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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                   For the fiscal year ended December 31, 2002

                                       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)


                    1022 Airport Parkway, Cheyenne, WY 82001
                    ----------------------------------------
                    (Address of principal executive offices)


Registrant's telephone number, including area code:  (307) 432-7000

Securities registered pursuant to Section 12(b) of the Act:     None

Securities registered pursuant to Section 12(g) of the Act:     Common Stock,
                                                                par value $.01

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 [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [_] No [X]

The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 31, 2003 was approximately $2,896,667.

As of March 31, 2003 there were 14,052,166 shares of Common Stock of the
registrant issued and outstanding.

                       Documents Incorporated By Reference

None.

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                                 FORM 10-K INDEX

PART I .....................................................................  1
    Item 1.  BUSINESS ......................................................  1
    Item 2.  PROPERTIES .................................................... 12
    Item 3.  LEGAL PROCEEDINGS ............................................. 12
    Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ........... 13

PART II .................................................................... 14
    Item 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
             STOCKHOLDER MATTERS ........................................... 14
    Item 6.  SELECTED FINANCIAL AND OPERATING DATA ......................... 14
    Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
             CONDITION AND RESULTS OF OPERATIONS ........................... 16
    Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .... 28
    Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ................... 30

PART III ................................................................... 58
    Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
             AND FINANCIAL DISCLOSURE ...................................... 58
    Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ............ 58
    Item 11  EXECUTIVE COMPENSATION ........................................ 59
    Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
             MANAGEMENT .................................................... 62
    Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ................ 63
    Item 14. CONTROLS AND PROCEDURES ....................................... 64

PART IV .................................................................... 65
    Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
             FORM 8-K ...................................................... 65

SIGNATURES ................................................................. 67



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Forward-Looking Statements

In accordance with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, Great Lakes Aviation, Ltd. ("Great Lakes" or the
"Company") notes that certain statements in this Form 10-K and elsewhere are
forward-looking and provide other than historical information. The Company's
management may also make oral, forward-looking statements from time-to-time.
These forward-looking statements include, among others, statements concerning
the Company's general business strategies, financing decisions and expectations
for funding expenditures and operations in the future. The words, "believe,"
"plan," "continue," "hope," "estimate," "project," "intend," "expect" and
similar expressions reflected in such forward-looking statements are based on
reasonable assumptions, and no statements contained in this Form 10-K and
elsewhere should be relied upon as predictions of future events. Such statements
are necessarily dependent on assumptions, data or methods that may be incorrect
or imprecise and may be incapable of being realized. The risks and uncertainties
inherent in these forward-looking statements could cause actual results to
differ materially from those expressed in or implied by these statements.

As more fully described in this report, important factors that could cause
results to differ materially from the expectations reflected in any
forward-looking statements include: (1) the Company's dependence on its
code-sharing relationships with United Airlines, Inc., which is undergoing
reorganization under the United States Bankruptcy Code, and Frontier Airlines,
Inc.; (2) the outcome of United's bankruptcy proceedings, including whether
United amends or rejects its code sharing agreement with the Company; (3) the
Company's ability to pay the restructured current maturities of indebtedness and
operating lease payments, which have been scheduled based on, among other
things, the Company's forecasted revenues; (4) the effect of general economic
conditions on business and leisure travel; (5) domestic and international
terrorism and military actions; (6) passenger confidence in the safety of air
travel; (7) fuel costs; (8) seasonality; (9) continued receipt of Essential Air
Service subsidies at currently contemplated rates; and (10) increased insurance
and security expenses. Additional information about the factors and events that
could cause actual results to differ materially from those implied by
forward-looking statements is contained in "Risk Factors Relating to the Company
and the Airline Industry" below.

Readers are cautioned not to place undue reliance on the forward-looking
statements contained herein, which speak only as of the date hereof. Changes may
occur after that date, and the Company does not undertake to update any
forward-looking statements except as required by law in the normal course of its
public disclosure practices.

                                     PART I

Item 1. BUSINESS

General

Great Lakes is a regional airline that began providing scheduled passenger
service under its own marketing identity on October 12, 1981. On April 26, 1992
the Company began operating a large portion of its route network as a United
Express carrier. The United Express marketing program included painting of
aircraft with a United Express paint scheme, branding of station facilities and
outfitting Great Lakes customer service employees with United designated
uniforms. On May 1, 2001, the program with United was terminated and the Company
implemented a new three-year code share agreement with United that included
returning aircraft, station signage and customer service personnel to the Great
Lakes market identity. Subsequently, the Company negotiated a code share
agreement with Frontier Airlines, Inc. which was implemented in phases beginning
on July 7, 2001. Under the terms of the Company's code share agreements,
schedules are published to enable customers of Great Lakes and its code sharing
partners to conveniently book well timed connecting flights. Customers that only
travel to and from the hubs (Denver, Minneapolis and Phoenix) purchase tickets
directly from Great Lakes or travel agents.

As of March 31, 2003, the Company served 32 destinations in nine states to and
from Denver as code sharing partners with both United and Frontier. It also
served four destinations in two states to and from Minneapolis and two
destinations in two states to and from Phoenix. On February 28, 2003, the
Company discontinued its service to the


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Chicago hub after the United States Department of Transportation ("DOT") elected
to reduce its subsidy funding for service from Chicago.

As of December 31, 2002, the Company's fleet consisted of 37 Beechcraft Model
1900D 19-passenger aircraft and seven Embraer Model 120 30-passenger aircraft.
The Company also has two Beechcraft Model 1900C aircraft that are used
exclusively for freight operations. As more fully explained below, on December
31, 2002, the Company entered into a restructuring agreement (the "Restructuring
Agreement") with Raytheon Aircraft Credit Corporation ("Raytheon") which, among
other provisions, permits the Company to return to Raytheon seven Model 1900D
aircraft during 2003 that are surplus to the needs of the Company.

Liquidity and Financing

Beginning in 2001, the airline industry suffered substantial declines in revenue
as demand for air service fell due to a variety of factors, including terrorism
and general economic trends. It is unclear when and to what extent demand for
air travel will return. Airlines have also incurred increased expenses,
including insurance and security. As a consequence, most air carriers, including
the Company, have incurred substantial losses.

Due to significant losses in 2001 and 2002, the Company has exhausted its
available sources of working capital and has no financing agreements in place
under which it can secure additional funds. At the end of 2001, the Company was
in arrears in its payments to some institutions providing financing for the
Company's aircraft, which resulted in most of the Company's long-term debt
obligation being reclassified into current liabilities as of December 31, 2001.

On December 31, 2002 and during the first quarter of 2003, the Company
restructured its financing arrangements with Raytheon and certain other
institutions providing financing for the Company's aircraft. The effect of this
restructuring was to reduce the Company's payments to these creditors. It also
provided for the return of surplus aircraft. However, the debt and lease rental
payments to be made under the restructuring agreements are closely aligned with
expected cash flows, and any shortfall from expected cash flows may result in
the Company's inability to make the scheduled payments. There are significant
uncertainties regarding the Company's ability to achieve the required cash flows
because of a variety of factors beyond the Company's control, including the
outcome of United's reorganization in bankruptcy, volatility of fuel prices,
reduced passenger demand, effects of the Iraq conflict and general economic
conditions. See "-- Restructuring Agreement with Raytheon" and "-- Other
Financing" below.

As a result of continued declines in traffic and fare levels as well as slower
receipt of essential air service payments, the Company did not make its February
and March payments under the Restructuring Agreement to Raytheon and will not
make the payments due Raytheon in April 2003. In addition the Company is not in
compliance with certain financial covenants contained in that Agreement. On
April 14, 2003, Raytheon waived the foregoing requirements until June 15, 2003.

At December 31, 2002, the Company was in compliance with its debt agreements or
had obtained amendments or short-term waivers from its lenders with respect to
any nonpayment of scheduled debt installments or noncompliance with financial
covenants. However, the Company cannot determine with a high degree of
confidence that it will be able to make the required payments or remain in
compliance with the agreements during the year 2003. Therefore the amount of
debt that by its terms would otherwise be due after one year is shown as
long-term obligations classified as current. In addition to the contractual
amounts due the lenders, the balance includes $22.3 million of additional
carrying amounts under FAS 15.

The Company plans to continue to seek additional sources of permanent capital;
however, it is unlikely that such capital will be available until the Company
and the airline industry appear capable of returning to a continuing level of
profitability. If the Company is unable to generate adequate funding through
improved financial performance or a combination of additional financing and
further settlements with creditors, the Company may be required to make further
reductions in operating levels and develop other alternatives to provide
sufficient operating funds. No assurances can be made that the Company will be
successful in finding financing alternatives to allow it to continue as a going
concern or that its creditors will not impose conditions that result in a
corporate restructuring or ceasing operations.

The Company's financial statements have been prepared assuming that the Company
will continue as a going concern. The financial statements do not include any
adjustments that might result if the Company were forced to discontinue
operations. As discussed in note 1 to the financial statements, the Company has
suffered significant losses in the years ended December 31, 2002 and 2001, and
had liabilities in excess of assets at December 31, 2002.


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The auditor's report dated March 17, 2003 on the Company's financial statements
states that these matters raise substantial doubt about the Company's ability to
continue as a going concern.

Air Transportation Safety and System Stabilization Act

The terrorist attacks of September 11, 2001 had a significant impact on the
business of the Company. Following the attacks, the Company took immediate
action to reduce its level of operations to better match the reduced level of
passenger demand. However, as was the case with most of the airline industry,
these actions were not sufficient to avoid large economic losses from the
initial grounding of all flights, increased expenses and substantially reduced
passenger revenues.

In response to the terrorist acts, Congress passed the Air Transportation Safety
and System Stabilization Act ("Stabilization Act"). The Stabilization Act
included for all U.S. airlines and air cargo carriers provisions for cash
compensation of $5 billion, of which $1.9 million was allocated to Great Lakes
and received during 2001 and 2002. In addition to benefits for the entire
airline industry, the Stabilization Act also took notice of the unique
requirements of providing service to small communities by increasing funding for
Essential Air Service. See "Essential Air Service Program" below.

Management

On December 31, 2002, the Company appointed Charles R. Howell IV as Chief
Executive Officer. Mr. Howell joined the Company in August 2002 as Chief
Operating Officer. He served most recently as President and Chief Executive
Officer of Corporate Airlines, Inc., a Nashville-based airline that he
co-founded in 1996. The Company plans to further strengthen management by hiring
a new senior financial officer and additional marketing personnel.

United and Frontier Code Sharing Relationships

Prior to May 1, 2001, the Company had been operating scheduled passenger service
exclusively as United Express under a cooperative marketing agreement with
United Airlines, Inc. ("United"). On February 1, 2001, the Company and United
entered into a three-year code sharing agreement, which became effective May 1,
2001. Under this agreement, the Company no longer operates under the name
"United Express"; rather, it operates under its own name but continues to use
the UA code for connecting service to United points beyond the Company's hubs.
The United code sharing agreement provides for use of United's flight designator
for Great Lakes flights connecting with United flights in Denver, Minneapolis,
Phoenix and Chicago, and permits the Company to enter into code sharing
agreements with certain other carriers.

On December 9, 2002, UAL, Inc. and its subsidiaries, including United, filed for
protection under Chapter 11 of the United States Bankruptcy Code. United has
obtained an order from the bankruptcy court that allows United to perform under
its code sharing agreement with the Company. United has assumed but has the
right to reject the code sharing agreement until October 6, 2003, which is the
deadline to file a plan of reorganization. The deadline for acceptance of the
plan is December 5, 2003. Creditors must file proofs of claim against United by
May 12, 2003. The deadline does not apply to executory contracts such as the
Company's code sharing agreement, unless such contracts are rejected by United.
The deadlines may be extended by the bankruptcy court.

On May 3, 2001, the Company entered into a code sharing agreement with Frontier
Airlines, Inc. ("Frontier"), which was implemented July 9, 2001. The Frontier
agreement provides for the use of Frontier's flight designator on Great Lakes'
flights connecting with Frontier's flights in Denver. Accordingly, certain
flights to and from Denver carry both the United and Frontier designator as well
as the Great Lakes designator.

Markets

As of December 31, 2002, the Company operated 84 departures daily from Denver,
five departures daily from Minneapolis/St. Paul, three departures daily from
Phoenix and five departures daily from Chicago. Chicago service was discontinued
on February 28, 2003. The Company currently serves 41 airports in 11 states.


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Essential Air Service Program

The Airline Deregulation Act of 1978 (the "Deregulation Act") allowed airlines
great freedom to introduce, increase and generally reduce or eliminate service
to existing markets. Under the Essential Air Service program ("EAS"), which is
administered by the DOT, certain communities that received scheduled air service
prior to the passage of the Deregulation Act are guaranteed specified levels of
"essential air service." The DOT may authorize federal subsidies to compensate a
carrier providing essential air service in otherwise unprofitable or minimally
profitable markets. An airline serving a community that qualifies for essential
air services is required to give the DOT advance notice before it may terminate,
suspend or reduce service. Depending on the circumstances, the DOT may require
the continuation of existing service until a replacement carrier is found. EAS
rates are normally set for two-year contract periods for each city. Significant
fluctuations in passenger revenues as well as in fuel and other costs cause EAS
routes to become unprofitable during these two-year terms.

The DOT may request competitive proposals from other airlines at the end of the
contract period for EAS service to a particular city. Proposals, when requested,
are evaluated on, among other things, level of service provided, subsidy
requested, fitness of the applicant and comments from the communities served.

For the federal fiscal year ended September 30, 2001, the EAS budgeted subsidy
funding level for the entire program was $50 million. In recognition of the
impact of the terrorist attacks of September 11, and the contractual obligation
to provide a fixed level of service to EAS communities by carriers receiving
subsidies, Congress authorized the DOT to increase subsidy rates to compensate
for reduced passenger revenues and higher level of expenses. Congress set the
EAS funding level at $113 million for the fiscal year ended September 30, 2002
and at $113 million for the fiscal year ending September 30, 2003.

As a result of these funding increases and the reduction of non-EAS service, the
Company's EAS revenues were approximately 36% of total revenue ($30.6 million)
in 2002, up from approximately 19% ($19.3 million) in 2001 and 11% ($14.9
million) in 2000. For 2003, total subsidy revenues are expected to be
approximately the same as the prior year due to the Company's filing for subsidy
support at additional cities, which are expected to replace subsidies lost with
the termination of service to and from Chicago. At March 31, 2003, the Company
served 25 essential air service communities on a subsidized basis. Of these, 12
were being served under closed rate orders and the remainder were in the process
of negotiation.

Aircraft

At December 31, 2002, the Company's fleet consisted of 39 Beechcraft 1900
aircraft and seven Embraer Brasilia passenger aircraft. Thirty-seven Beechcraft
1900D aircraft were available for use in passenger service, and two Beechcraft
1900C aircraft were being utilized exclusively for scheduled mail and freight
operations. The Beechcraft 1900D aircraft are pressurized, radar equipped and
offer a 300-mile per hour cruising speed for 19 passengers, plus cargo, with a
range of 850 miles. The Beechcraft 1900D aircraft is widely regarded by airlines
as an efficient and reliable aircraft for regional service. At December 31,
2002, the Company owned 36 and leased one of the passenger-configured Beechcraft
1900D aircraft.

On May 14, 2002, one owned Beechcraft 1900D and one leased Beechcraft 1900D,
along with spare parts inventory, were destroyed by fire in a maintenance hangar
owned by the Hall County Airport Authority and located in Grand Island,
Nebraska. The fire started during hangar door modification performed by an
outside contractor at the request of the Hall County Airport Authority. Of the
total insurance proceeds of $10.0 million received by the Company, $7.8 million
was applied to payment of the value of the leased aircraft and current and past
due debt and lease obligations due Raytheon. The balance was used by the Company
to replace spare parts inventory and tooling or was added to general corporate
funds.

Because of the reduction in demand for air service following the events of
September 11, the Company decided to retire seven of its Beechcraft 1900D
aircraft. In conjunction with the Restructuring Agreement, as more fully
described below, the Company will return the seven 1900D aircraft during 2003.
Also in conjunction with the Restructuring Agreement, the Company purchased nine
of the formerly leased 1900D aircraft which it elected to


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retain in its fleet. The aggregate purchase price for the nine aircraft was
$22.5 million. Two 1900C aircraft were returned during 2002.

At December 31, 2002, two of the Company's seven Brasilia aircraft were in
scheduled service and the remainder were being used as spares and for limited
charter service. Four of the Brasilia aircraft are owned and three are leased
under terms ranging from nine months to 10 years. The 30 passenger Embraer
Brasilia aircraft are equipped with advanced avionics, have restrooms, are
staffed with a flight attendant and offer a 330-mile per hour cruising speed
with a range of 750 miles. The Company intends to increase the number of
Brasilia aircraft in scheduled service beginning in July 2003, as warranted by
passenger demand. The Company will return one Brasilia at the end of its lease
term in September 2003. Thereafter, the Company believes that there will be
greater opportunities to deploy these aircraft as the larger airlines reduce
service to small cities that are unprofitable for their regional jet aircraft.

The table below shows the number and type of aircraft operated by the Company on
January 1, 2002 and December 31, 2002.

                                                       December 31, 2002
                           January 1,   December 31,  ------------------
                              2002          2002        Owned    Leased
                          -----------  -------------  --------  --------
Beechcraft 1900C                4             2           --        2
Beechcraft 1900D               40            37           36        1
Embraer 120                     8             7            4        3
                          -----------  -------------  --------  --------
      Total                    52            46           40        6
                          ===========  =============  ========  ========

As of December 31, 2002, the average age of the Company's aircraft was
approximately eight years and as of December 31, 2001, the average age of the
Company's aircraft was approximately seven years.

Restructuring Agreement with Raytheon

Following the terrorist attacks of September 11 and due to continuing
unfavorable economic conditions, the Company suffered substantial losses during
the fourth quarter of 2001 and the year 2002. These losses produced a
significant reduction in liquidity and rendered several aircraft surplus to the
Company's reduced level of operations. Because of these financial difficulties,
the Company missed contractual debt and lease payments during these periods and
made only minor payments on its debt and lease obligations. As a result, debt of
$111.0 million was in default and the Company was in arrears on lease payment
obligations which totaled $11.3 million at December 31, 2002, immediately prior
to the restructuring discussed below. Of these amounts, $106.0 million and $6.8
million, respectively, were owed to Raytheon.

On December 31, 2002, the Company finalized an agreement (the "Restructuring
Agreement") with Raytheon regarding lease and debt financing provided by
Raytheon for the Company's Beechcraft 1900C and 1900D aircraft fleet. The
Restructuring Agreement included provisions for:

     o    the issuance of 5,371,980 shares of the Company's Common Stock to
          Raytheon,

     o    the termination and modification of aircraft operating leases,

     o    the return of aircraft in satisfaction of indebtedness obligations,

     o    the modification of principal and interest rates for various aircraft
          financing promissory notes and

     o    a restructuring of certain non-aircraft indebtedness.


