAS". The DOT may authorize federal
subsidies to compensate a carrier providing essential air service in
otherwise unprofitable markets. Under the FAA Reauthorization Act of 1996,
beginning October 1, 1997, the EAS program will be continuously funded from a
newly established Air Traffic Control Overflight Fee charged to foreign air
carriers. This new $50 million enhanced EAS budget is not subject to the
annual appropriations process previously used to fund the program. The new
enhanced EAS program has no scheduled expiration date and replaces the old
program that was scheduled to expire on September 30, 1998. If, in the
future, this new congressionally mandated funding mechanism was modified to
reduce or eliminate subsidy monies, the Company anticipates that it would
discontinue service to some or all of the subsidized communities.

At September 30, 1997 and September 30, 1996, the Company served 21 and 16
subsidized essential air service communities, respectively. The Company
received $3.8 and $2.3 million in essential air service subsidies for the
nine months ended September 30, 1997 and September 30, 1996, respectively. An
airline serving a community that qualifies for essential air services is
required to give the DOT a ninety (90) day advance notice before it may
terminate, suspend or reduce service. Depending on the circumstances, the DOT
may require the continuation of existing service until an agreement has been
reached with DOT for a new increased subsidy rate or a replacement carrier is
found.

Negotiations with DOT took place during the third quarter and have continued
into the fourth quarter to establish new rates which will increase future
Public Service Revenues. This is pursuant to congressional guidance that
encourages DOT to improve air service to small communities by increasing
service from two round trips to three each weekday and from two round trips
to three over the weekend period.

CURRENT ANNUALIZED ESSENTIAL
AIR SERVICE RATE STATUS AS OF: NOVEMBER 11, 1997

ANNUAL
ORDER SUBSIDY
ORDER # DATE RATE EXPIRES
-------- -------- ---------- ---------
* Alpena & Sault Ste. Marie, MI 97-09-15 09-19-97 $ 397,597 12-31-98

Dickinson, ND 96-02-23 02-20-96 $ 188,669 03-02-98

* Fairmont, MN / Brookings &
Yankton, SD / Devils Lake &
Jamestown, ND / Norfolk, NE 97-08-09 08-12-97 $4,070,247 07-31-99

Ironwood, MI 97-07-06 07-11-97 $ 412,726 06-30-98

Manistee, MI 96-12-42 01-04-97 $ 132,014 12-28-98

Mattoon, IL 97-05-03 05-14-97 $ 182,319 02-28-99

Mount Vernon, IL 96-08-23 08-23-96 $ 205,766 06-30-98

Ottumwa, IA &
Sterling-Rockfalls, IL 97-01-14 01-22-97 $ 764,142 09-30-98

* Lamar, CO / Goodland,
KS / Alliance, Chadron,
Kearney, & McCook, NE 97-10-10 10-14-97 $5,579,110 06-30-99
-----------
TOTAL $11,932,798
-----------

* Communities where the Company has completed negotiations and DOT has
subsequently issued a new enhanced Air Service Order.

Subsidy amounts received for all EAS routes in years ending:

December 31, 1996 $ 3,512,156

December 31, 1995 $ 2,639,857

4. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND
1996

The following table sets forth certain financial information regarding the
Company:

