The management of Great Lakes Aviation, Ltd. (the “Company”) has determined that the Company is unable to file its Form 10-K Annual Report for the period ended December 31, 2013 within the prescribed time period, without unreasonable effort and expense. Management needs additional time to accurately evaluate and disclose the risks and circumstances pertaining to the Company, including the Company’s non-compliance with a leverage ratio covenant in its credit agreement with GB Merchant Partners, LLC and Crystal Capital LLC, and the Company’s ability to continue as a going concern. The Company expects to file its Form 10-K Annual Report for the period ended December 31, 2013 by April 15, 2014.
New Federal Aviation Administration (“FAA”) pilot qualification rules imposed as part of the Airline Safety and Federal Aviation Administration Extension Act of 2010 in combination with revised FAR Part 117 (Flight Crew Member Flight and Duty Limitations and Rest Requirements) pilot rest and duty time rules, has created a shortage of qualified pilots and negatively affected our operations and financial condition.
The lack of available pilots to hire has caused the Company to curtail operations and reduce capacity in the fourth quarter of 2013, and is expected to continue into 2014 or until the Company can hire and train a sufficient number of pilots. The curtailment of operations has had a negative impact on revenue, operating income and liquidity. As of December 31, 2013 the Company was not in compliance with a leverage ratio covenant contained in our senior credit facility’s credit agreement.
On March 18, 2014, the FAA granted the Company authority to operate our Beechcraft 1900D aircraft in a restricted operational configuration which has allowed us to hire pilots under FAR Part 135. The significance of this change is that it now enables the Company to rebuild pilot staffing levels. The Company believes that this authorization has improved its ability to hire new pilots. The Company requires additional time to analyze the impact of this change and make adjustments to forecasted operations.
Until the Company is able to re-staff qualified pilots, in sufficient quantity, it is expected that the Company will not have sufficient forecasted liquidity to service our existing debt obligations which raises substantial doubt on the Company’s ability to continue as a going concern. We are engaged in discussions with the lenders of our senior credit facility and are pursuing additional or alternative sources of financing.