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Return of Aircraft. The Company has agreed to return seven Beechcraft 1900D
aircraft to Raytheon during 2003 in exchange for the cancellation and
extinguishment of one operating lease and six promissory notes. Because the
Company will incur repair and refurbishment expenses during 2003 in order to
return the aircraft to Raytheon in good working order, the Company has
recognized a liability of $4 million for such expenditures. In addition, and in
accordance with the provisions of SFAS 15 regarding the satisfaction of debt by
a transfer of assets, the Company has adjusted the net book value of the six
owned aircraft down to the aircrafts' total fair market value of $15 million,
and has recognized an impairment loss of $5.5 million. Upon return of the
aircraft to Raytheon in 2003, the Company expects to reduce its outstanding
aircraft debt and lease liabilities for these seven aircraft by $20.9 million
and record a gain from extinguishment of debt of $5.4 million.

Termination of Aircraft Operating Leases/Financed Purchase of Aircraft.
Operating leases for nine Beechcraft 1900D aircraft have been converted to
aircraft ownership with purchase money financing. The Company has recorded the
purchase of the nine aircraft at a total fair market value of $22.5 million with
a corresponding increase in long-term aircraft debt. Interest will accrue on the
unpaid principal balance of the new debt at the rate of LIBOR plus 375 basis
points per annum. Payments of principal and accrued interest are to be made in
120 monthly installments, with the amount of the monthly payment to be adjusted
quarterly to reflect any change in the LIBOR rate.

Restructured Financing Terms for Aircraft Promissory Notes. The Company obtained
amended debt financing for 21 Beechcraft 1900D aircraft promissory notes (the
"Restructured Aircraft Notes") in the amount of $52.5 million. Each of the
Restructured Aircraft Notes reflects an initial principal balance in the amount
of $2.5 million with interest to accrue on the unpaid principal balance at the
rate of LIBOR plus 375 basis points per annum. Payments of principal and accrued
interest are to be made in 120 monthly installments, with the amount of monthly
payment to be adjusted quarterly to reflect any change in the LIBOR rate. Total
cash payments for all of the Restructured Aircraft Notes is estimated to be
$68.1 million over the term of the notes.

Accounting for Refinancing of Aircraft Debt and Lease Obligations under SFAS 15.
Consistent with SFAS 15, the restructured financing terms for all 30 of the
Beechcraft 1900D aircraft debt and lease obligations discussed above (the "Old
Aircraft Debt") has been accounted for as a troubled debt restructuring. SFAS 15
states that in a troubled debt restructuring, the debtor shall account for the
effects of the restructuring prospectively from the time of restructuring and
shall not reduce the carrying amount of the existing debt unless the carrying
amount of the existing debt exceeds the total future cash payments of the new
debt under the restructured terms. Included in the carrying value of
restructured debt and lease obligations were $3.7 million of deferred gains and
other deferred credits. The effects of any changes in the face amount or
interest rate are to be amortized in future periods by reducing interest expense
to an effective interest rate which equates the net present value of the future
cash payments under the modified terms to the carrying value on the debtor's
books.

After increasing the Company's liabilities by $22.5 million for financing of the
Purchased Aircraft, the carrying value on the Company's books for the Old
Aircraft Debt was $101.3 million, while total future cash flows for the 30 new
and amended aircraft promissory notes (the "New Aircraft Debt") was estimated to
be $95.7 million. In accordance with the provisions of SFAS 15, the amount of
the Company's long-term liabilities has been reduced by $5.6 million in order to
reflect the carrying value of the Old Aircraft Debt to an amount not more than
the estimated future cash flows of the New Aircraft Debt. The $20.7 million
difference between the $95.7 million restructured value of the Old Aircraft Debt
and the $75 million principal amount of the New Aircraft Debt will be amortized
as a reduction to the Company's interest expense over the next ten years.

Modification of Terms for Aircraft Operating Leases. Pursuant to the terms of
the Restructuring Agreement, $384,000 of pre-December 31, 2002 unpaid lease
payments on two Beechcraft 1900C aircraft operating leases has been
contractually extinguished and the Company negotiated a reduction in the monthly
lease payments for the two leases, which is anticipated to yield net cash flow
savings of $1.2 million over the next ten years. The $384,000 liability will
remain on the Company's books and be amortized over a period of 120 months.

Other Debt Restructuring Involving Partial Settlement Through Issuance of
Equity. $14.9 million of outstanding principal and accrued interest on various
non-aircraft debt was restructured into three new promissory notes (the


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"Non-Aircraft Debt") with a total principal amount of $11.2 million and
estimated future cash payments of $15.2 million. In addition, the Company issued
5,371,980 shares of the Company's Common Stock to Raytheon, representing a 38.2%
interest in the Company's outstanding post-restructuring shares of Common Stock.

The restructuring of the Non-Aircraft Debt through the issuance of equity and
new debt obligations was accounted for in compliance with SFAS 15. The new debt
obligations were recorded at the carrying amount of the prior debt obligations,
less the fair value of the equity granted to Raytheon. The Company has
determined that, on the effective date of the Restructuring Agreement, the fair
market value of the equity interest granted to Raytheon was $2.1 million.
Accordingly, the Company has reduced $14.9 million of the Non-Aircraft Debt by
$2.1 million to a net carrying amount of $12.8 million, and has recorded an
increase of $2.1 million in shareholders' equity.

Board of Director Observer Rights. As further consideration for the concessions
granted by Raytheon in the Restructuring Agreement, the Company has granted
Raytheon observer rights for the Company's Board of Directors, but without any
right to vote or enter into any discussions at any Board of Directors meetings.

Registration Rights. The Company agreed to file a shelf registration statement
to permit Raytheon to resell the shares of Company Common Stock issued to it
under the Restructuring Agreement. The registration statement was to have been
filed by the date of this annual report, but has not yet been filed.

Independent Directors. The Restructuring Agreement provides that the Company
will appoint two new directors unaffiliated with the Company or Raytheon by
March 31, 2003. Mr. John Reardon has been appointed as a director under this
provision. The second director has not yet been appointed.

Mandatory Prepayments. Not later than the earlier of 90 days after the end of
the Company's fiscal year or the filing of the Company's Form 10-K for such
fiscal year, the Company is required to prepay amounts outstanding under the
Company's notes held by Raytheon in an amount equal to 50% of the "excess cash
flow" for that fiscal year. "Excess cash flow" means cash flow from the
Company's operations, less (a) capital expenditures, (b) payments of funded
indebtedness for or made during such fiscal year and (c) $250,000.

Anti-Dilution. The Restructuring Agreement gives Raytheon anti-dilution rights
with respect to certain issuances of Common Stock, rights to purchase Common
Stock or securities convertible into Common Stock.

As a result of continued declines in traffic and fare levels as well as slower
receipt of essential air service payments, the Company did not make its February
and March payments under the Restructuring Agreement to Raytheon and will not
make the payments due Raytheon in April 2003. In addition the Company is not in
compliance with certain financial covenants contained in that Agreement. On
April 14, 2003, Raytheon waived the foregoing requirements until June 15, 2003.

At December 31, 2002, the Company was in compliance with its debt agreements or
had obtained amendments or short-term waivers from its lenders with respect to
any nonpayment of scheduled debt installments or noncompliance with financial
covenants. However, the Company cannot determine with a high degree of
confidence that it will be able to make the required payments or remain in
compliance with the agreements during the year 2003. Therefore the amount of
debt that by its terms would otherwise be due after one year is shown as
long-term obligations classified as current. In addition to the contractual
amounts due the lenders, the balance includes $22.3 million of additional
carrying amounts under FAS 15.

Other Financing

The Company is renegotiating agreements with three other creditors who provide
the financing for six of the Company's seven Brasilia aircraft. In August 2002,
the Company entered into a settlement with Finova Capital Corporation ("Finova")
with respect to an aircraft returned to Finova. As a part of that agreement, the
Company agreed to pay Finova a total of $727,589 with interest at 10% over a
period of 48 months. The Company retained the second aircraft leased from Finova
and agreed to pay Finova $10,000 per month from October 2002 through March 2003
and $15,000 per month from April 2003 until the end of the lease term on
September 30, 2003. For the period prior to September 30, 2003 the parties have
agreed to negotiate a settlement of amounts due under the lease agreement and
for unpaid rentals and return condition of the remaining aircraft.

At December 31, 2002, Great Lakes had three notes payable to the CIT
Group/Equipment Financing, Inc. ("CIT") with interest at 8.7% to 9.08%, totaling
$5.0 million for financing of three of its Brasilia aircraft, of which $214,000
was in arrears. In April 2003, the Company combined and modified the notes to
provide for reduced monthly payments through March 2008 at an interest rate of
LIBOR plus 275 basis points.


                                       7

<PAGE>

At December 31, 2002, the Company was in arrears on rental payments to Boeing
Capital Corporation ("Boeing") for lease of two Brasilia aircraft in the amount
of $3.4 million. Subsequent to year-end, the Company entered into a letter
agreement with Boeing, effective as of December 31, 2002, cancelling the unpaid
lease installments, reducing the monthly rental payments through the end of the
lease terms in 2013, requiring the Company to fund major overhauls in advance
and giving Boeing the right to terminate the leases at its option with six
months notice. Boeing will receive shares of redeemable preferred stock valued
at $4.5 million. The Company intends to file a Certificate of Designation
setting forth the terms of the redeemable preferred stock by April 30, 2003. The
parties will further document the terms and conditions of the lease
restructuring by that date.

Maintenance

The Federal Aviation Administration ("FAA") mandates periodic inspection and
maintenance of commercial aircraft. The Company performs most maintenance and
inspection of its aircraft and engines (except engine overhaul) using its own
personnel. Heavy maintenance bases are located at Cheyenne, Wyoming; Huron,
South Dakota; and Grand Island, Nebraska. Line maintenance is also performed in
Denver, Colorado. Parts and supplies inventories are also maintained at these
locations to promote the mechanical dispatch reliability of the fleet. The
Company also maintains an inventory of spare engines and propellers for its
fleet to allow for minimal downtime during major overhauls. The Company
internally performs overhaul of selected aircraft components for its fleet.

In October 2001, Great Lakes became the first operator of Beechcraft 1900D
aircraft with Pratt & Whitney PT6A-67D engines to be authorized by the FAA to
maintain its engines on an "on-condition" basis. As part of the Restructuring
Agreement with Raytheon, the Company agreed that by April 30, 2003, it will
enter into an engine reserve funding plan with a third party vendor that covers
the next complete overhaul performed on each 1900D engine after the engine
completes the current refurbishment cycle.

Yield Management

The Company closely monitors its inventory and pricing of available seats with
yield management systems. These systems enable the Company's revenue control
analysts to examine the Company's past traffic and pricing trends and to
estimate the optimal number of seats made available for sale at various fares.
The analysts then monitor each flight to adjust seat allocations and booking
levels, with the objective of maximizing the total revenue for each flight.

Marketing

The Company's services are marketed primarily by means of listings in
computerized reservation systems and the Official Airline Guide, and through
direct contact with travel agencies and corporate travel departments. The
Company's promotional programs emphasize the Company's close affiliation with
its code sharing partners and the opportunity for the Company's passengers to
participate in United's "Mileage Plus" frequent flyer program.

Competition

The Company competes for passenger traffic primarily with regional and major air
carriers and ground transportation. It may also compete with other regional
carriers and smaller carriers to provide Essential Air Service and receive
subsidies for providing service to small communities. The Company's competition
from other air carriers varies from location to location and, in certain areas,
comes from regional and major carriers who serve the same destinations as the
Company but through different hub and spoke systems. The domestic airline
industry has undergone major structural changes since the enactment of the
Deregulation Act. Deregulation has made possible the rapid entry of competitors
into the Company's markets, and competitors are able to adjust fares rapidly to
improve their competitive position. The Company could experience increased
competition from existing competitors or from new entrants on one or more of the
Company's routes.

Almost all markets are subject to a high degree of price competition both from
established carriers and low fare jet carriers. The Company believes, however,
that its ability to compete in its market areas is strengthened by its code
sharing relationships with United and Frontier at Denver. The Company competes
with other airlines by offering


                                       8

<PAGE>

frequent flights, flexible schedules and competitive fares. In addition, the
Company's competitive position benefits from the large number of participants in
United's "Mileage Plus" frequent flyer program. These participants receive
mileage credits on flights operated by Great Lakes under its own identity and on
connecting flights with United. They may also use their awards to travel on
United or Great Lakes flights.

Fuel

The Company has not experienced difficulty with fuel availability and expects to
continue to be able to obtain fuel in quantities sufficient to meet its future
requirements. The Company contracts directly with refiners for the purchase of
portions of its fuel. Standard industry contracts generally do not provide
protection against fuel price increases and do not ensure availability of
supply. Accordingly, an increase in the cost of fuel, if not accompanied by an
equivalent increase in passenger revenues, could have a material adverse impact
on the Company's future operating results. During 2002, the Company's average
price of fuel including taxes and into plane service fees was $1.11 per gallon
as compared to $1.25 in 2001 and $1.26 in 2000. At current rates of consumption,
a one cent increase or decrease in the per gallon price of fuel will increase or
decrease expense by approximately $115,000 annually.

Employees

At March 31, 2003, the Company had 674 full-time and 222 part-time active
employees as compared to 762 full-time and 174 part-time active employees at
December 31, 2001, as follows:

                                                       March 31,   December 31,
                                                         2003          2001
                                                      ----------  -------------
       Classification:
             Pilots                                        233          219
             Station personnel                             417          484
             Maintenance personnel                         152          161
             Administrative and clerical personnel          66           43
             Flight attendants                               8            2
             Management                                     20           27
                                                      ---------    ------------
       Total employees                                     896          936
                                                      =========    ============

The Company's pilots are represented by the International Brotherhood of
Teamsters. The Company's agreement with the pilots became amendable October 30,
2000, and the Company and the union are negotiating to achieve an agreement. The
members of the union have authorized a strike at some future date if an
agreement is not reached. However, before any work stoppage can occur, the
Federal Mediation Board must release the participants to self help, followed by
a 30-day cooling off period. The Company's flight attendants are also
represented by the International Brotherhood of Teamsters, and the Company's
agreement with the flight attendants became amendable April 1, 2002.
Negotiations with the flight attendants are inactive at the present time.

The Company's mechanics and maintenance clerks are represented by the
International Association of Machinists. The Company's agreement with the
mechanics becomes amendable November 1, 2005, and the Company's agreement with
the maintenance clerks became amendable March 1, 2002. Negotiations with the
maintenance clerks are inactive at the present time.

Charter and Freight Service

The Company uses its Beechcraft and Brasilia aircraft to provide charter
services to private individuals, corporations and athletic teams. The Company
also carries freight, mail and small packages on most of its scheduled flights
and has two Beechcraft 1900C aircraft devoted to providing service under a
subcontract for carriage of mail for the U.S. Postal Service. Revenues from the
Company's charter flights and freight and mail


                                       9

<PAGE>

deliveries were 3.8%, 4.1% and 3.8% of the Company's total revenues for the
years ended December 31, 2002, 2001 and 2000, respectively.

Regulation

In accordance with the provisions of the Federal Aviation Act of 1958, as
amended (the "1958 Act"), the Company is an air carrier subject to regulation by
the DOT, primarily with respect to economic matters, and is also subject to
regulation by the FAA with respect to certain safety related matters.

The Company holds an air carrier operating certificate issued by the FAA
pursuant to Part 121 of the FAA's regulations. The Company, as a commuter air
carrier, is licensed under Part 298 of the Economic Regulations of the DOT. The
Company is subject to the jurisdiction of the FAA with respect to its aircraft
maintenance and operations, including equipment, ground facilities, dispatch,
communications, training, weather observation, flight personnel and other
matters affecting air safety. To ensure compliance with its regulations, the FAA
requires airlines to obtain an operating certificate and operations
specifications for the particular aircraft and types of operations conducted by
the carrier, all of which are subject to suspension or revocation for cause.

The Deregulation Act eliminated many regulatory constraints so that airlines
became free to set fares and, with limited exceptions, to establish domestic
routes without the necessity of seeking government approval. The DOT is still
authorized to establish consumer protection regulations; to prohibit certain
pricing practices; to mandate conditions of carriage; and to make ongoing
determinations of a carrier's fitness, willingness and ability to properly and
lawfully provide air transportation. The DOT also has the power to bring
proceedings to enforce its regulations under the 1958 Act and seek penalties,
including the assessment of civil penalties, the revocation of operating
authority and criminal sanctions.

The Aviation and Transportation Security Act requires the adoption of certain
security measures by airlines and airports, including screening of passengers
and baggage. The new security measures are being partially funded by a $2.50 per
flight segment tax on tickets. The Company is responsible for certain security
costs above this level.

The Company is subject to the jurisdiction of the Federal Communications
Commission regarding the use of its radio facilities. Local governments and
authorities in certain markets have adopted regulations governing various
aspects of aircraft operations, including noise abatement, curfews and use of
airport facilities. The Company believes that it is in compliance with all such
regulations.

Insurance

The Company carries the types and amounts of insurance required by the DOT and
customary in the regional airline industry, including coverage for public
liability, property damage, aircraft loss or damage, baggage and cargo liability
and workers' compensation.

As a result of the September 11 terrorist attacks, aviation insurers have
significantly increased premiums for all aviation coverage while dramatically
reducing the amount of coverage available for war-risk occurrences. In response
to the reduction in coverage, the Stabilization Act provided U.S. air carriers
with the option to purchase certain war-risk liability insurance from the U.S.
government on an interim basis at rates that are more favorable than those
available in the private market. The Company has purchased this coverage and
anticipates renewing it for as long as the coverage is available from the U.S.
government. The airlines and insurance industries, together with the U.S. and
other governments, are continuing to evaluate both the cost and options for
providing coverage of aviation insurance. The Company anticipates that it will
follow industry practices with respect to sources of insurance. The Company
believes that its insurance is adequate as to amounts and risks covered. There
can be no assurance, however, that the limits of the Company's insurance will be
sufficient to cover any catastrophic loss.


                                       10

<PAGE>

          Risk Factors Relating to the Company and the Airline Industry

Dependence on Relationship with United

The Company believes approximately 70% of Great Lakes passenger traffic
currently connects with United flights. As a result of the Company's
relationship with United, the Company's business is sensitive to events and
risks affecting United. If adverse events affect United's business, the
Company's business is also adversely affected. Such events include the outcome
of United's bankruptcy reorganization, changes in United's business plan or
model, employee strikes or job actions, significant curtailment of services or
terrorist events. However, to the extent that the Company is successful in
developing its own identity on its operating system and is successful in
developing its code sharing relationship with Frontier, it will reduce its
dependence on United and mitigate the effects of such adverse events if they
relate to United only.