1997 1996
--------------------------- -------------
Cents % Increase Cents
Amount Per (decrease) Amount Per
(in 000s) ASM from 1996 (in 000s) ASM
---------- ---- --------- -------- -----
TOTAL OPERATING REVENUES........... 20,374 21.8 (34.6)% $31,174 17.4
---------- ---- --------- -------- -----
Salaries, Wages and Benefits....... 4,539 4.9 (34.7) 6,947 3.9
Aircraft Fuel...................... 2,515 2.7 (54.3) 5,500 3.1
Aircraft Parts..................... 909 1.0 (76.1) 3,811 2.1
Commissions........................ 1,285 1.4 (39.1) 2,109 1.1
Depreciation and Amortization...... 940 1.0 (31.6) 1,375 0.8
Aircraft Rental.................... 1,850 2.0 (40.0) 3,083 1.7
Other Rentals and Landing Fees..... 1,206 1.3 (36.4) 1,897 1.0
Other Operating Expense............ 4,250 4.5 (28.4) 5,939 3.3
Shutdown and other nonrecurring
expenses........................ 2,638 2.8 - - -
---------- ---- --------- -------- -----
Total Operating Expenses......... 20,132 21.6 (34.3)% 30,661 17.1
---------- ---- --------- -------- -----
Operating Income................... 242 0.2 (52.8) 513 0.3
---------- ---- --------- -------- -----
---------- ---- --------- -------- -----
Interest Expense (net)............. 1,287 1.4 (10.6)% 1,439 0.8
---------- ---- --------- -------- -----
---------- ---- --------- -------- -----

SELECTED OPERATING DATA Increase/(Decrease)
1997 from 1996 1996
---------------------------------------
Available Seat Miles (000s)........ 93,447 (48.0)% 179,575
Revenue Passenger Miles (000s)..... 49,276 (38.4)% 79,946
Passenger Load Factor.............. 52.70% 8.2 pts 44.5%
Passengers carried................. 160,512 (41.1)% 272,532
Average Yield per Revenue
passenger mile................... 36.9 cents 0.0 cents 36.9 cents
Revenue per ASM.................... 21.8 cents 4.4 cents 17.4 cents

OPERATING REVENUES

Operating revenues decreased 34.6% to $20.4 million in the third quarter of 1997
from $31.2 million during the third quarter of 1996. The decrease in operating
revenues resulted from the decrease in revenue passenger miles flown by 38.4% to
49.3 million in the third quarter of 1997 from 79.9 million during the third
quarter of 1996 in conjunction with a 48.0% decrease in capacity to 93.4 million
ASMs in the third quarter of 1997 from 179.6 million ASMs during the third
quarter of 1996. Corresponding load factor increased 18.4% from 44.5 % to
52.7%. The 34.6% decrease in operating revenue was not as sharp as the decrease
in capacity and revenue passenger miles flown due to a 54.1% increase in public
service revenue to $1.6 million in the third quarter of 1997 from $1.1 million
during the third quarter of 1996.

OPERATING EXPENSES

Total operating expenses decreased to $20.1 million, or 21.6 cents per ASM, in
the third quarter of 1997 from $30.7 million, or 17.1 cents per ASM in the third
quarter of 1996. The increase in cost per ASM reflects the costs associated
with the voluntary shutdown and the decrease in ASMs due to the shutdown.

Salaries, wages, and benefits expense increased to 4.9 cents per ASM during the
third quarter of 1997, from 3.9 cents per ASM during the third quarter of 1996,
due to normal pay increases and a smaller ASM base across which to spread fixed
labor.

Aircraft fuel expense per ASM decreased to 2.7 cents in the third quarter of
1997 from 3.1 cents in the third quarter of 1996 due to fuel prices, which began
rising dramatically in the fall of 1996 and subsequently dropped in 1997.

Aircraft parts and component repair expenses decreased to 1.0 cents per ASM
during the third quarter of 1997 from 2.1 cents per ASM during the third quarter
of 1996. This is mainly due to a decrease in the number of engine overhauls
performed from five during the third quarter of 1996 to one during the third
quarter of 1997.

Other operating expenses increased to 4.5 cents per ASM in the third quarter of
1997 from 3.3 cents in the third quarter of 1996, reflecting higher general and
administrative, marketing, communications, supplies, and contract airline
handling costs spread across a lower ASM base.

PROVISION FOR INCOME TAXES

The Company's effective tax rate was 0 percent in the third quarter of 1997 and
(8.9) percent in the third quarter of 1996. In recognition of the Company's
financial results of recent periods and the uncertainties of the airline
competitive environment, the Company has elected to cease recognizing future tax
benefits until it is reasonably assured that such benefits will be realized.

5. RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996

The following table sets forth certain financial information regarding the
Company:

STATEMENT OF OPERATIONS DATA

For the Nine Months Ended September 30
----------------------------------------------------------------------
1997 1996
----------------------------------------- ---------------------------
Cents % Increase Cents
Amount Per (decrease) Amount Per
(in 000s) ASM from 1996 (in 000s) ASM
----------- ------- ------------ ---------- -------
TOTAL OPERATING REVENUES 66,382 19.2 (20.1)% $ 83,029 16.4
---------- ------- ------------ ---------- ------

Salaries, Wages and Benefits..................... 16,333 4.7 (19.0) 20,157 4.0
Aircraft Fuel.................................... 10,141 2.9 (26.9) 13,873 2.7
Aircraft Parts and Component Repair.............. 4,684 1.4 (54.1) 10,199 2.0
Commissions...................................... 4,456 1.3 (24.0) 5,861 1.2
Depreciation and Amortization.................... 3,489 1.0 (16.9) 4,199 0.8
Aircraft Rental.................................. 7,489 2.2 (8.3) 8,169 1.6
Other Rentals and Landing Fees................... 4,325 1.2 (19.9) 5,398 1.1
Other Operating Expense.......................... 16,905 4.9 (2.5) 17,337 3.4
Shutdown and other nonrecurring expenses......... 6,855 2.0 - - -
---------- ------- ----------- --------- -----
Total Operating Expenses....................... 74,677 21.6 (12.3)% 85,193 16.8
---------- ------- ----------- --------- -----
Operating Income................................. (8,295) (2.4) - (2,164) (0.4)
---------- ------- ----------- --------- -----
---------- ------- ----------- --------- -----
Interest Expense (net) 4,360 1.3 (0.6)% 4,388 0.9
---------- ------- ----------- --------- -----
---------- ------- ----------- --------- -----

SELECTED OPERATING DATA Increase/(Decrease)
1997 From 1996 1996
---------------------------------------
Available Seat Miles (000s).......... 345,678 (31.7)% 506,424
Revenue Passenger Miles (000s)....... 157,196 (30.1)% 224,866
Passenger Load Factor................ 45.5% 1.1pts 44.4%
Passengers carried................... 524,618 (31.2)% 762,964
Average yield per Revenue
passenger mile..................... 38.5 CENTS 3.4 CENTS 35.1 CENTS
Revenue per ASM...................... 19.2 CENTS 2.8 CENTS 16.4 CENTS

OPERATING REVENUES

Operating revenues decreased 20.1 percent to $66.4 million in the first three
quarters of 1997 from $83.0 million during the first three quarters of 1996.
The decrease in operating revenues resulted from the decrease in revenue
passenger miles flown by 30.1 % to 157.2 million in the first three quarters of
1997 from 224.9 million during the first three quarters of 1996 in conjunction
with a 31.7% decrease in capacity to 345.7 million ASMs in the first three
quarters of 1997 from 506.4 million ASMs during the first three quarters of
1996. The 20.1% decrease in operating revenues was not as sharp as the 30.1%
decrease in revenue passenger miles flown due to a 3.4 cent increase in yield to
38.5 cents in the first three quarters of 1997 from 35.1 cents in the first
three quarters of 1996. The increase in passenger yield is due primarily to

price increases in key markets, moving service from lower yield markets to
higher yield markets, and due to an increased emphasis on managing the quantity
of seats made available for sale at discounted rates. In addition, public
service revenue increased 67.3% to $3.8 million in the first three quarters of
1997 from $2.3 million in the first three quarters of 1996.

OPERATING EXPENSES

Total operating expenses decreased to 74.7 million, or 21.6 cents per ASM, in
the first three quarters of 1997 from $85.2 million, or 16.8 cents per ASM
during the first three quarters of 1996. The increase in cost per ASM reflects
the costs associated with the voluntary shutdown and the decrease in ASMs.