Terrorist Events

The Company is sensitive to items related to the September 11, 2001 terrorist
attacks, such as the impact of additional airline and security charges on
Company costs, customer demand for travel, cost and availability of war risk and
other aviation insurance, including the federal government's provision of third
party war-risk coverage and the possibility of additional terrorist events which
could cause further customer aversion to air travel.

War

War or other military action by the United States or others could have a
significant effect on passenger traffic.

Dependence on Essential Air Service Revenues

In 2002, 36.2% of the Company's revenues were received as EAS subsidies. EAS
subsidies are expected to remain a significant portion of the Company's revenues
in 2003 and future years. Changes in DOT policies with regard to payment of
subsidies and reduction or loss of subsidies as a result of competitive bidding
may have a substantial impact on the Company.

Effect of General Economic Conditions

The airline industry is significantly affected by general economic conditions.
During recent recessions, most airlines reduced fares in an effort to increase
traffic. The Company does not hedge its fuel purchasing costs. Economic and
competitive conditions in the airline industry have contributed to a number of
bankruptcies and liquidations among airlines. A worsening of current economic
conditions, or an extended period of recession nationally or regionally, would
have a materially adverse effect on the Company's operations.

Fuel Costs

Fuel is a major component of operating expense for all airlines. The Company's
cost of fuel varies directly with market conditions, and the Company has no
guaranteed long-term sources of supply. The Company intends generally to follow
industry trends by raising fares in response to significant fuel price
increases. However, the Company's ability to pass on increased fuel costs
through fare increases may be limited by economic and competitive conditions.
Accordingly, a reduction in the availability or an increase in the price of fuel
could have a material adverse effect on the Company's cash flow from operations
and profitability.

Weather

The Company passenger traffic and costs can be directly impacted by adverse
weather conditions and air traffic control related constraints.


                                       11

<PAGE>

Restructuring Agreement

Payments under the Restructuring Agreement signed on December 31, 2002 with
Raytheon are closely aligned with future forecasted cash flows. If the Company
fails to achieve those cash flows, it will be unable to meet its obligations
under that and other agreements. This could result in the demand for immediate
payment of all obligations by the Company's creditors.

Control by Principal Stockholders

Raytheon, the Company's principal creditor, owns approximately 38.2% of the
outstanding shares of the Company's common stock. Raytheon and the Company are
parties to a Restructuring Agreement. See "Business-Restructuring Agreement with
Raytheon."

Mr. Douglas G. Voss, Chairman of the Board of the Company beneficially owns or
controls approximately 38.3% of the outstanding shares of the Company's common
stock. On October 22, 1996, Mr. Voss transferred approximately one-half of the
shares of the Company's common stock owned by him to his ex-spouse, Ms. Gayle R.
Brandt, pursuant to a Marital Dissolution Stipulation and Property Settlement.
Ms. Brandt has granted Mr. Voss an Irrevocable Proxy to vote such securities
until June 28, 2010. Accordingly, Mr. Voss and Raytheon are in a position to
control the management and affairs of the Company.

Noncompliance with the Nasdaq Continued Listing Requirements

The Company's Common Stock was de-listed from The Nasdaq SmallCap Market on
August 14, 2002. As a result of the delisting, the Company's Common Stock has
become subject to certain rules of the SEC relating to "penny stocks." These
rules require broker-dealers to make a suitability determination for purchasers
and to receive the purchaser's prior written consent for a purchase transaction,
thus restricting the ability to purchase or sell the securities in the open
market. Trading of the Company's Common Stock is conducted on the OTC Bulletin
Board, which was established for securities that do not meet Nasdaq listing
requirements. Consequently, trading the Company's Common Stock may be more
difficult, because of lower trading volumes, transaction delays and reduced
security analyst and news media coverage of the Company. These factors could
also contribute to lower prices and larger spreads in the bid and ask prices for
the Company's Common Stock.

Item 2. PROPERTIES

At December 31, 2002, the Company leased gate and ramp facilities at 40 airports
where ticketing, passenger loading and unloading are handled by Company
personnel. Payments to airport authorities for ground facilities are based on a
number of factors, including the amount of space used and flight volume. The
Company also leases aircraft hangar space for maintenance operations at three of
the locations it serves.

Effective January 1, 2000, the Company entered into a lease in Cheyenne,
Wyoming, for approximately 42,000 square feet of space for administration and
maintenance needs. In 2000, the Company constructed an additional leased
facility in Cheyenne. This facility is approximately 54,000 square feet and is
used for administrative, flight operations, maintenance offices, maintenance and
hangar space.

The Company believes that it has adequate facilities for the conduct of its
current and planned operations.

Item 3. LEGAL PROCEEDINGS

On February 27, 2002, Finova Capital Corporation ("Finova") filed suit against
the Company in the United States District Court for the District of Arizona. No.
Civ. 02-0362 PHX SMM. Finova alleged that the Company breached two airplane
lease agreements and sought damages, costs and attorney's fees. On August 1,
2002, Finova and the Company entered into a Settlement Agreement and Covenant
Not to Execute on one of the aircraft. On November 1, 2002, Finova and the
Company entered into a Deferral Agreement which provides for the withdrawal of
the suit and payment of $10,000 per month from October 2002 through March 2003
and $15,000 per month from


                                       12

<PAGE>

April 2003 until the end of the lease term on September 30, 2003 for the second
aircraft. Finova and the Company have agreed that prior to the end of the lease
term they will negotiate the other outstanding issues regarding the second
aircraft. The Company has recognized in its accounts the expected cost
associated with these aircraft and these agreements.

The Company is a also a defendant in a lawsuit arising from the collision of a
small aircraft with one of the Company's Beechcraft 1900 aircraft in Quincy,
Illinois on November 19, 1996. The collision occurred at the intersection of two
runways as the Company's aircraft was landing, and resulted in the death of all
10 passengers and the two crewmembers. The Company's insurance carrier is
providing for the Company's defense in the lawsuit and the Company believes that
all claims arising from the accident will be adequately covered by insurance.

The Company is a party to several routine pending legal proceedings, none of
which management believes are material to the Company.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of the Company's shareholders during
the three-month period ended December 31, 2002.

Executive Officers of the Registrant

The following table provides information with respect to the Company's executive
officers as of March 15, 2003. Each executive officer has been appointed to
serve until his successor is duly appointed by the Board of Directors or his
earlier removal or resignation from office.

Name                           Age      Title
----                           ---      -----
Douglas G. Voss                48       Chairman of the Board of Directors
Charles R. Howell IV           45       Chief Executive Officer
Michael L. Tuinstra            49       Treasurer
Christopher C. Wilken          32       Controller
James A. Frazier               44       Vice President-Customer Service

     Douglas G. Voss. Mr. Voss co-founded the Company in 1979 and served in the
position of Chief Executive Officer from the Company's inception until December
31, 2002. Mr. Voss has served as a director of the Company since the Company's
inception. Mr. Voss became a pilot in 1974 and holds both an Airline Transport
Pilot Certificate and an Airframe and Powerplant Mechanic Certificate. Mr. Voss
is a graduate of Colorado Aero Tech. In 1977 and 1978, Mr. Voss was employed as
a mechanic for a subsidiary of Executive Beechcraft, Inc. Mr. Voss has also
served the Company in a number of operational positions, including Director of
Maintenance and Director of Operations.

     Charles R. Howell IV. Mr. Howell became the Chief Executive Officer of the
Company on December 31, 2002. Mr. Howell served as Chief Operating Officer from
August 2002 until December 31, 2002. Prior to joining the Company, Mr. Howell
was the President and Chief Executive Officer of Corporate Airlines, Inc., a
Nashville-based airline that he co-founded in 1996.

     Michael L. Tuinstra. Mr. Tuinstra became the Company's Treasurer in January
2002. From August 1998 to January 2002 Mr. Tuinstra served as the Company's
Director of Purchasing and Inventory Control, and prior to this, from August
1998 until April 1999, he was the Company's budget and financial analyst. From
June 1995 until August 1998 Mr. Tuinstra was self employed and was a financial
consultant.

     Christopher C. Wilken. Mr. Wilken became the Company's Controller in
January 2002. Mr. Wilken has served the Company in various positions since
November 1987. From March 1999 until January 2002 Mr. Wilken was the Company's
Director of Planning and Financial Analysis, and from August 1996 to March 1999,
he was the Company's Manager of Market Planning. Mr. Wilken is also a commercial
pilot with instructor's ratings and holds airframe and powerplant mechanic's
ratings with inspection authorization.

     James A. Frazier. Mr. Frazier joined Great Lakes in March 1990 as Director
of Stations and was promoted to his present position of Vice President of
Customer Service in March 1992.


                                       13

<PAGE>

                                     PART II

Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock is traded under the symbol "GLUX" on the
Over-the-Counter Bulletin Board (the "OTCBB"). The Company's Common Stock began
trading on January 19, 1994, the date of its initial public offering. The
initial public offering price of the Company's Common Stock was $11.00 per
share. On August 14, 2002, the Company's common stock was delisted from the
NASDAQ SmallCap Market as a result of the failure to maintain an average stock
price of at least $1 per share.

The following table sets forth the range of high and low sale prices for the
Company's Common Stock for each of the fiscal quarters for the past two years as
reported by Nasdaq and the OTCBB. These prices represent inter-dealer prices
without adjustments for mark-up, mark-down or commission and do not necessarily
reflect actual transactions.

          Stock Quotations           High            Low
        -----------------------   -----------   -----------
        2002:
              First quarter        $  0.64        $  0.36
              Second quarter          0.87           0.35
              Third quarter           0.46           0.16
              Fourth quarter          0.46           0.12

        2001:
              First quarter           2.50           0.875
              Second quarter          1.75           1.01
              Third quarter           1.25           0.40
              Fourth quarter          0.75           0.25

As of March 31, 2003, the Company had approximately 375 record holders of its
Common Stock.

The transfer agent for the Company's Common Stock is Wells Fargo Bank Minnesota,
N.A., 161 North Concord Exchange, South St. Paul, Minnesota, 55075-0738,
telephone: (651) 450-4064.

The Company has not paid any dividends on its Common Stock since its initial
public offering in January 1994 and expects that for the foreseeable future it
will follow a policy of retaining earnings in order to finance the continued
development of its business. Payment of dividends is within the discretion of
the Company's Board of Directors and will depend upon the earnings, capital
requirements and operating and financial condition of the Company, and any
applicable restrictive debt and lease covenants, among other factors. Under the
Restructuring Agreement, the Company is prohibited from paying dividends until
after December 31, 2005.

Recent Sales of Unregistered Securities

On December 31, 2002, the Company issued to Raytheon Aircraft Credit Corporation
5,371,980 shares of Common Stock of the Company. The Company issued the shares
to Raytheon as partial consideration for a series of transactions that included
restructured finance terms for aircraft promissory notes, termination of
aircraft operating leases, aircraft purchases, aircraft returns, modified
aircraft operating leases and other debt restructuring. See "Business--
Restructuring Agreement with Raytheon" for a description of the Restructuring
Agreement, including certain continuing rights and obligations of the parties.
The issuance of common stock to Raytheon is exempt from registration pursuant to
Section 4(2) of the Securities Act.

Item 6. SELECTED FINANCIAL AND OPERATING DATA

The following statement of operations and balance sheet data as of and for each
of the years in the five-year period ended December 31, 2002 are derived from
the Company's financial statements. The financial statements for the year ended
December 31, 2002, 2001, 2000, 1999 and 1998 have been audited by KPMG LLP. The
financial statements as of December 31, 2002 and 2001 and for each of the years
in the three-year period ended December 31, 2002 and the report thereon are
included elsewhere in this Form 10-K. The following selected financial data
should be read in conjunction with and are qualified in their entirety by the
financial statements and the notes thereto included elsewhere in this Form 10-K.
The financial statements and selected data do not include any adjustments that
might result from the outcome of the uncertainty over the Company's ability to
continue as a going concern.


                                       14

<PAGE>

<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                               ----------------------------------------------------------------------------
                                                  2002           2001             2000             1999             1998
                                               ----------     ----------       ----------       ----------       ----------
                                                      (In thousands, except per share and selected operating data)
<S>                                            <C>             <C>             <C>              <C>              <C>
Statement of Operations Data:
    Passenger and public service revenues      $   81,330     $   97,030       $  126,914       $  122,890       $  108,467
    Other revenues                                  3,399          4,410            6,676            8,480            5,565
                                               ----------     ----------       ----------       ----------       ----------
                 Total operating revenues          84,729        101,440          133,590          131,370          114,032
                                               ----------     ----------       ----------       ----------       ----------
    Operating expenses:
       Salaries, wages and benefits                25,856         31,124           35,162           33,037           29,106
       Aircraft fuel                               12,616         17,514           21,503           16,557           13,974
       Aircraft repairs                            12,740         15,122           17,491           17,478            9,426
       Commissions                                    871          2,512            4,248            5,796            5,560
       Depreciation and amortization                7,012          7,063            7,103            4,779            3,499
       Aircraft rental                              7,462          8,682            9,226           13,194           16,511
       Other rentals and landing fees               5,780          6,363            7,808            6,504            6,375
       Other operating expense                     18,101         23,689           30,113           25,316           22,922
       Impairment of assets and other property      5,470             --               --               --               --
       Non-recurring expenses                          --             --               --               --              146
                                               ----------     ----------       ----------       ----------       ----------
                 Total operating expenses          95,908        112,069          132,654          122,661          107,519
                                               ----------     ----------       ----------       ----------       ----------
                 Operating (loss) income          (11,179)       (10,629)             936            8,709            6,513
    Interest expense, net                          (6,643)        (9,961)          (9,169)          (5,974)          (3,485)
    Federal grant                                      --          1,927               --               --               --
    Gain on insurance recovery                      1,438             --               --               --               --
    Loss on sale of assets                             --             --               --               (7)            (191)
    Gain on extinguishment of debt                  5,573             --               --               --               --
                                               ----------     ----------       ----------       ----------       ----------
                 Income (loss) before
                    income tax expense            (10,811)       (18,634)          (8,233)           2,728            2,837
                                               ----------
    Income tax expense (benefit)                                      --                6               --              115
                                               ----------     ----------       ----------       ----------       ----------
                 Net income (loss)             $  (10,811)    $  (18,634)      $   (8,239)      $    2,728       $    2,722
                                               ==========     ==========       ==========       ==========       ==========
Net income (loss) per share: Basic             $    (1.24)    $    (2.15)      $    (0.95)      $     0.32       $     0.34
                                               ==========     ==========       ==========       ==========       ==========
Net income (loss) per share: Diluted           $    (1.24)    $    (2.15)      $    (0.95)      $     0.29       $     0.34
                                               ==========     ==========       ==========       ==========       ==========
Average number of common shares
    outstanding Basic                               8,698          8,658            8,646            8,634            7,925
                                               ==========     ==========       ==========       ==========       ==========
Average number of common shares
    outstanding Diluted                             8,698          8,658            8,646            9,336            8,703
                                               ==========     ==========       ==========       ==========       ==========
Balance Sheet Data:

Working capital (deficit)                      $ (147,246)      (121,820)         (10,366)          (3,112)          (3,025)
Total assets                                      136,182        132,111          143,179          148,876           72,281
Long-term debt, net of current maturities             672          4,727           96,054           98,701           28,471
Stockholders' equity (deficit)                    (27,158)       (18,496)             130            8,619            5,850
Selected Operating Data:
Available seat miles (000s) (1)                   358,541        428,707          525,872          526,095          489,213
Revenue passenger miles (000s) (2)                134,236        200,536          265,589          265,733          250,098
Revenue passengers carried                        505,176        811,217        1,117,576        1,057,798          873,186
Departures flown                                   84,933        102,379          126,770          133,423          122,278
Passenger load factor (3)                            37.4%          46.8%            50.5%            50.5%            51.1%
Break-even passenger load factor (4)                 45.3%          58.0%            52.9%            49.1%            49.3%
Average yield per revenue passenger mile (5)         37.8(cent)     38.8(cent)       42.2(cent)       40.1(cent)       37.4(cent)
Operating cost per available seat mile (6)           25.2(cent)     26.1(cent)       25.2(cent)       23.3(cent)       22.0(cent)
Average passenger fare (7)                     $    100.39          95.87           100.25           100.83           107.26
Average passenger trip length (miles) (8)             266            247              238              251              286
Aircraft in service (end of period)                    46             52               52               52               53
Destinations served (end of period)                    40             48               57               67               71

</TABLE>


                                       15

<PAGE>

(1)  "Available seat miles" or "ASMs" represent the number of seats available
     for passengers in scheduled flights multiplied by the number of scheduled
     miles those seats are flown.

(2)  "Revenue passenger miles" or "RPMs" represent the number of miles flown by
     revenue passengers.

(3)  "Passenger load factor" represents the percentage of seats filled by
     revenue passengers and is calculated by dividing revenue passenger miles by
     available seat miles.

(4)  "Break-even passenger load factor" represents the percentage of available
     seat miles which must be flown by revenue passengers at the average yield
     (net of commissions and fees) for airline operations to break even.

(5)  "Average yield per revenue passenger mile" represents the average passenger
     revenue received for each mile a revenue passenger is carried.

(6)  "Operating cost per available seat mile" represents operating expenses
     divided by available seat miles.

(7)  "Average passenger fare" represents passenger revenue divided by the number
     of revenue passengers carried.

(8)  "Average passenger trip length" represents revenue passenger miles divided
     by the number of revenue passengers carried.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Overview

The discussion and analysis throughout this filing contains 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. See Liquidity and Capital Resources for discussion of the Company's
financial condition.

The Company began providing air charter service in 1979, and has provided
scheduled passenger service in the Upper Midwest since 1981. Beginning in April
1992, the Company operated as a United Express carrier under a cooperative
marketing agreement with United, which terminated on April 30, 2001. The Company
now operates under its own name and as a code sharing partner with United and
Frontier. As of March 1, 2003 the Company provided passenger service to 41
airports in 11 states with 1,433 scheduled departures each week.


                                       16

<PAGE>

                              Results of Operations

<TABLE>
<CAPTION>
                                                                 For the years ended December 31
                                  -----------------------------------------------------------------------------------------
                                                                     (Dollars in thousands)
                                                 2002                              2001                       2000
                                  ---------------------------------- --------------------------------- --------------------
                                               Cents     % Increase               Cents     % Increase              Cents
                                                Per      (decrease)                Per      (decrease)               Per
                                   Amount       ASM       from 2001   Amount       ASM      from 2000   Amount       ASM
                                  --------    -------    ----------- --------   --------  ------------ --------  ----------
<S>                               <C>         <C>         <C>        <C>        <C>        <C>         <C>        <C>
Operating revenues
Passenger                         $ 50,716                  (34.8)%    77,753                 (30.6)%   112,037
Public service                      30,614                   58.8      19,276                  29.6      14,877
Other                                3,399                  (22.9)      4,410                 (33.9)      6,676
                                  --------                  -----    --------                 -----    --------
       Total operating revenues     84,729                  (16.5)    101,439                 (24.1)    133,590
                                  --------                  -----    --------                 -----    --------
Salaries, wages and benefits        25,856     7.2(cent)    (16.9)     31,124     7.3(cent)   (11.5)     35,162     6.7(cent)
Aircraft fuel                       12,616     3.5          (28.0)     17,514     4.1         (18.6)     21,503     4.1
Aircraft maintenance materials
    and component repairs           12,740     3.6          (15.8)     15,122     3.6         (13.5)     17,491     3.3
Commissions                            871     0.2          (65.3)      2,512     0.6         (40.9)      4,248     0.8
Depreciation and amortization        7,012     2.0           (0.7)      7,063     1.6          (0.6)      7,103     1.4
Aircraft rental                      7,462     2.1          (14.1)      8,682     2.0          (5.9)      9,226     1.8
Other rentals and landing fees       5,780     1.6           (9.2)      6,363     1.5         (18.5)      7,808     1.5
Other operating expense             18,101     5.0          (23.6)     23,689     5.5         (21.3)     30,113     5.7
Impairment of assets and other
property                            (5,470)     --            --           --      --           --          --       --
                                  --------    ----          -----     -------    ----         -----     -------    ----
       Total operating expenses     95,908    25.2(cent)    (19.3)%   112,069    26.1(cent)   (15.5)%   132,654    25.2(cent)
                                  --------    ----          -----     -------    ----         -----     -------    ----
       Operating income (loss)    $(11,179)     --            --      (10,630)     --           --          936      --
                                  ========    ====          =====     =======    ====         =====     =======    ====
Interest expense, net               (6,643)   (1.9)(cent)   (33.1)%    (9,931)    2.4(cent)     8.3%     (9,169)   (1.7)(cent)
                                  ========    ====          =====     =======    ====         =====     =======    ====
Gain on insurance recovery           1,438                                 --                               --
                                  ========                            =======                           ======
Gain on extinguishment of debt       5,573                                 --                               --
                                  ========                            =======                           ======
</TABLE>

<TABLE>
<CAPTION>
                                                               Increase (decrease)              Increase (decrease)
                                                  2002             from 2001          2001           from 2000        2000
                                                -----------    ------------------   --------    ------------------- ---------
<S>                                              <C>                 <C>            <C>               <C>            <C>
Available Seat Miles (000s)                      358,541             (16.4)%        428,707           (18.5)%        525,872
Revenue Passenger Miles (000s)                   134,236             (33.1)%        200,536           (24.5)%        265,589
Passenger Load Factor                              37.4%             (20.0)%          46.8%            (7.4)%          50.5%
Average Yield per Revenue Passenger Mile           37.8(cent)         (2.6)%          38.8(cent)       (8.1)%          42.2(cent)
Cost  per ASM                                      25.2(cent)         (3.5)%          26.1(cent)         3.7%          25.2(cent)

</TABLE>

                                       17

<PAGE>

Comparison of 2002 to 2001

Passenger Revenues: Passenger revenues and revenue passenger miles decreased
34.8% and 33.1% respectively, from 2001. Although the Company discontinued
service to four cities during the year the decrease was largely due to the
continued industry wide decline in passenger traffic following the September 11
terrorist attacks.

Public Service Revenues: Public service revenues collected through the Essential
Air Service program increased 58.8% in 2002 compared to 2001. As a result of the
September 11 terrorist attacks, the Department of Transportation, in Order
number 2002-2-13, entitled "Order Authorizing Emergency Essential Air Service
Payments," provided for an immediate increase in all subsidized rates effective
retroactively to October 1, 2001. This order also began the process of
renegotiating all of the Company's subsidy contracts as of October 1, 2001 to
recognize the effects of the September 11 attacks on airline operations,
specifically higher insurance costs and lower passenger revenues.

Other Revenues: Other revenues declined 23.0% to $3.4 million in 2002. Freight
revenue decreased as a result of reduced capacity and increased security
requirements governing the acceptance of air freight following the September 11
terrorist acts. Charter revenues were down as a result of the non-renewal of
various university charter contracts.

Operating Expenses: Total operating expenses decreased 19.3%, or $21.7 million,
in 2002 compared to 2001. Cost per ASM decreased 3.5% from 2001 to 25.2 cents
per ASM. The suspension of service following the September 11 terrorist attacks
and the ensuing reduced schedule had a significant impact upon direct operating
costs.

Salaries, wages, and benefits decreased 16.9% to $25.9 million from 2001 as a
result of reductions in staffing levels, pay rates, hours worked and the closing
of service to and from some cities.

Aircraft fuel expense was down 28.0% in 2002. The decrease is attributed to the
continued flight schedule reductions following the September 11 terrorist
attacks. The Company benefited from flat average fuel costs through the first
three quarters. Rising fuel costs in the fourth quarter were offset by the usual
seasonal reduction in scheduled operations. The average per gallon rate
decreased 11.2% to $1.11 for the year.

Aircraft maintenance, materials and component repair expense was 3.6 cents per
ASM for both 2002 and 2001. The reduction in expense to $12.7 million
corresponds with the reduction of ASMs.

Commissions decreased 65.3% to $0.9 million in 2002 from $2.5 million in 2001 as
a result of lower travel agency commission rates, decreased gross revenues and
increasing direct sales. Following a majority of the airline industry, the
Company discontinued paying commissions to travel agents on tickets sold after
June 12, 2002.

Depreciation expenses were largely flat due to the Company's owned aircraft
fleet remaining substantially unchanged during the year from 2001.

Aircraft lease expense decreased 14.1% in 2002 to $7.5 million from $8.7 million
in 2001 as a result of the termination of a lease of one EMB-120 and two Beech
1900D aircraft. As of March 31, 2002, one of two EMB-120 aircraft leased from
Finova Corporation was returned to the lessor, and the lease was terminated. At
January 1, 2002, the Company was leasing one aircraft, a Beech 1900D, from an
affiliated company. Effective March 31, 2002, the aircraft was returned to the
lessor. On May 14, 2002, a leased Beech 1900D was one of two aircraft destroyed
in a hangar fire, and lease rentals ceased May 31, 2002. The second aircraft
destroyed in the fire was a Company-owned Beech 1900D aircraft.

Other rentals and landing fees decreased 9.2% in 2002. Landing fees were reduced
in conjunction with a corresponding decrease in total landings.


                                       18

<PAGE>

Other operating expenses decreased 23.6% in 2002 to $18.1 million from $23.7
million in 2001, representing a 0.5 cent per ASM reduction in cost. The decrease
is primarily due to the elimination of certain fees associated with the former
United Express agreement, lower levels of operations and other actions that were
taken to reduce costs.

The decrease in interest expense from $9.9 million in 2001 to $6.6 million in
2002 was primarily due to reduced interest rates as the majority of the
Company's fleet is financed at variable interest rates. Also, one Company-owned
Beech 1900D with debt of $3.2 million was destroyed in a hangar fire. In
addition, on April 30, 2002 the Company fully paid and terminated its line of
credit with Coast Business Credit.

Income Tax Expense (benefit): The realization of any benefits remains
substantially in doubt as the Company continues in its loss carry forward
position.

Gain on Insurance Recovery: The Company recorded a gain of $1.4 million in
connection with receipt of insurance proceeds for two aircraft destroyed in a
hangar fire. See "Busines--Aircraft" above.

Impairment of Assets and Gain on Extinguishment of Debt: The Company recognized
an impairment loss of $5.5 million and recognized a gain on extinguishment of
debt of $5.6 million in connection with the recording of the Restructuring
Agreement with Raytheon. See "--Restructuring Agreement with Raytheon Aircraft
Credit Corporation."

Comparison of 2001 to 2000

Passenger Revenues: Passenger revenues and revenue passenger miles decreased
30.6% and 24.5%, respectively, from 2000. As the Company continued to shift its
operational focus to the Denver hub, service was discontinued at a total of 10
cities serving Chicago O'Hare Airport by the end of the second quarter of 2001.
Service was also discontinued at Meigs Lakefront Airport in Chicago during
August 2001. These closings resulted in a 47% reduction in total departures for
the Chicago market. The closing of service to and from these cities contributed
to a reduction in yield as the traffic mix was primarily business oriented. The
suspension of air service following the terrorist attacks of September 11 and a
subsequent 39% decrease in passengers flown during the fourth quarter of 2001 as
compared to the first and second quarters further contributed to the decline in
revenue for 2001.

Public Service Revenues: Public service revenues collected through the EAS
program increased 29.6% in 2001 compared to 2000. While EAS service was
discontinued at Mattoon, Illinois; Ottumwa, Iowa; and Yankton, South Dakota;
service was added at Page, Arizona and Moab and Vernal, Utah. The Company
further negotiated and became eligible to collect subsidy for service to Pierre,
South Dakota.

As a result of the September 11 terrorist attacks, the Department of
Transportation, in Order number 2002-2-13, entitled "Order Authorizing Emergency
Essential Air Service Payments," provided for an immediate increase in all
subsidized rates effective retroactively to October 1, 2001. This order also
began the process of renegotiating all of the Company's subsidy contracts as of
October 1, 2001 to recognize the effects of the September 11 attacks on airline
operations, specifically higher insurance costs and lower passenger revenues.
These renegotiated rates superseded the interim rates through the normal end of
the contract period.

Other Revenues: Other revenues declined 33.9% in 2001. Freight revenue decreased
as a result of reduced capacity and increased security requirements governing
the acceptance of air freight following the September 11 terrorist attacks.
Charter revenues were down as a result of the cancellation of various university
charters following the highly publicized fatal accident in January 2001,
involving another charter operator and the Oklahoma State University basketball
team. These revenue losses were partially offset by an increase in December
2001, of the per pound rate paid by the U.S. Postal Service for mail carried on
the Company's air mail routes.

Operating Expenses: Total operating expenses decreased 15.5%, or $20.6 million
in 2001 compared to 2000. Cost per ASM increased 3.5% over 2000 to 26.1 cents
per ASM. The suspension of service following the September 11 terrorist attacks
and the ensuing reduced schedule had a significant impact upon direct operating
costs.

Salaries, wages, and benefits decreased $4.0 million from 2000 as a result of
employee furloughs, pay reductions, and pay freezes following the September 11
terrorist attacks.

Aircraft fuel expense was down 18.6% in 2001 on flat average fuel costs of $1.25
per gallon. Overall consumption was down 18.2% in 2001 as a result of reduced
flying.

Aircraft maintenance, materials and repairs showed a 13.5% decrease in 2001 from
an overall reduction in flights year over year and the reduction of utilization
of the Company's aircraft.


                                       19

<PAGE>

Commissions were down 40.9% in 2001 because of a corresponding decrease in
passenger revenue, further reductions in the number of tickets purchased through
travel agencies and continuing decreases in commission rates.

Depreciation and amortization and aircraft rental expenses were largely flat due
to the Company's aircraft fleet composition remaining unchanged from 2000.

Other rentals and landing fees decreased 18.5% in 2001 with no net change in
cost per ASM. Other rentals including terminal facilities expense at various
airports decreased as a result of the discontinuation of service in 15 markets.
Landing fees were reduced in conjunction with a corresponding decrease in total
landings.

Other operating expenses decreased 21.3% from 2000, representing a 0.2 cent per
ASM reduction in cost. The reduction was largely the result of the termination
of the United Airlines / United Express marketing agreement and its associated
franchise and marketing fees. Ongoing cost cutting efforts further contributed
to the reduction in expenses.

The Company recognized a grant of $1.9 million from the Air Transportation
Safety and System Stabilization Act, passed by Congress and signed into law by
President Bush on September 22, 2001.

Income Tax Expense (benefit): The realization of any benefits from the Company's
net operating loss carry forward is substantially in doubt.

Liquidity and Capital Resources

The Company's cash and cash equivalents balance at December 31, 2002 was
$358,000, down from $1.5 million at December 31, 2001. The Company had negative
working capital of $147.2 million at December 31, 2002.

While the Company experienced a net loss of $10.8 million for the year 2002,
cash of $6.1 million was provided by operating activities primarily as a result
of non cash depreciation and amortization charges of $7.0 million and increases
in accounts payable and accrued liabilities which includes the non-payment of
interest and the deferral of lease payments totaling $8.3 million. Recording of
the Restructuring Agreement as of December 31, 2002, included a charge for
impairment of assets and other property of $5.5 million that was offset by a
non-cash gain on extinguishment of debt of $5.6 million.

The $6.1 million of cash provided from operations and the $2.2 million proceeds
from the hangar fire insurance recovery were the primary sources of funds used
to retire a working capital line of credit balance of $4.6 million and reduce
notes payable and long-term debt by $4.4 million.

Following the terrorist attacks of September 11 and due to the continued
downturn in the economy, the Company suffered substantial losses during the
fourth quarter of 2001 and the year 2002. These losses produced a significant
reduction in liquidity as well as rendering a number of aircraft surplus to the
Company's reduced level of operations. Because of these financial difficulties,
the Company missed contractual debt and lease payments during these periods and
made only minor payments on its debt and lease obligations. As a result, debt of
$111.0 million was in default and the Company was in arrears on lease payment
obligations which totaled $11.3 million at December 31, 2002, immediately prior
to the restructuring discussed below. Of these amounts, $106.0 million and $6.8
million, respectively, were owed to Raytheon.

Restructuring Agreement with Raytheon Aircraft Credit Corporation. On December
31, 2002, the Company finalized an agreement (the Restructuring Agreement) with
Raytheon Aircraft Credit Corporation (Raytheon) regarding lease and debt
financing provided by Raytheon for the Company's Beechcraft 1900C and 1900D
aircraft fleet. The complex nature of the Restructuring Agreement included
separate provisions for i) the termination and/or modification of aircraft
operating leases, ii) the return of aircraft in satisfaction of indebtedness
obligations, iii) the modification of principal and interest rates for various


                                       20

<PAGE>

aircraft financing promissory notes, and iv) a restructuring of other
indebtedness by means of an issuance of new debt instruments and equity. For
purposes of accounting for the Restructuring Agreement, the Company has
identified the major types of transactions contained within the Restructuring
Agreement in order to more accurately apply the appropriate accounting treatment
to each type of transaction. Transactions involving the termination and/or
modification of aircraft operating leases have been accounted for pursuant to
the provisions of Statement of Financial Accounting Standards No. 13, Accounting
for Leases (SFAS 13), while the restructuring of indebtedness owed by the
Company to Raytheon has been accounted for in accordance with the provisions of
Statement of Financial Accounting Standards No. 15, Accounting for Debtors and
Creditors for Troubled Debt Restructurings (SFAS 15). Accordingly, the major
elements of the Restructuring Agreement and the Company's accounting treatment
of those transactions are as follows:

(a)      Return of Aircraft

The Company has agreed to return seven Beechcraft 1900D aircraft to Raytheon
during 2003 in exchange for the cancellation and extinguishment of one operating
lease and six promissory notes. Because the Company will incur repair and
refurbishment expenses during 2003 in order to return the aircraft to Raytheon
in good working order, the Company has recognized a liability of $4 million for
such expenditures. In addition, and in accordance with the provisions of SFAS 15
regarding the satisfaction of debt by a transfer of assets, the Company has
adjusted the net book value of the six owned aircraft down to the aircrafts'
fair market value of $15 million, and has recognized an impairment loss of $5.5
million. Upon return of the aircraft to Raytheon in 2003, the Company expects to
reduce its outstanding aircraft debt and lease liabilities for these seven
aircraft by $20.9 million and record a gain from exinguishment of debt of $5.4
million.

(b)      Termination of Aircraft Operating Leases/Financed Purchase of Aircraft

Pursuant to the terms of the Restructuring Agreement, operating leases for nine
Beechcraft 1900D aircraft (the "Purchased Aircraft") have been converted to
aircraft ownership with purchase money financing. The Company has recorded the
purchase of the nine aircraft at a total fair market value of $22.5 million with
a corresponding increase in long-term aircraft debt. Interest will accrue on the
unpaid principal balance of the new debt at the rate of LIBOR plus 375 basis
points per annum. Payments of principal and accrued interest are to be made in
120 monthly installments, with the amount of the monthly payment to be adjusted
quarterly to reflect any change in the LIBOR rate.

(c)      Restructured Financing Terms for Aircraft Promissory Notes

The Company obtained amended debt financing for 21 Beechcraft 1900D aircraft
promissory notes (the "Restructured Aircraft Notes") in the amount of $52.5
million. Each of the Restructured Aircraft Notes reflects an initial principal
balance in the amount of $2.5 million with interest to accrue on the unpaid
principal balance at the rate of LIBOR plus 375 basis points per annum. Payments
of principal and accrued interest are to be made in 120 monthly installments,
with the amount of monthly payment to be adjusted quarterly to reflect any
change in the LIBOR rate. Total cash payments for all of the Restructured
Aircraft Notes is estimated to be $68.1 million over the term of the notes.

(d)      Accounting for Refinancing of Aircraft Debt and Lease Obligations under
         SFAS 15

Consistent with SFAS 15, the restructured financing terms for all 30 of the
Beechcraft 1900D aircraft debt and lease obligations discussed in (b) and (c)
above (the "Old Aircraft Debt") has been accounted for as a troubled debt
restructuring. SFAS 15 states that in a troubled debt restructuring, the debtor
shall account for the effects of the restructuring prospectively from the time
of restructuring and shall not reduce the carrying amount of the existing debt
unless the carrying amount of the existing debt exceeds the total future cash
payments of the new debt under the restructured terms. Included in the carrying
value of restructured debt and lease obligations were $3.7 million of deferred
gains and other deferred credits. The effects of any changes in the face amount
or interest rate are to be amortized in future periods by reducing interest
expense to an effective interest rate which equates the net present value of the
future cash payments under the modified terms to the carrying value on the
debtor's books.



                                       21

<PAGE>

After increasing the Company's liabilities by $22.5 million for financing of the
Purchased Aircraft, the carrying value on the Company's books for the Old
Aircraft Debt was $101.3 million, while total future cash flows for the thirty
(30) new and amended aircraft promissory notes (the "New Aircraft Debt") was
estimated to be $95.7 million. In accordance with the provisions of SFAS 15, the
amount of the Company's long-term liabilities has been reduced by $5.6 million
in order to reflect the carrying value of the Old Aircraft Debt to an amount not
more than the estimated future cash flows of the New Aircraft Debt. The $20.7
million difference between the $95.7 million restructured value of the Old
Aircraft Debt and the $75 million principal amount of the New Aircraft Debt will
be amortized as a reduction to the Company's interest expense over the next ten
years.