Salaries, wages, and benefits expenses increased to 4.7 cents per ASM during the
first three quarters of 1997, from 4.0 cents per ASM during the first three
quarters of 1996, due to normal pay increases, increases in maintenance and
customer service payroll, increased health insurance claims expenses in the
first quarter of 1997, and a smaller ASM base across which to spread fixed labor
costs.

Aircraft fuel expense per ASM increased to 2.9 cents in the first three quarters
of 1997 from 2.7 cents in the first three quarters of 1996 due to higher fuel
prices, particularly during the first half of 1997 as compared with the first
half of 1996.

Aircraft parts and component repair expenses decreased to 1.4 cents per ASM
during the first three quarters of 1997, from 2.0 cents per ASM in the first
three quarters of 1996, due to thirteen fewer engine overhauls performed in the
first three quarters of 1997 compared with the first three quarters of 1996.

Other operating expenses increased to 4.9 cents per ASM in the first three
quarters of 1997 from 3.4 cents per ASM in the first three quarters of 1996,
reflecting fixed expenses, including general and administrative, marketing, and
communications, spread across a lower ASM base in the first three quarters of
1997. Airline supplies (deicing fluid) and interrupted trip expense also
increased in early 1997 versus early 1996 due to the increase in weather related
flight irregularities.

PROVISION FOR INCOME TAXES

The Company's effective tax rate was 0 percent in the first three quarters of
1997 and 24.7 percent in the first three quarters of 1996. In recognition of
the Company's financial results of recent periods and the uncertainties of the
airline competitive environment, in the second quarter of 1996, the Company
elected to cease recognizing future tax benefits until it is reasonably assured
that such benefits will be realized.

LIQUIDITY AND CAPITAL RESOURCES

Cash decreased $4.9 million to $1.8 million at September 30, 1997 from $6.7
million at December 31, 1996. Net cash flows used in operating activities were
$8.2 million and $4.0 million in the first three quarters of 1997 and 1996,
respectively. The major use of such cash flows in the first three quarters of
1997 was the funding of the Company's $12.7 million loss offset by the deferral
of lease payments of $4.8 million.

The Company has suffered recent losses and negative operating cash flows, has
negative working capital, and has defaulted on certain financial and operating
agreements. These matters have raised substantial doubt about its ability to
continue as a going concern and, as a result, the Report of Independent Public
Accountants on the financial statements for the year ended December 31, 1996,
contains a statement to this effect. The Company's ability to continue as a
going concern depends upon returning to sustained profitability.

Capital expenditures related to aircraft and equipment totaled $234,000 in the
first three quarters of 1997 and $1.6 million during the first three quarters of
1996. New notes provided cash totaling $5.2 million in the first three quarters
of 1997 while 1.9 million of principal repayments were made. Principal
repayments exceeded long-term borrowings by $14.8 million in the first three
quarters of 1996.

Long-term debt, net of current maturities of $6.1 million, totaled $27.7 million
at September 30, 1997 compared to $66.0 million, net of current maturities of
$6.7 million, at December 31, 1996.

ITEM 6

EXHIBITS AND REPORTS ON FORM 8-K

a) Exhibit 27 Financial Data Schedule

b) The Company filed the following documents with the Commissioner (File
No. 0-23224) during the quarter for which this report is filed:

1) The Company's Current Report of Form 8-K filed on October 20, 1997
(File No. 0-23224) relating to the resignation of the Company's
independent public accountant.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunder duly authorized.

GREAT LAKES AVIATION, LTD.

Dated: November 11, 1997 By /s/ Douglas G. Voss
--------------------------------
Douglas G. Voss
President and Chief Executive Officer

By /s/ Steven J. Wagner
----------------------------------
Steven J. Wagner
Vice President and
Chief Accounting Officer

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
- -------- -----------

27 Financial Data Schedule