(e)      Modification of Terms for Aircraft Operating Leases

Pursuant to the terms of the Restructuring Agreement, $384,000 of pre-12/31/02
unpaid lease payments on two Beechcraft 1900C aircraft operating leases has been
contractually extinguished and the Company negotiated a reduction in the monthly
lease payments for the two leases, which is anticipated to yield net cash flow
savings of $1.2 million over the next ten years. The $384,000 liability will
remain on the Company's books and be amortized over a period of 120 months.

(f)      Other Debt Restructuring Involving Partial Settlement Through Issuance
         of Equity

$14.9 million of outstanding principal and accrued interest on various
non-aircraft debt was restructured into three new promissory notes (the
"Non-Aircraft Debt") with a total principal amount of $11.2 million and
estimated future cash payments of $15.2 million. In addition, the Company issued
5,371,980 shares of the Company's common stock to Raytheon, representing a 38.2%
interest in the Company's outstanding post-restructuring shares of common stock.

The restructuring of the Non-Aircraft Debt through the issuance of equity and
new debt obligation(s) was accounted for in compliance with SFAS 15. The new
debt obligations were recorded at the carrying amount of the prior debt
obligation(s), less the fair value of the equity granted to Raytheon. The
Company has determined that, on the effective date of the Restructuring
Agreement, the fair market value of the equity interest granted to Raytheon was
$2.1 million. Accordingly, the Company has reduced $14.9 million of Non-Aircraft
Debt by $2.1 million to a net carrying amount of $12.8 million, and has recorded
an increase of $2.1 million in shareholders' equity.

(g)      Board of Director Observer Rights

As further consideration for the concessions granted by Raytheon in the
Restructuring Agreement, the Company has granted Raytheon observer rights for
the Company's Board of Directors, but without any right to vote or enter into
any discussions at any Board of Directors meetings.

As a result of continued declines in traffic and fare levels as well as slower
receipt of essential air service payments, the Company did not make its February
and March payments under the Restructuring Agreement to Raytheon and will not
make the payments due Raytheon in April 2003. In addition the Company is not in
compliance with certain financial covenants contained in that Agreement. On
April 14, 2003, Raytheon waived the foregoing requirements until June 15, 2003.


                                       22

<PAGE>

A summary of the obligations immediately preceding the restructuring, the
contractual obligations after the restructuring and the recording of the
restructuring in accordance with SFAS 13 and 15 is set forth below.

        RESTRUCTURING OF RAYTHEON AIRCRAFT CREDIT CORPORATION OBLIGATIONS
                              at December 31, 2002

<TABLE>
<CAPTION>
                                            Prior to            Restructured Contractual              Recorded in Accordance
                                         Restructuring                 Obligation                          with SFAS 15
                                                                                 Interest                              Interest
                                             Amount            Amount              Rate              Amount              Rate
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>               <C>               <C>                  <C>               <C>
21 Aircraft owned and retained by         $  71,166,954     $  52,500,000     LIBOR + 375          $  66,514,494     0.0%
Great Lakes - notes payable, unpaid                                           basis points                           initially
interest and other accrued credits                                            5.13%
                                                                              initially

-----------------------------------------------------------------------------------------------------------------------------------

9 Aircraft under operating leases             7,609,117        22,500,000     LIBOR + 375             29,188,957     0.0%
purchased by Great Lakes - unpaid                                             basis points                           initially
lease installments, accrued credits                                           5.13%
and purchase price                                                            initially

-----------------------------------------------------------------------------------------------------------------------------------

6 Aircraft owned by Great Lakes to           20,331,001        20,331,001     None                    20,331,001     None
be returned to Raytheon and unpaid
obligations cancelled - notes
payable, unpaid interest and other
accrued credits
-----------------------------------------------------------------------------------------------------------------------------------

1 Aircraft to be returned to                    577,276           577,276     None                       577,276     None
Raytheon  and unpaid lease
installments cancelled in 2003 and
other accrued credits
-----------------------------------------------------------------------------------------------------------------------------------

2 1900C Aircraft under operating                384,000                --     None                       384,000     None
leases to be retained by Great
Lakes - unpaid lease installments
cancelled and are to be amortized
over remaining terms of the leases

-----------------------------------------------------------------------------------------------------------------------------------

Other notes payable and unpaid               14,987,735
interest

  Deferral Note                                                 1,200,000     LIBOR + 375              1,200,000     LIBOR + 375
                                                                              basis points                           basis points

  Senior Note                                                   5,000,000     8.25%                    6,087,713     6.8%

  Subordinated Note                                             5,000,000     6.00%                    5,551,231     2.5%

  Equity 5,371,980 shares of                                    2,148,792                              2,148,792
  common stock

-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Other Financing

The Company has also renegotiated agreements with three other creditors who
provide the financing for six of the Company's seven Brasilia aircraft. In
August 2002, the Company entered into a settlement with Finova Capital
Corporation ("Finova") with respect to an aircraft returned to Finova. As a part
of that agreement, the Company agreed to pay Finova a total of $727,589 with
interest at 10% over a period of 48 months. The Company retained


                                       23

<PAGE>

the second aircraft leased from Finova and agreed to pay Finova $10,000 per
month from October 2002 through March 2003 and $15,000 per month from April 2003
until the end of the lease term on September 30, 2003. For the period prior to
September 30, 2003 the parties have agreed to negotiate a settlement of amounts
due under the lease agreement and for unpaid rentals and return condition of the
remaining aircraft.

At December 31, 2002, the Company was in arrears on rental payments to Boeing
Capital Corporation ("Boeing") for lease of two Brasilia aircraft in the amount
of $3.4 million. Subsequent to year-end, the Company entered into a letter
agreement with Boeing, effective as of December 31, 2002, to cancel the unpaid
lease installments, to reduce the monthly rental payments through the end of the
lease terms in 2013, requiring the Company to fund major overhauls in advance
and giving Boeing the right to terminate the leases at its option with six
months notice. Boeing will receive shares of redeemable preferred stock valued
at $4.5 million. The Company intends to file a Certificate of Designation
setting forth the terms of the redeemable preferred stock by April 30, 2003. The
parties will further document the terms and conditions of the lease
restructuring by that date.

At December 31, 2002, Great Lakes had three notes payable to The CIT
Group/Equipment Financing, Inc. ("CIT") Corporation with interest at 8.7% to
9.08%, totaling $5.0 million for financing of three of its Brasilia aircraft, of
which $214,000 was in arrears. In April 2003, the notes were combined and
modified to provide for reduced monthly payments through March 2008 at an
interest rate of LIBOR plus 275 basis points.

Debt Service

The restructured financing agreements with creditors are based in part on a
financial model that contains forecasts of expected revenues, expenses and cash
flows. Payments to creditors are closely aligned with expected cash flows, and
any shortfall in these cash flows would have an immediate effect on the
Company's ability to meet its payment obligations under its debt restructuring
agreements. There are significant uncertainties regarding the Company's ability
to achieve the required cash flows because of the unknown outcome of United's
attempt to reorganize under its bankruptcy filing, volatility of fuel prices,
unknown effects of the Iraq conflict and general economic conditions. The
foregoing uncertainties are outside the control of the Company, and the Company
has no alternative source of funding or financing to provide sufficient cash to
continue operations if the Company does not achieve its forecasted cash flows.
If the Company is unable to make the payments required under the restructuring
agreements, it will be required to attempt to renegotiate its payment schedule
with its current creditors. There can be no assurance that creditors will be
willing or able to renegotiate such payments.

At December 31, 2002, the Company was in compliance with its debt agreements or
had obtained amendments or short-term waivers from its lenders with respect to
any nonpayment of scheduled debt installments or noncompliance with financial
covenants. However, the Company cannot determine with a high degree of
confidence that it will be able to make the required payments or remain in
compliance with the agreements during the year 2003. Therefore the amount of
debt that by its terms would otherwise be due after one year is shown as
long-term obligations classified as current.

As a result of the significant uncertainties concerning the Company's ability to
achieve the results contained in its financial model and to pay its obligations
as they become due, there is substantial doubt as to the Company's ability to
continue as a going concern. The accompanying financial statements have been
prepared on a going concern basis which assumes continuity of operations and
realization of assets and liabilities in the ordinary course of business. The
financial statements do not include any adjustments that might result if the
Company were forced to discontinue operations.

The Company's financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in note 1 to the financial
statements, the Company has suffered significant losses in the years ended
December 31, 2002 and 2001, and had liabilities in excess of assets at December
31, 2002. The auditor's report dated March 17, 2003 on the Company's financial
statements states that these matters raise substantial doubt about the Company's
ability to continue as a going concern.

The terrorist attacks of September 11, brought about an immediate reduction of
passenger traffic as well as additional costs. The Company adjusted its level of
operations to better match the available traffic along with retiming its
schedules to align them with United's reduced capacity at Denver.

Since September 11, 2001, the Company has aggressively reduced its operations to
match as closely as possible its service to available traffic and the reduced
level of capacity by United and has instituted an aggressive cost control


                                       24

<PAGE>

program. It has also concentrated on maintaining and expanding its service in
markets eligible for government subsidy. At the end of 2002, approximately 54%
of its operations were in markets eligible for subsidy support.

Essential Air Service: The DOT also recognized the change in economics as a
result of September 11 for carriers providing service to Essential Air Service
cities and ordered the renegotiation of all subsidy contracts retroactive to
October 1, 2001. DOT Order 2002-2-13 provided for the adjustment of subsidy
payments to recognize lower levels of passenger revenues and compensate carriers
for higher levels of costs such as insurance and security.

Contracts with the DOT for providing Essential Air Service, while nominally
permitting a 5% margin on costs, have usually been negotiated against an overall
program funding limitation by Congress, which has resulted in carriers accepting
a subsidy rate that historically was not fully compensatory. With the enactment
of the Air Transportation Safety and System Stabilization Act and associated
increased funding, Congress appropriated a total of $113 million to compensate
EAS carriers for their total increased costs, including costs resulting from
September 11. This compares to an EAS subsidy level of $50 million for the
federal fiscal year ended September 30, 2001. The Company received approximately
$30.6 million of EAS subsidies in 2002 to compensate it for service it provides
to small cities as compared to $19.3 million in 2001. The total amount of
subsidy ultimately received over an extended period is determined by, among
other things, overall funding levels to the DOT by Congress, competitive bids by
other carriers, schedule modifications at the request of the DOT and the
Company's optimization of its schedules.

Relationship with United: Great Lakes may be impacted in the future by the
outcome of United's reorganization or liquidation in bankruptcy. Successful
reorganization by United may include changes in code sharing relationships under
a new business plan and changes in scope clauses contained in United's contract
with its pilots. As is the case with many of the major carriers, in the past,
United has agreed with its pilots to specific limits on the number of turboprop
and regional jet aircraft that may be operated by its affiliates, either as a
United Express or a code-sharing partner, in relation to the number of jet
aircraft that are flown by United pilots. The Company cannot predict what
limitations, if any, may be included in a United agreement with its pilots
negotiated as part of its reorganization. A liquidation would have a significant
impact on the Company's connecting traffic at Denver until Frontier increases
its service or a replacement carrier increases its operations and the Company is
able to enter into a marketing agreement with that carrier. There could also be
an increase in demand for the Company's services as service to smaller cities
currently receiving uneconomical jet service is discontinued.

Contractual Obligations

The following table summarizes our major contractual obligations as of December
31, 2002:

<TABLE>
<CAPTION>
                                 2003             2004, 2005          2006, 2007          After 2007             Total
                           ----------------    ----------------    ----------------    ----------------    -----------------
<S>                        <C>                      <C>                 <C>                 <C>                 <C>
Long-term debt             $     8,922,045          17,477,719          24,319,137          59,822,556          110,541,457
SFAS 15 amortization             3,431,059           6,263,545           6,312,842           6,334,949           22,342,395
                           ----------------    ----------------    ----------------    ----------------    -----------------

      Total debt           $    12,353,104          23,741,264          30,631,979          66,157,505          132,883,852
Operating leases                 1,436,000           2,232,000           2,328,000           6,862,000           12,858,000
                           ----------------    ----------------    ----------------    ----------------    -----------------

Total Obligations          $    13,789,104          25,973,264          32,959,979          73,019,505          145,741,852
                           ================    ================    ================    ================    =================
</TABLE>

See notes 3 and 4 to the financial statements.

Critical Accounting Policies and Estimates

The preparation of the Company's financial statements in conformity with
accounting principles generally accepted in the United States of America
requires the use of estimates, judgments and assumptions that affect the
reported


                                       25

<PAGE>

amounts of assets and liabilities as of the date of the financial statements,
revenues and expenses during the reporting period and related disclosures of
contingent assets and liabilities in the financial statements and the
accompanying notes. Actual results could differ from those estimates.

The U.S. Securities and Exchange Commission ("SEC") has defined a company's most
critical accounting policies as the ones that are most important to the
portrayal of the Company's financial condition and results, and that require the
company to make its most difficult and subjective judgments, often as a result
of the need to make estimates of matters that are inherently uncertain. Based on
this definition, the Company has identified its critical accounting policies as
including those addressed below. The Company also has other key accounting
policies, which involve the use of estimates, judgments and assumptions. See
Note 3 "Summary of Significant Accounting Policies and Procedures" in the Notes
to the Financial Statements for additional discussion of these items. Management
believes that its estimates and assumptions are reasonable, based on information
presently available; however, changes in these estimates, judgments and
assumptions will occur as a result of future events. Accordingly, actual results
could differ from amounts estimated.

Passenger revenues. The Company recognizes revenues from ticket sales when the
service is provided and records as a liability amounts received for service to
be provided in the future. To the extent that a passenger travels using a joint
fare that provides for a portion of the service to be provided by another
airline, the amount of the ticket is apportioned to the carrying airline based
upon contractual formulas which approximate usual industry standard formulas for
sharing of ticket revenues.

Essential Air Service Subsidy Rates. EAS revenues are recorded based on
completed contracts for providing service to individual cities and estimated
revenues based upon contract negotiations that are in process and could change
once the agreements are finalized.

Estimated lives used to record depreciation on aircraft and obsolescence
reserves for aircraft parts inventories. The estimated lives used to record
depreciation may be affected by passenger traffic and fare levels, technology,
policies regarding EAS subsidies promulgated by the DOT and changes in strategy
by the Company. The foregoing may impact depreciation rates, impairment, or
both.

Maintenance expense. The Company records maintenance expense as it is incurred
and does not provide for any maintenance expense in advance. As required under
the Restructuring Agreement and its agreement with Boeing, the Company will in
the future begin advance funding for certain maintenance overhauls, which will
be expensed as the overhaul is incurred.

Aircraft Valuation and Impairments. The Company has evaluated its long-lived
assets for possible impairments in compliance with SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets. The Company records impairment
losses on long-lived assets used in operations when events and circumstances
indicate the assets might be impaired and the undiscounted cash flows estimated
to be generated by those assets are less than their carrying amounts. Impairment
losses are measured by comparing the fair value of the assets to their carrying
amounts. In determining the need to record impairment charges, the Company is
required to make certain estimates regarding such things as the current fair
market value of the asset and future net cash flows to be generated by the
asset. The current fair market value of the asset is determined by independent
appraisal, and the future net cash flow are based on assumptions such as asset
utilization, expected remaining useful lives, future market trends and projected
salvage values. In conjunction with the Restructuring Agreement, the Company
incurred an impairment charge of $5,469,539 to reduce the carrying value of the
six 1900D aircraft to fair market value as of December 31, 2002.

Impact of Recently Issued Accounting Pronouncements

In October 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which addressed financial accounting and
reporting for the impairment or disposal of long-lived assets. While Statement
No. 144 supersedes Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of, it retains


                                       26

<PAGE>

many of the fundamental provisions of that Statement. Statement No. 144 also
supersedes the accounting and reporting provisions of APB Opinion No. 30,
Reporting the Results of Operations-Reporting the Effects of Disposal of A
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, for the disposal of a segment of a business. The
Company adopted SFAS No. 144 on January 1, 2002. The adoption did not have a
material impact on the Company's financial condition or results of operations.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as
of April 2002." This statement rescinds SFAS No. 4, "Reporting Gains and Losses
from Extinguishment of Debt," and an amendment of that Statement, SFAS No. 64,
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements" and excludes
extraordinary item treatment for gains and losses associated with the
extinguishment of debt that do not meet the APB Opinion No. 30, "Reporting the
Results of Operations -- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" ("APB 30") criteria. Any gain or loss on extinguishment of debt
that was classified as an extraordinary item in prior periods presented that
does not meet the criteria in APB 30 for classification as an extraordinary item
shall be reclassified. SFAS No. 145 also amends SFAS No. 13, "Accounting for
Leases," as well as other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under
changed conditions. SFAS 145 is applied to all transactions occurring after May
15, 2002 and for all financial statements issued after that date. The adoption
did not have a material impact on the Company's financial condition or results
of operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)" ("EITF 94-3"). SFAS No.
146 requires that a liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. Under EITF 94-3, a
liability for exit costs, as defined in EITF 94-3, was recognized at the date of
an entity's commitment to an exit plan. The provisions of SFAS No. 146 are
effective for exit or disposal activities that are initiated by the Company
after December 31, 2002. The adoption is not expected to have a material impact
on the Company's financial condition or results of operations unless the Company
enters into an exit or disposal activity covered by this statement.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure." This statement amends FASB Statement
No. 123, "Accounting for Stock-Based Compensation," to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, this Statement
amends the disclosure requirements of Statement 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock based employee compensation and the effect of the method
used on reported results. SFAS 148 is effective for financial statements for
fiscal years ending after December 15, 2002. The adoption is not expected to
have a material impact on the Company's financial condition or results of
operations.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others," which disclosures are effective for financial
statements issued after December 15, 2002. This Interpretation elaborates on the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The Company does not believe that the adoption will have
a material impact on its financial condition or results of operations.

Effects of Inflation

Except for the price of fuel, inflation has not had a material effect on the
Company's operations in the past five years. The Company is subject to
inflationary pressures from labor agreements, fuel price escalations and costs
at airports served which it attempts to recover through fare and schedule
adjustments.


                                       27

<PAGE>

Seasonality

Historically, the Company has experienced lower passenger volumes during the
months of January through April and in November and December. This seasonality
can be attributed primarily to relatively difficult winter weather operating
conditions in the Company's principal area of operations, resulting in fewer
vacations and other discretionary trips and reduced business travel during these
months. These seasonal factors have generally resulted in reduced revenues,
increased operating losses and reduced cash flow for the Company during these
months.

Item7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risks

The Company is susceptible to certain risks related to changes in the cost of
aircraft fuel and changes in interest rates. As of December 31, 2002, the
Company did not have any derivative financial instruments.

Aircraft Fuel

Airline operators are dependent upon fuel to operate and therefore, are impacted
by changes in aircraft fuel prices. Great Lakes' earnings are affected by
changes in the price and availability of aircraft fuel. Aircraft fuel
represented approximately 13.2% of Great Lakes' operating expenses in 2002. A
one-cent change in the average cost of aircraft fuel would impact the Company's
aircraft fuel expense by approximately $115,000 annually, based upon fuel
consumption in 2002.

Interest Rates

The Company's operations are very capital intensive because the vast majority of
its assets consists of flight equipment, which is long lived. The Company's
exposure to market risk associated with changes in interest rates relates to its
debt obligations. The Company has exposure to changes in cash flows resulting
from changes in interest rates because a significant portion of its long-term
debt has variable interest rates. Additionally, the Company is exposed to
changes in fair values of its debt obligations that carry fixed rates of
interest. See Note 5 to the Consolidated Financial Statements. A one percent
increase in interest rates would increase annual interest cost by approximately
$800,000 annually based on December 31, 2002 balances.


                                       28

<PAGE>

Due to the accounting treatment of the restructuring of the Raytheon liabilities
under SFAS 15, the Company's interest expense under SFAS 15 will be
significantly less than the contractual interest expense throughout the terms of
the Raytheon notes. At December 31, 2002, the interest expense, for purposes of
accounting under SFAS 15, on long-term obligations due in the five subsequent
years and thereafter are as follows:

<TABLE>
<CAPTION>
                             Fixed Rate          Average Fixed           Variable Rate         Average Variable
                              Interest           Interest Rate              Interest             Interest Rate
    Maturity               under SFAS 15         under SFAS 15           under SFAS 15           under SFAS 15
-------------------     --------------------   -------------------    -------------------    -------------------
<S>                          <C>                     <C>                 <C>                       <C>
2003                         $198,527                1.613               $1,880,657                1.381
2004                          185,571                1.508                1,621,179                1.346
2005                          562,169                4.716                1,462,476                1.347
2006                          680,726                4.392                1,289,586                1.353
2007                          505,935                4.778                1,115,959                1.357
Thereafter                    211,639                6.867                1,201,041                0.818
</TABLE>

In comparison, the contractual interest expense on the Company's long-term
obligations (based upon the interest rate stated in the debt instruments) for
the five subsequent years and thereafter are as follows:

<TABLE>
<CAPTION>
                             Fixed Rate             Average               Variable Rate      Average Contractual
                             Contractual       Contractual Fixed           Contractual             Variable
    Maturity                  Interest           Interest Rate              Interest             Interest Rate
-------------------     --------------------   -------------------    -------------------    -------------------
<S>                          <C>                     <C>                 <C>                       <C>
2003                         $791,995                7.306               $5,311,716                5.844
2004                          830,596                7.225                4,801,147                5.824
2005                          826,238                7.034                4,366,084                5.822
2006                          734,982                6.814                3,901,488                5.817
2007                          548,251                6.905                3,419,987                5.807
Thereafter                    251,450                8.250                7,473,932                5.520
</TABLE>


                                       29

<PAGE>

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements of the Company as of December 31, 2002 and 2001
together with Independent Auditor's Report are included in this Form 10-K on the
pages indicated below.

<TABLE>
<CAPTION>
                                                                                      Page
<S>                                                                                     <C>
Independent Auditors' Report .......................................................... 31

Balance Sheets as of December 31, 2002 and 2001 ....................................... 32

Statements of Operations for the Years Ended December 31, 2002, 2001 and 2000 ......... 33

Statements of Stockholders' Equity (Deficit) for the Years
     Ended December 31, 2002, 2001 and 2000 ........................................... 34

Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000 ......... 35

Notes to Financial Statements ......................................................... 36

Supplemental Schedule to Financial Statements

Schedule II - Valuation and Qualifying Accounts ....................................... 56
</TABLE>


                                       30

<PAGE>

                          Independent Auditors' Report

The Board of Directors
Great Lakes Aviation, Ltd.:

We have audited the accompanying balance sheets of Great Lakes Aviation, Ltd.
(an Iowa Corporation) as of December 31, 2002 and 2001, and the related
statements of operations, stockholders' equity (deficit), and cash flows for
each of the years in the three-year period ended December 31, 2002. In
connection with our audits of the financial statements we have also audited the
financial statement schedule. These financial statements and the financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Great Lakes Aviation, Ltd. as
of December 31, 2002 and 2001, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2002, in
conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 1 to the
financial statements, the Company has suffered significant losses in the years
ended December 31, 2002 and 2001, and has liabilities in excess of assets at
December 31, 2002. These matters raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

Denver, Colorado
March 17, 2003, except as to notes 1, 3, 4 and 5,
which are as of April 15, 2003


                                       31

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                                 Balance sheets

                           December 31, 2002 and 2001

<TABLE>
<CAPTION>
                           Assets                                                  2002             2001
                                                                              -------------    -------------
<S>                                                                           <C>                  <C>
Current assets:
     Cash                                                                     $     357,924    $   1,514,565
     Accounts receivable (note 3), net of allowance of $160,000 at
        December 31, 2002 and 2001                                                8,802,045        9,836,925
     Inventories, net (note 3)                                                    5,325,291        8,100,037
     Prepaid expenses and other current assets                                      222,630        1,363,904
                                                                              -------------    -------------
                 Total current assets                                            14,707,890       20,815,431
                                                                              -------------    -------------
Property and equipment:
     Flight equipment, including aircraft to be returned (notes 2, 3 and 4)     147,839,945      132,343,382
     Other property and equipment                                                 7,366,312        7,064,091
        Less accumulated depreciation and amortization                          (34,852,955)     (30,198,893)
                                                                              -------------    -------------
                 Total property and equipment                                   120,353,302      109,208,580
                                                                              -------------    -------------
Other assets                                                                      1,121,044        2,086,577
                                                                              -------------    -------------
                 TOTAL ASSETS                                                 $ 136,182,236    $ 132,110,588
                                                                              =============    =============

        Liabilities and Stockholders' Equity (Deficit)

Current liabilities:
     Note payable and current maturities of long-term debt (note 5)           $  12,353,104    $  28,507,699
     Long-term debt classified as current (note 5)                              119,858,463       82,347,252
     Accounts payable                                                            14,102,042       16,646,584
     Accrued liabilities and unearned revenue                                     9,974,642        7,108,643
     Deferred lease payments                                                      5,665,742        6,234,612
                                                                              -------------    -------------
                 Total current liabilities                                      161,953,993      140,844,790
                                                                              -------------    -------------
Long-term debt, net of current maturities (note 5)                                  672,285        4,727,169
Deferred credits                                                                    713,866        3,130,263
Deferred lease payments                                                                  --        1,903,929

Stockholders' equity (deficit) (notes 2 and 7):
     Common stock, $0.01 par value. Authorized 50,000,000 shares;
        issued and outstanding 14,052,166 and 8,680,186 shares at
        December 31, 2002 and 2001                                                  140,522           86,802
     Paid-in capital                                                             33,462,257       31,367,185
     Accumulated deficit                                                        (60,760,687)     (49,949,550)
                                                                              -------------    -------------
                 Total stockholders' equity (deficit)                           (27,157,908)     (18,495,563)

Commitments and contingencies (notes 2, 5, 7, and 10)
                                                                              -------------    -------------
                 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $ 136,182,236    $ 132,110,588
                                                                              =============    =============
</TABLE>

See accompanying notes to financial statements.


                                       32

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                            Statements of Operations

                  Years ended December 31, 2002, 2001, and 2000

<TABLE>
<CAPTION>
                                                      2002            2001            2000
                                                  ------------    ------------    ------------
<S>                                               <C>               <C>            <C>
Operating revenues:
     Passenger                                    $ 50,716,126    $ 77,753,247    $112,036,604
     Public service                                 30,614,182      19,276,397      14,876,983
     Freight, charter, and other                     3,398,833       4,410,133       6,676,160
                                                  ------------    ------------    ------------
                 Total operating revenues           84,729,141     101,439,777     133,589,747
                                                  ------------    ------------    ------------
Operating expenses:
     Salaries, wages, and benefits                  25,856,164      31,123,960      35,162,270
     Aircraft fuel                                  12,616,230      17,513,730      21,503,364
     Aircraft maintenance materials and repairs     12,739,503      15,122,171      17,491,132
     Commissions                                       871,297       2,512,020       4,247,974
     Depreciation and amortization                   7,011,996       7,063,272       7,103,304
     Aircraft rental (note 4)                        7,461,549       8,682,381       9,225,622
     Other rentals and landing fees                  5,779,890       6,362,654       7,808,230
     Other operating expense                        18,101,460      23,689,139      30,112,321
     Impairment of assets and other property         5,469,539              --              --
                                                  ------------    ------------    ------------
                 Total operating expenses           95,907,628     112,069,327     132,654,217
                                                  ------------    ------------    ------------
                 Operating income (loss)           (11,178,487)    (10,629,550)        935,530
Other expense:
     Interest expense, net                           6,643,176       9,931,213       9,168,247
     Federal grant                                          --      (1,926,879)             --
     Gain on insurance recovery                     (1,437,905)             --              --
     Gain on extinguishment of debt                 (5,572,621)             --              --
                                                  ------------    ------------    ------------
                 Loss before income taxes          (10,811,137)    (18,633,884)     (8,232,717)
Income tax expense                                          --              --           6,116
                                                  ------------    ------------    ------------
                 Net loss                         $(10,811,137)   $(18,633,884)   $ (8,238,833)
                                                  ============    ============    ============
Net loss per share:
     Basic                                        $      (1.24)   $      (2.15)   $      (0.95)
     Diluted                                             (1.24)          (2.15)          (0.95)

Average shares outstanding:
     Basic                                           8,698,093       8,658,330       8,645,774
     Diluted                                         8,698,093       8,658,330       8,645,774

</TABLE>

See accompanying notes to financial statements.


                                       33

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                  Statements of Stockholders' Equity (Deficit)

                  Years ended December 31, 2002, 2001, and 2000

<TABLE>
<CAPTION>
                                     Common stock
                               -------------------------                  Accumulated
                                  Shares        Amount   Paid-in capital    deficit        Total
                               -----------   ----------- --------------- ------------   ------------
<S>                            <C>           <C>           <C>            <C>           <C>
Balance at December 31, 1999     8,637,440   $    86,374   $31,609,841   $(23,076,833)  $  8,619,382

Issuance of common stock            20,211           203        30,756             --         30,959
Redemption of warrants                  --            --      (281,750)            --       (281,750)
Net loss                                --            --            --     (8,238,833)    (8,238,833)
                               -----------   -----------   -----------   ------------   ------------
Balance at December 31, 2000     8,657,651        86,577    31,358,847    (31,315,666)       129,758

Issuance of common stock            22,535           225         8,338             --          8,563
Net loss                                --            --            --    (18,633,884)   (18,633,884)
                               -----------   -----------   -----------   ------------   ------------
Balance at December 31, 2001     8,680,186        86,802    31,367,185    (49,949,550)   (18,495,563)

Issuance of common stock         5,371,980        53,720     2,095,072             --      2,148,792
Net loss                                --            --            --    (10,811,137)   (10,811,137)
                               -----------   -----------   -----------   ------------   ------------
Balance at December 31, 2002    14,052,166   $   140,522   $33,462,257   $(60,760,687)  $(27,157,908)
                               ===========   ===========   ===========   ============   ============
</TABLE>

See accompanying notes to financial statements.


                                       34

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                            Statements of Cash Flows

                  Years ended December 31, 2002, 2001, and 2000

<TABLE>
<CAPTION>
                                                                         2002            2001             2000
                                                                     ------------    ------------    ------------
<S>                                                                  <C>              <C>              <C>
Operating activities:
    Net loss                                                         $(10,811,137)   $(18,633,884)    $(8,238,833)
    Adjustments to reconcile net (loss) income to net cash
       provided by (used in) operating activities:
          Depreciation and amortization                                 7,011,996       7,063,272       6,932,179
          Impairment of assets and other property                       5,469,539              --              --
          Gain on extinguishment of debt                               (5,572,621)             --              --
          Gain on insurance recovery                                   (1,437,905)             --              --
          Loss on disposal of assets, net                                      --           3,726              --
          Change in current operating items:
            Accounts receivable, net                                    1,034,880       2,704,419          34,318
            Inventories and major aircraft parts, net                   1,009,213       2,017,869       1,943,207
            Prepaid expenses and other current assets                   1,141,274        (439,919)       (280,542)
            Accounts payable and accrued liabilities                    2,641,106       8,925,664        (836,376)
            Deferred lease payments                                     5,632,119       7,948,049         104,905
            Other                                                              --              --         176,733
                                                                     ------------    ------------     -----------
               Net cash provided by (used in) operating activities      6,118,464       9,589,196        (164,409)
                                                                     ------------    ------------     -----------
Investing activities:
    Purchases of flight equipment and other property
       and equipment                                                     (547,294)       (728,509)     (1,154,641)
    Proceeds from insurance recovery                                    2,187,808              --              --
    Decrease (increase) in other assets                                    65,533         (33,289)          3,213
                                                                     ------------    ------------     -----------
               Net cash (used in) provided by investing activities      1,706,047        (761,798)     (1,151,428)
                                                                     ------------    ------------     -----------
Financing activities:
    Repayment of notes payable and long-term debt                      (4,371,344)       (765,563)     (5,882,457)
    Net proceeds from line of credit                                           --              --       9,360,834
    Net payments on line of credit                                     (4,609,808)     (8,551,539)             --
    Redemption of warrant                                                      --              --        (281,750)
    Proceeds from sale of common stock                                         --           8,563          30,959
                                                                     ------------    ------------     -----------
               Net cash provided by (used in) financing activities     (8,981,152)     (9,308,539)      3,227,586
                                                                     ------------    ------------     -----------
               Net change in cash                                      (1,156,641)       (481,141)      1,911,749
Cash:
    Beginning of year                                                   1,514,565       1,995,706          83,957
                                                                     ------------    ------------     -----------
    End of year                                                      $    357,924    $  1,514,565     $ 1,995,706
                                                                     ============    ============     ===========
Supplementary cash flow information:
    Cash paid during the year for:
       Interest                                                      $    955,770    $    919,061     $ 9,905,457

Noncash transactions:
    Long-term debt issued in acquisition of Beechcraft
       1900D airliners (see note 2)                                  $ 22,500,000              --     $        --
    Conversion of deferred lease payments to long-term debt                    --              --     $ 1,981,902
    Conversion of line of credit to long-term debt                             --              --       4,713,429
                                                                     ------------    ------------     -----------
                                                                     $ 22,500,000              --     $ 6,695,331
                                                                     ============    ============     ===========
</TABLE>

See accompanying notes to financial statements.


                                       35

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


(1)  Business, Liquidity, and Going-Concern Matters

     (a)  Business

          Great Lakes is a regional airline that until May 1, 2001 operated
          under the United Airlines, Inc. (United) identity as a United Express
          carrier. Effective May 1, 2001, the Company entered into an agreement
          with United which terminated the United Express relationship and
          established a code sharing relationship. Under this agreement the
          Company regained its own identity but continued sale and operation of
          connecting flight using the United flight codes. The Company also
          negotiated a similar code sharing agreement with Frontier Airlines,
          Inc. (Frontier) that became effective July 9, 2001. In addition to the
          above code sharing agreements, the Company operates flights to
          destinations under the Great Lakes Airlines name. Additionally, the
          Company operates charter and cargo flights, including cargo service
          for the US mail.

          As of March 1, 2003, the Company served 32 destinations in 9 states to
          and from Denver as code sharing partners with both United and
          Frontier. It also served 4 destinations in 2 states to and from
          Minneapolis and 2 destinations in 2 states to and from Phoenix. On
          February 28, 2003, the Company discontinued its service to its Chicago
          hub.

          Under the new code sharing relationship, approximately 71 % and 72 %
          of Great Lakes' traffic connected with United in 2002 and 2001,
          respectively. For the year 2000 when Great Lakes' operations were
          totally conducted as a United Express carrier, 75 % of the Great
          Lakes' passengers connected with United.

     (b)  Liquidity and Going-Concern Matters

          The Company suffered substantial losses during the fourth quarter of
          2000 and the years 2001 and 2002. These losses produced a significant
          reduction in liquidity, and the Company made only minor payments on
          the majority of its debt and lease obligations during 2001 and 2002.
          As a result, during 2001 and 2002 the Company was not in compliance
          with payment terms and financial covenants covering certain debt
          obligations and was in arrears on lease payment obligations. On
          December 31, 2002, the Company entered into a restructuring
          transaction with its primary lender and aircraft financer as discussed
          in Note 2.

          In addition, in December 2002, United filed for bankruptcy protection
          under Chapter 11 of the US Bankruptcy Code. There can be no assurance
          that United will be able to emerge from bankruptcy protection or will
          continue to utilize the services of the Company as a regional airline
          connection at levels that will allow the Company to become profitable.
          The Company's dependence on United, combined with the liquidity
          matters discussed above, raise doubts about the Company's ability to
          continue as a going concern.

          The Company's ability to continue as a going concern, of which there
          is substantial doubt, depends upon its ability to increase
          profitability and cash flow and/or obtain new sources of financing to
          pay its obligations as they come due, upon maintaining adequate
          liquidity, and achieving sustained profitability. The accompanying
          financial statements have been prepared on a going concern basis which
          assumes continuity of operations and realization of assets and
          liabilities in the ordinary course

                                                                     (Continued)

                                       36

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


          of business. The financial statements do not include any adjustments
          that might result if the Company was forced to discontinue its
          operations.

          The Company currently has no financing agreements in place under which
          it can secure additional funds. The Company has reached agreements
          with the creditors providing debt financing for its equipment and,
          with the exception of a lease of one Embraer Brasilia EMB 120, its
          equipment lessors to restructure the agreements to improve
          profitability and cash flow.

          In certain instances the Company has required subsequent amendments
          and short-term waivers of payments and other provisions of the
          agreements with certain creditors. As a result of these waivers and
          amendments, at December 31, 2002, the Company is in compliance with
          all of its long-term debt and lease obligations. However, the Company
          cannot determine with a high degree of probability that it will be
          able to make the required payments or remain in compliance with the
          agreements during the year 2003. Therefore the amount of debt that by
          its terms would otherwise be due after one year is shown as long-term
          obligations classified as current.

(2)  Restructuring Agreement with Raytheon Aircraft Credit Corporation

     On December 31, 2002, the Company finalized an agreement (the Restructuring
     Agreement) with Raytheon Aircraft Credit Corporation (Raytheon) regarding
     lease and debt financing provided by Raytheon for the Company's Beechcraft
     1900C and 1900D aircraft fleet. The complex nature of the Restructuring
     Agreement included separate provisions for i) the termination and/or
     modification of aircraft operating leases, ii) the return of aircraft in
     satisfaction of indebtedness obligations, iii) the modification of
     principal and interest rates for various aircraft financing promissory
     notes, and iv) a restructuring of other indebtedness by means of an
     issuance of new debt instruments and equity. For purposes of accounting for
     the Restructuring Agreement, the Company has identified the major types of
     transactions contained within the Restructuring Agreement in order to more
     accurately apply the appropriate accounting treatment to each type of
     transaction. Transactions involving the termination and/or modification of
     aircraft operating leases have been accounted for pursuant to the
     provisions of Statement of Financial Accounting Standards No. 13,
     Accounting for Leases (SFAS 13), while the restructuring of indebtedness
     owed by the Company to Raytheon has been accounted for in accordance with
     the provisions of Statement of Financial Accounting Standards No. 15,
     Accounting for Debtors and Creditors for Troubled Debt Restructurings (SFAS
     15). Accordingly, the major elements of the Restructuring Agreement and the
     Company's accounting treatment of those transactions are as follows:

     (a)  Return of Aircraft

          The Company has agreed to return seven Beechcraft 1900D aircraft to
          Raytheon during 2003 in exchange for the cancellation and
          extinguishment of one operating lease and six promissory notes.
          Because the Company will incur repair and refurbishment expenses
          during 2003 in order to return the aircraft to Raytheon in good
          working order, the Company has recognized a liability of $4 million
          for such expenditures. In addition, and in accordance with the
          provisions of SFAS 15 regarding the satisfaction of debt by a transfer
          of assets, the Company has adjusted the net book value of the six
          owned aircraft down to the aircrafts' fair market value of $15
          million, and has recognized an impairment loss of $5.5 million. Upon
          return of the aircraft to Raytheon in 2003, the Company expects to
          reduce its outstanding aircraft debt and lease liabilities for these
          seven aircraft by $20.9 million and record a gain from extinguishment
          of debt of $5.4 million.

     (b)  Termination of Aircraft Operating Leases/Financed Purchase of Aircraft

          Pursuant to the terms of the Restructuring Agreement, operating leases
          for nine Beechcraft 1900D aircraft (the "Purchased Aircraft") have
          been converted to aircraft ownership with purchase money

                                                                     (Continued)

                                       37

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


          financing. The Company has recorded the purchase of the nine aircraft
          at a total fair market value of $22.5 million with a corresponding
          increase in long-term aircraft debt. Interest will accrue on the
          unpaid principal balance of the new debt at the rate of LIBOR plus 375
          basis points per annum. Payments of principal and accrued interest are
          to be made in 120 monthly installments, with the amount of the monthly
          payment to be adjusted quarterly to reflect any change in the LIBOR
          rate.

     (c)  Restructured Financing Terms for Aircraft Promissory Notes

          The Company obtained amended debt financing for 21 Beechcraft 1900D
          aircraft promissory notes (the "Restructured Aircraft Notes") in the
          amount of $52.5 million. Each of the Restructured Aircraft Notes
          reflects an initial principal balance in the amount of $2.5 million
          with interest to accrue on the unpaid principal balance at the rate of
          LIBOR plus 375 basis points per annum. Payments of principal and
          accrued interest are to be made in 120 monthly installments, with the
          amount of monthly payment to be adjusted quarterly to reflect any
          change in the LIBOR rate. Total cash payments for all of the
          Restructured Aircraft Notes is estimated to be $68.1 million over the
          term of the notes.

     (d)  Accounting for Refinancing of Aircraft Debt and Lease Obligations
          under SFAS 15

          Consistent with SFAS 15, the restructured financing terms for all 30
          of the Beechcraft 1900D aircraft debt and lease obligations discussed
          in (b) and (c) above (the "Old Aircraft Debt") has been accounted for
          as a troubled debt restructuring. SFAS 15 states that in a troubled
          debt restructuring, the debtor shall account for the effects of the
          restructuring prospectively from the time of restructuring and shall
          not reduce the carrying amount of the existing debt unless the
          carrying amount of the existing debt exceeds the total future cash
          payments of the new debt under the restructured terms. Included in the
          carrying value of restructured debt and lease obligations were $3.7
          million of deferred gains and other deferred credits. The effects of
          any changes in the face amount or interest rate are to be amortized in
          future periods by reducing interest expense to an effective interest
          rate which equates the net present value of the future cash payments
          under the modified terms to the carrying value on the debtor's books.

          After increasing the Company's liabilities by $22.5 million for
          financing of the Purchased Aircraft, the carrying value on the
          Company's books for the Old Aircraft Debt was $101.3 million, while
          total future cash flows for the thirty (30) new and amended aircraft
          promissory notes (the "New Aircraft Debt") was estimated to be $95.7
          million. In accordance with the provisions of SFAS 15, the amount of
          the Company's long-term liabilities has been reduced by $5.6 million
          in order to reflect the carrying value of the Old Aircraft Debt to an
          amount not more than the estimated future cash flows of the New
          Aircraft Debt. The $20.7 million difference between the $95.7 million
          restructured value of the Old Aircraft Debt and the $75 million
          principal amount of the New Aircraft Debt will be amortized as a
          reduction to the Company's interest expense over the next ten years.

     (e)  Modification of Terms for Aircraft Operating Leases

          Pursuant to the terms of the Restructuring Agreement, $384,000 of
          pre-12/31/02 unpaid lease payments on two Beechcraft 1900C aircraft
          operating leases has been contractually extinguished and the Company
          negotiated a reduction in the monthly lease payments for the two
          leases, which is

                                                                     (Continued)

                                       38

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


          anticipated to yield net cash flow savings of $1.2 million over the
          next ten years. The $384,000 liability will remain on the Company's
          books and be amortized over a period of 120 months.

     (f)  Other Debt Restructuring Involving Partial Settlement Through Issuance
          of Equity

          $14.9 million of outstanding principal and accrued interest on various
          non-aircraft debt was restructured into three new promissory notes
          (the "Non-Aircraft Debt") with a total principal amount of $11.2
          million and estimated future cash payments of $15.2 million. In
          addition, the Company issued 5,371,980 shares of the Company's common
          stock to Raytheon, representing a 38.2% interest in the Company's
          outstanding post-restructuring shares of common stock.

          The restructuring of the Non-Aircraft Debt through the issuance of
          equity and new debt obligation(s) was accounted for in compliance with
          SFAS 15. The new debt obligations were recorded at the carrying amount
          of the prior debt obligation(s), less the fair value of the equity
          granted to Raytheon. The Company has determined that, on the effective
          date of the Restructuring Agreement, the fair market value of the
          equity interest granted to Raytheon was $2.1 million. Accordingly, the
          Company has reduced $14.9 million of Non-Aircraft Debt by $2.1 million
          to a net carrying amount of $12.8 million, and has recorded an
          increase of $2.1 million in shareholders' equity.

     (g)  Board of Director Observer Rights

          As further consideration for the concessions granted by Raytheon in
          the Restructuring Agreement, the Company has granted Raytheon
          unlimited observer rights for the Company's Board of Directors, but
          without any right to vote or enter into any discussions at any Board
          of Directors meetings.

     (h)  Subsequent Events

          The Company did not make its February and March 2003 payments under
          the Restructuring Agreement to Raytheon and will not make the payments
          due Raytheon in April 2003. In addition, the Company is not in
          compliance with certain financial covenants contained in that
          Agreement. On April 14, 2003 Raytheon waived the foregoing
          requirements until June 15, 2003.

          At December 31, 2002, the Company was in compliance with its debt
          agreements or had obtained amendments or short-term waivers from its
          lenders with respect to any nonpayment of scheduled debt installments
          or noncompliance with financial covenants. However, the Company cannot
          determine with a high degree of confidence that it will be able to
          make the required payments or remain in compliance with the agreements
          during the year 2003. Therefore the amount of debt that by its terms
          would otherwise be due after one year is shown as long-term
          obligations classified as current. In addition to the contractual
          amounts due the lenders, the balance includes $22.3 million of
          additional carrying amounts under FAS 15.

     A summary of the obligations immediately preceding the restructuring, the
     contractual obligations after the restructuring and the recording of the
     restructuring in accordance with SFAS 13 and 15 is set forth below.

                                                                     (Continued)

                                       39

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


<TABLE>
<CAPTION>
                                            Prior to       Restructured Contractual         Recorded in Accordance
                                         Restructuring            Obligation                      with SFAS 15
                                                                           Interest                          Interest
                                            Amount          Amount           Rate             Amount           Rate
-------------------------------------  ---------------  --------------  ---------------  ----------------  --------------
<S>                                     <C>             <C>             <C>               <C>              <C>
21 Aircraft owned and retained by       $  71,166,954   $  52,500,000   LIBOR + 375        $  66,514,494   0.0%
Great Lakes - notes payable,                                            basis points                       initially
unpaid interest and other accrued                                       5.13%
credits                                                                 initially

-------------------------------------  ---------------  --------------  ---------------  ----------------  --------------

9 Aircraft under operating leases           7,609,117      22,500,000   LIBOR + 375           29,188,957   0.0%
purchased by Great Lakes - unpaid                                       basis points                       initially
lease installments, accrued credits                                     5.13%
and purchase price                                                      initially

-------------------------------------  ---------------  --------------  ---------------  ----------------  --------------

6 Aircraft owned by Great Lakes to         20,331,001      20,331,001   None                  20,331,001   None
be returned to Raytheon and unpaid
obligations cancelled - notes
payable, unpaid interest and
other accrued credits

-------------------------------------  ---------------  --------------  ---------------  ----------------  --------------

1 Aircraft to be returned to                  577,276         577,276   None                     577,276   None
Raytheon  and unpaid lease
installments cancelled in 2003 and
other accrued credits

-------------------------------------  ---------------  --------------  ---------------  ----------------  --------------

2 1900C Aircraft under operating              384,000              --   None                     384,000   None
leases to be retained by Great
Lakes - unpaid lease installments
cancelled and are to be amortized
over remaining terms of the leases

-------------------------------------  ---------------  --------------  ---------------  ----------------  --------------

Other notes payable and unpaid             14,987,735
interest

  Deferral Note                                             1,200,000   LIBOR + 375            1,200,000   LIBOR + 375
                                                                        basis points                       basis points

  Senior Note                                               5,000,000   8.25%                  6,087,713   6.8%

  Subordinated Note                                         5,000,000   6.00%                  5,551,231   2.5%

  Equity 5,371,980 shares of                                2,148,792                          2,148,792
  common stock

-------------------------------------  ---------------  --------------  ---------------  ----------------  --------------
</TABLE>

(3)  Summary of Significant Accounting Policies and Procedures

     (a)  Use of Estimates

          The preparation of financial statements in conformity with accounting
          principles generally accepted in the United States requires management
          to make estimates and assumptions that affect the reported

                                                                     (Continued)

                                       40

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


          amounts of assets and liabilities and disclosure of contingent assets
          and liabilities at the date of the financial statements and the
          reported amounts of revenues and expenses during the reporting period.
          Significant estimates include ticket revenue, government air service
          subsidies, depreciable lives, impairment and obsolescence and lease
          termination costs. Actual results could differ from those estimates.

     (b)  Accounts Receivable

          Substantially all accounts receivable balances are due from various
          airlines and the U.S. government, with approximately 5% and 42% of the
          December 31, 2002 and 42% and 45% of the December 31, 2001, balances,
          respectively due from United and the U.S. government. All receivables
          are pledged as collateral securing the Company's debt agreements.

     (c)  Inventories

          Inventories consist of spare parts, fuel, materials, and supplies
          relating to flight equipment and are stated at the lower of average
          cost or market. Allowances for obsolescence are provided over the
          estimated useful life of the related aircraft and engines for spare
          parts expected to be on hand at the date aircraft are retired from
          service. Expendable parts are charged to maintenance expense as used.
          Inventories consisting of spare parts and equipment are pledged as
          collateral securing the Raytheon notes.

     (d)  Property and Equipment

          Property and equipment includes aircraft and major parts relating to
          such aircraft and is stated at cost and depreciated on a straight-line
          basis for financial reporting purposes over estimated useful lives of
          14-20 years for flight equipment and 3-10 years for other property and
          equipment. Leasehold improvements are amortized over the shorter of
          the life of the lease or the life of the asset. Accelerated methods of
          depreciation are used for tax reporting purposes. All owned aircraft
          are pledged to collateralize outstanding obligations.

          Maintenance and repairs, including periodic aircraft overhauls, are
          expensed as incurred or when the component is placed in service.

     (e)  Measurement of Impairment

          The Company has adopted Statement of Financial Accounting Standards
          (SFAS) No. 144, Accounting for the Impairment or Disposal of
          Long-Lived Assets which supercedes SFAS No. 121. The Company reviews
          long-lived assets for impairment whenever events or changes in
          circumstances indicate that the carrying amount of an asset may not be
          recoverable. When factors indicate that the carrying amount of an
          asset may not be recoverable, the Company estimates the impairment
          from the use of such asset and its eventual disposition. The amount of
          any impairment is included in income from continuing operations and
          the method or methods of determining fair value are disclosed.

                                                                     (Continued)

                                       41

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


     (f)  Other Assets

          Other assets are deposits with financial institutions, bonding
          companies, facilities lessors and others to secure the payment of
          fixed obligations. $1.1 million and $2.1 million at December 31, 2002
          and 2001, respectively, represents deposits related to long term
          operating leases. As a result of restructuring described in Note 2,
          certain deposits were cancelled.

     (g)  Long-term Obligations Classified As Current

          At December 31, 2001, the Company was not in compliance with its debt
          agreements as a result of nonpayment of scheduled installments of
          substantially all of its long-term debt at that time. In accordance
          with generally accepted accounting principles, long-term debt which
          may become due and payable at the option of the lender as a result of
          noncompliance under the debt agreement was classified as a current
          liability.

          At December 31, 2002, the Company was in compliance with its debt
          agreements or had obtained amendments or short-term waivers from its
          lenders with respect to any nonpayment of scheduled debt installments
          or noncompliance with financial covenants. However, the Company cannot
          determine with a high degree of confidence that it will be able to
          make the required payments or remain in compliance with the agreements
          during the year 2003. Therefore the amount of debt that by its terms
          would otherwise be due after one year is shown as long-term
          obligations classified as current. In addition to the contractual
          amounts due the lenders, the balance includes $22.3 million of
          additional carrying amounts under FAS 15.

     (h)  Accrued Liabilities

          The balance in accrued liabilities consists of the following at
          December 31, 2002 and 2001:

                                                      2002         2001
                                                  -----------   ----------
                Accrued expenses                  $   689,796   $  286,500
                Unearned revenue                    1,942,634      368,142
                Accrued property taxes                356,246      682,734
                Accrued payroll                     1,497,860    1,510,595
                Accrued aircraft refurbishment      4,000,000           --
                Accrued interest                    1,488,106    4,260,672
                                                  -----------   ----------
                                                  $ 9,974,642   $7,108,643
                                                  ===========   ==========

     (i)  Deferred Payments

          During 1997, the Company failed to make scheduled payments on several
          leases and subsequently renegotiated substantially all of their lease
          agreements. The renegotiated leases contain higher monthly payments
          and longer payment terms than the original agreements. The unpaid
          rentals have been accrued and expensed in the period to which they
          related and are being amortized over the new lease terms of the
          aircraft as a reduction in future operating costs. During 2002, as a
          result of the

                                                                     (Continued)

                                       42

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


          Company's restructuring transaction, the unamortized deferred payments
          are included in the amounts reflected in Note 2.

     (j)  Deferred Credits

          The Company has received various incentives in the form of interest
          rate subsidies and spares parts in connection with the acquisition of
          new aircraft. Incentives are being amortized as a reduction of rent
          expense or interest expense over the term of the related agreement.
          During 2002, as a result of the Company's restructuring transaction,
          certain of the unamortized deferred credits were included in the
          amounts reflected in Note 2.

     (k)  Revenue Recognition

          Passenger revenues are recorded as income when the respective services
          are rendered or when the time for use of the ticket has expired.
          Liability for unused tickets issued by the Company is recorded as
          unearned revenue. The Company also receives public service subsidy
          revenues for serving certain communities that do not generate
          sufficient traffic to fully support profitable air service, which are
          recorded as revenue based on rates applicable to such periods as
          approved by the Department of Transportation as the agreed upon air
          service is furnished by the Company.

     (l)  Frequent Flyer Awards

          The Company operates under a code-sharing agreement with United. It
          also participates in United's frequent flyer program for which an
          agreement is being negotiated. The Company has not deferred any
          revenue or accrued for incremental costs or revenue for mileage
          accumulation relating to these programs, and believes the impact has
          not been material.

     (m)  Income Taxes

          Income taxes are accounted for under the asset and liability method.
          Deferred tax assets and liabilities are recognized for the future tax
          consequences attributable to differences between the financial
          statement carrying amounts of existing assets and liabilities and
          their respective tax bases and operating loss and tax credit carry
          forwards. Deferred tax assets and liabilities are measured using
          enacted tax rates expected to apply to taxable income in the years in
          which those temporary differences are expected to be recovered or
          settled. The effect of a change in tax rates on deferred tax assets
          and liabilities is recognized in income in the period that includes
          the enactment date.

     (n)  Loss Per Share

          Basic loss per share has been computed by dividing net loss by the
          weighted average number of shares of common stock during outstanding
          each of the years presented. Diluted loss per share have been
          calculated by also including in the computation the impact of the
          issuance of common stock pursuant to the exercise of outstanding
          warrants and the effect of those employee stock options granted to
          employees as potential common stock that would be dilutive. Since the
          Company had suffered a net loss in the years ended December 31, 2002,
          2001 and 2000, the effects of potential common stock issuances were
          not included in the calculation for those years, as their effects
          would be anti-dilutive.

                                                                     (Continued)

                                       43

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


     (o)  Stock Option Plans

          The Company has elected the pro forma disclosure option of Statement
          of Financial Accounting Standards (SFAS) No. 123, Accounting for
          Stock-Based Compensation. The Company will continue applying the
          accounting treatment prescribed by the provisions of APB Opinion No.
          25, Accounting for Stock Issued to Employees and Related
          Interpretations. Pro forma net loss and pro forma net loss per share
          have been provided as if SFAS No. 123 were adopted for all stock-based
          compensation plans.

          The Company applies APB Opinion No. 25 and related interpretations in
          accounting for the Plans, both of which are fixed stock option plans.
          Accordingly, no compensation cost has been recognized for the Plans as
          exercise prices are at least equal to the fair market value of the
          Company's common stock on the date of Great Lakes. Had compensation
          cost for the Company's fixed stock option plans been determined
          consistent with SFAS No. 123, the Company's net loss and loss per
          share would have been impacted as follows:

<TABLE>
<CAPTION>
                                                        Year ended December 31
                                             ----------------------------------------
                                                   2002          2001          2000
                                             -------------   -----------   ----------
<S>                                          <C>             <C>           <C>
          Net (loss) income as reported      $ (10,811,137)  (18,633,884)  (8,238,833)
          Pro forma net (loss) income          (10,902,124)  (18,768,701)  (8,838,525)
          Basic (loss) income per share
             as reported                             (1.24)        (2.15)       (0.95)
          Pro forma basic (loss) income
             per share                               (1.25)        (2.17)       (0.96)
          Diluted (loss) income per share
             as reported                             (1.24)        (2.15)       (0.95)
          Pro forma diluted (loss) income
             per share                               (1.25)        (2.17)       (0.96)
</TABLE>

          As required, the pro forma disclosures above include options granted
          since January 1, 1995. Consequently, the effects of applying SFAS 123
          for providing pro forma disclosures may not be representative of the
          effects on reported net income for future years until all options
          outstanding are included in the pro forma disclosures. For purposes of
          pro forma disclosures, the estimated fair value of stock-based
          compensation plans and other options is amortized to expense primarily
          over the vesting period. See Note 7 for further discussion of the
          assumptions relating to the Company's stock-based employee
          compensation.

     (p)  Fair Value of Financial Instruments

          Fair value estimates, methods, and assumptions are set forth below:

          Cash, accounts receivable, accounts payable and accrued liabilities:

               The carrying amount approximates fair value because of the
               short-term nature of these instruments.

                                                                     (Continued)

                                       44

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


          Long-term debt:

               Based upon the Company's concentration of long-term debt with the
               manufacturer of aircraft, the fair value of long-term debt was
               not reasonably determinable.

     (q)  Supplemental Disclosure of Noncash Investing and Financing Activities

          Amounts on the statement of cash flows exclude the one-time effect of
          recording the insured loss of one owned and one leased Beech 1900D and
          inventory in a hangar fire on May 14, 2002. The net book values of the
          Company's inventory and flight equipment lost were $794,000 and
          $3,821,000 respectively, and the Company had a debt obligation for the
          aircraft of $3,184,000. In addition, the Company incurred a liability
          to Raytheon Aircraft Credit Corporation for the stipulated loss value
          of the leased aircraft. Insurance proceeds on the assets totaled
          $9,988,000 of which $7,800,000 was paid to Raytheon on the foregoing
          obligations including past due interest and deferred lease payments on
          these aircraft. A gain on insurance recovery of $1,438,000 was
          recognized representing the excess of the total insurance over the net
          book value of the Company's assets that were destroyed and liability
          incurred on the leased aircraft.

(4)  Flight Equipment

          At December 31, 2002, the Company's passenger airline fleet consisted
          of 37 Beechcraft Model 1900D 19-passenger aircraft, seven Embraer
          Brasilia Model 120 30-passenger aircraft, and two Beechcraft Model
          1900C aircraft in a cargo configuration for carriage of U.S. mail. The
          Beechcraft 1900C aircraft are operated under leases with remaining
          terms of approximately 10 years and which include early termination
          provisions. One Beechcraft 1900D and three Embraer Brasilia Model 120
          aircraft are operated under long-term leases. The remaining aircraft
          are owned by the Company. After the restructuring transaction
          discussed above, a summary of the operating aircraft is as follows:

                                               2002
                             ----------------------------------------
                             Beechcraft    Beechcraft
                               1900C          1900D          Brasilia
                             ----------    ----------        --------
     Owned                        --             36             4
     Operating leases              2              1             3
                             ----------    ----------        --------
                                   2             37             7
                             ==========    ==========        ========

                                                                     (Continued)

                                       45

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


     At December 31, 2001, the Company's airline fleet consisted of 40
     Beechcraft Model 1900D 19-passenger aircraft, eight Embraer Brasilia Model
     120 30-passenger aircraft, and four Beechcraft Model 1900C aircraft in a
     cargo configuration for carriage of US mail. A summary as of December 31,
     2001 is as follows:

                                               2001
                             ----------------------------------------
                             Beechcraft    Beechcraft
                               1900C          1900D          Brasilia
                             ----------    ----------        --------
     Owned                        --             28             4
     Operating leases              4             12             4
                             ----------    ----------        --------
                                   4             40             8
                             ==========    ==========        ========

     As of December 31, 2002, the Company had obtained executed waivers or
     deferrals from the following lessors with respect to the following unpaid
     lease rentals: Raytheon Aircraft Credit Corporation, $1,241,000 for the two
     Beechcraft 1900C and one Beechcraft 1900D aircraft leases; and Finova
     Capital Corporation, $897,000 for one Embraer 120 aircraft lease.

     At December 31, 2002, the Company was in arrears on rental payments to
     Boeing Capital Corporation ("Boeing") for lease of two Brasilia aircraft in
     the amount of $3.4 million. Subsequent to year-end, the Company entered
     into a letter agreement with Boeing, effective as of December 31, 2002, to
     cancel the unpaid lease installments, to reduce the monthly rental payments
     through the end of the lease terms in 2013, requiring the Company to fund
     major overhauls in advance and giving Boeing the right to terminate the
     leases at its option with six months notice. Boeing will receive shares of
     redeemable preferred stock valued at $4.5 million. The Company intends to
     file a Certificate of Designation setting forth the terms of the redeemable
     preferred stock by April 30, 2003. The parties will further document the
     terms and conditions of the lease restructuring by that date.

     Under the terms of four aircraft lease agreements, the Company is
     responsible for lease payments over the remaining term of the leases of
     approximately $7,474,000 to Raytheon Aircraft Credit Corporation and
     $404,000 to Finova Capital Corporation. However, such amounts would be
     mitigated by the proceeds from a subsequent lease or sale of the aircraft.
     The Company has agreed to return to Raytheon the one Beechcraft 1900D
     leased aircraft which is in excess of the Company's current requirements.
     Upon return of the aircraft in 2003, all of the Company's liability for
     unpaid lease rentals of $857,000 and future obligations of $4,040,000 under
     the lease agreement shall be extinguished. Provision has been made in the
     2002 financial statements for estimated repair and refurbishment costs of
     $571,400 that will be incurred in connection with the return of the
     Beechcraft 1900D aircraft.

     Under the current agreements, and following the restructuring discussed
     above, lease commitments for aircraft were as follows as of December 31,
     2002:

                                      Total
                                  ------------
        2003                      $  1,436,000
        2004                         1,104,000
        2005                         1,128,000
        2006                         1,128,000
        2007                         1,200,000
        Thereafter                   6,862,000
                                  ------------
                                  $ 12,858,000
                                  ============

     The lease commitments shown above exclude those commitments related to one
     aircraft to be returned to Raytheon as discussed in Note 2.


                                                                     (Continued)

                                       46

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


     Nonaircraft lease commitments are set forth in note 10.

     Raytheon Aircraft Corporation, including its financing affiliates, is the
     Company's primary aircraft supplier and largest creditor. The Company has
     financed all of its Beechcraft 1900 aircraft fleet pursuant to lease and
     debt agreements with Raytheon. In addition, pursuant to the Restructuring
     Agreement executed by Raytheon and the Company on December 31, 2002 (see
     Note 2), the Company has restructured other non-aircraft liabilities owed
     by the Company to Raytheon into three notes payable representing a total
     face amount of $11.2 million. Raytheon has also agreed to extend to the
     Company a $3 million line of credit for the purpose of financing a portion
     of the refurbishment costs to be incurred by the Company on the seven
     Beechcraft 1900D aircraft to be returned to Raytheon in 2003.

(5)  Notes Payable and Long-Term Debt

     Notes payable and current maturities of long-term debt consist of the
     following at December 31, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                    2002           2001
                                                                ------------   -----------
<S>                                                             <C>            <C>
Line of credit with Coast Business Credit (A)                   $         --   $ 4,609,808
Amounts due Raytheon:
   Unpaid principal due in 2001 (B)                                       --     5,743,762
   Demand note (C)                                                        --     8,786,778
   Current maturities of Raytheon long-term debt - principal       6,969,491     8,051,990
   Current portion of additional carrying value under SFAS 15      3,431,059            --
                                                                ------------   -----------
       Current maturities of Raytheon long-term debt              10,400,550    27,192,338

   Other current liabilities of long-term debt                     1,952,554     1,315,361
                                                                ------------   -----------
                                                                $ 12,353,104   $28,507,699
                                                                ============   ===========
</TABLE>

     Long-term debt and long-term debt classified as current consist of the
     following at December 31, 2002 and 2001:

<TABLE>
<CAPTION>
                                                            2002           2001
                                                       -------------   -----------
<S>                                                    <C>              <C>
Raytheon - principal (C)                               $ 104,914,339  $ 96,143,005
Additional carrying value under SFAS 15                   22,342,395            --
Other long-term notes (D)                                  5,627,118     6,042,529
                                                       -------------  ------------
                                                         132,883,852   102,185,534
                                                       -------------  ------------
Less:
   Unpaid principal due in 2001 (B)                               --     5,743,762
   Raytheon current maturities of long-term debt
     and additional carrying value under SFAS 15          10,400,550     8,051,990
   Other current maturities of long-term debt              1,952,554     1,315,361
   Long-term debt classified as current (E)              119,858,463    82,347,252
                                                       -------------  ------------
                                                       $     672,285  $  4,727,169
                                                       =============  ============
</TABLE>

                                                                     (Continued)

                                       47

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


     (A)  On January 7, 2000, the Company entered into a $20 million line of
          credit agreement with Coast Business Credit. Under the terms of the
          agreement, interest accrued on the outstanding balance of the line of
          credit at a rate of prime plus 0.5% and at December 31, 2001 the
          interest rate was 8.5%. In April 2002, the Company paid in full all
          outstanding amounts due under the line of credit, and the line of
          credit was terminated.

     (B)  Unpaid principal payments which were due on Raytheon debt during 2001.

          On June 29, 2001, the Company issued a demand note to Raytheon in
          payment of substantially all of the principal, interest and lease
          installments on aircraft due Raytheon during the first 6 months of
          2001. According to the terms of the note, interest accrued on the
          principal balance at a rate of 8% (11% if the note was in default),
          with such interest to be paid monthly in arrears beginning August 1,
          2001. Amounts due under this note were restructured as discussed in
          Note 2, and the demand note was extinguished.

     (C)  At December 31, 2001, the Raytheon notes consisted of 31 term notes.
          The notes required monthly payments ranging from $30,000 to $145,000,
          including interest, with total payments on these notes approximating
          $1,150,000 per month. The interest rates on the notes ranged from 4.1%
          to 8.0% as of December 31, 2001.

          At December 31, 2002, the Raytheon notes consisted of 36 promissory
          notes and three long-term notes payable. Thirty of the promissory
          notes require monthly payments in the amount of $25,500, with interest
          accruing on unpaid balances at the rate of LIBOR plus 375 basis points
          per annum. A balloon payment of approximately $200,000 will be due and
          payable upon each promissory note's maturity at December 31, 2012.

          The other six promissory notes require monthly payments ranging from
          $30,000 to $35,000 with interest rates ranging from 4.75% to 7.15% per
          annum. The Company has agreed to return to Raytheon all six of the
          Beechcraft 1900D aircraft which serve as collateral for the six
          promissory notes, which aircraft are in excess of the Company's
          current requirements. As a result of this agreement, further payments
          of principal and interest under the six promissory notes will be
          deferred until the collateral aircraft are returned to Raytheon in
          2003, at which time all of the Company's liability under the six
          promissory notes will be extinguished. Provision has been made in the
          2002 financial statements for estimated repair and refurbishment costs
          of $3.4 million which will be incurred in connection with the return
          of the six Beechcraft 1900D aircraft.

          Of the three long-term notes payable, the first note payable requires
          quarterly payments of principal and interest during 2003 in amounts
          ranging from $16,500 per quarter to $150,000 per quarter, with
          interest accruing on the unpaid balances at the rate of LIBOR plus 375
          basis points per annum. The first note payable will mature on December
          31, 2005. The second note payable requires no payments until 2005, at
          which time payments of principal and interest in the amount of
          $362,000 will be due and payable quarterly. Interest will accrue on
          the unpaid balances at the rate of 8.25% per annum and the second note
          payable will mature on December 31, 2009. The third note payable
          requires no payments until 2005, at which time payments of interest
          ranging in amounts from $41,000 to $44,000 will be due and payable
          quarterly. Interest will accrue on the unpaid balances at

                                                                     (Continued)

                                       48

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


          the rate of 6% per annum. The third note payable will mature on
          September 30, 2007, at which time all outstanding amounts under the
          note will be due and payable.

          All of the Raytheon notes are collateralized by the Beechcraft 1900
          aircraft and other assets of the Company.

     (D)  Other long-term notes consist primarily of four term notes that
          require monthly or quarterly payments, including interest, and are
          collateralized by Embraer aircraft. At December 31, 2002, the interest
          rates on the notes ranged from 8.7% to 10%.

     (E)  At December 31, 2001, the Company was not in compliance with payment
          terms of the Raytheon debt. As a result, in accordance with generally
          accepted accounting principles, all of the long-term debt owed by the
          Company to Raytheon was classified as a current liability because of
          Raytheon's ability under the debt agreements to require payment of the
          total outstanding obligations.

          At December 31, 2002, the Company was in compliance with its debt
          agreements or had obtained waivers or deferrals from its lenders with
          respect to any nonpayment of scheduled debt installments. As a result,
          and in accordance with generally accepted accounting principles, $12.4
          million of principal payments due and payable during 2003 have been
          classified by the Company as a current liability, of which $7.0
          million represents the contractual amount of principal payments due
          and payable during 2003 to Raytheon and $3.4 million represents the
          current portion of additional carrying amounts under SFAS 15 (see note
          2).

          Notwithstanding the Company's current compliance with its debt
          agreements or availability of waivers, however, the Company cannot
          determine with a high degree of confidence that it will be able to
          make future required payments or remain in compliance with the
          agreements during the year 2003. Therefore, the amount of debt that
          by its terms would otherwise be due after one year is shown as long-
          term obligations classified as current.

     As of December 31, 2002, the long-term debt obligations due in the five
     subsequent years and thereafter under their contractual terms were as
     follows:

                              Beechcraft
                                1900s       Brasilias      Other         Total
                            ------------   ----------  -----------  ------------
2003                        $  6,569,491   $1,792,824  $   559,730  $  8,922,045
2004                           6,911,661      593,256      676,455     8,181,372
2005                           7,283,751      649,013    1,363,583     9,296,347
2006                           7,676,115      710,007    1,071,025     9,457,147
2007                           8,089,876      776,735    5,995,379    14,861,990
Thereafter                    57,183,445      432,999    2,206,112    59,822,556
                            ------------   ----------  -----------  ------------
                              93,714,339    4,954,834   11,872,284   110,541,457
Additional carrying value
   under SFAS 15              20,703,451           --    1,638,944    22,342,395
                            ------------   ----------  -----------  ------------
                            $114,417,790   $4,954,834  $13,511,228  $132,883,852
                            ============   ==========  ===========  ============

                                                                     (Continued)

                                       49

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


(6)  Income Taxes

     Income tax expense for the years ended December 31, 2002, 2001, and 2000
     consists of current state income taxes of $0, $0, and $6,116, respectively.

     The federal statutory tax rate differs from the Company's effective income
     tax rate for the years ended December 31 as follows:

                                                 2002      2001      2000
                                                -----     -----     -----
        Federal statutory rate                   35.0%     35.0%     35.0%
        State income taxes, of federal benefit     --        --        --
        Change in valuation allowance           (35.0)    (35.0)    (35.0)
                                                -----     -----     -----
                                                    0%        0%        0%
                                                =====     =====     =====

     Deferred tax assets (liabilities) as of December 31 were as follows (in
     thousands):

                                                      2002           2001
                                                     -------       --------
        Deferred tax assets:
           Net operating loss carryforwards          $27,642       $ 28,108
           Accrued liabilities and other               5,998          6,853
                                                     -------       --------
             Total gross deferred tax asset           33,640         34,961
        Less valuation allowance                     (18,656)       (23,247)
                                                     -------       --------
                                                      14,984         11,714
        Deferred tax liabilities:
           Property and equipment                    (14,984)       (11,714)
                                                     -------       --------
             Total deferred tax asset (liability)    $  --         $   --
                                                     =======       ========

     The Company has estimating net operating loss carry forwards for federal
     income tax purposes totaling approximately $79 million at December 31,
     2002, expiring in years from 2006 through 2022. The net change in total
     valuation allowance for the years ended December 31, 2002 and 2001 was an
     increase (decrease) of $(4,591) and $6,979 respectively.

(7)  Employee Benefit Plans

     (a)  401(k)

          The Company maintains a qualified 401(k) employee savings plan for the
          benefit of substantially all employees. The Company matches up to 4%
          of participating employees' contributions. Company contributions
          totaled $294,000 in 2002, $243,000 in 2001, and $318,000 in 2000.

                                                                     (Continued)

                                       50

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


     (b)  Stock Option Plans

          The Company has adopted The Great Lakes Aviation, Ltd. 1993 Stock
          Option Plan and the 1993 Director Stock Option Plan (the Plans). The
          Plans permit the grant of qualified incentive stock options or
          nonqualified stock options covering in the aggregate 1,300,000 shares
          of the Company's common stock to be granted to key employees,
          officers, and directors of the Company. Options outstanding under the
          Plans become exercisable one-fifth in years one through five from the
          date of grant. The options expire after 10 years from the date of
          grant. Options are forfeited upon termination for reasons other than
          retirement, death or disability.

          A summary of the status of the Company's fixed option plans as of
          December 31, 2002, 2001, and 2000 and changes during the years ended
          on those dates is presented below:

<TABLE>
<CAPTION>
                                        2002                  2001                  2000
                               ---------------------    ------------------   ------------------
                                            Weighted              Weighted             Weighted
                                            average                average              average
                                            exercise              exercise             exercise
                                 Shares       price      Shares     price     Shares    price
                               ---------     ------     --------   ------    --------   ------
<S>                            <C>           <C>        <C>        <C>       <C>        <C>
Outstanding at beginning
   of year                       360,000     $ 2.71      380,000   $ 2.62     330,000   $ 3.27

Granted                          420,000       0.40       30,000     0.44     140,000     1.34
Forfeited                       (110,000)      2.60      (50,000)    0.64     (90,000)    2.93
                               ---------                --------             --------
Outstanding at end
   of year                       670,000       1.28      360,000     2.71     380,000     2.62
                               =========                ========             ========
Options exercisable at
   year end                      192,800       2.98      195,600     3.35     140,400     3.80
Weighted average fair
   value of options
   granted during the
   year                        $    0.48                $   0.54             $   1.38

</TABLE>

                                                                     (Continued)

                                       51

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


          A summary of stock options outstanding and exercisable as of December
          31, 2002 are as follows:

                             Options outstanding            Options exercisable
                    -----------------------------------   ----------------------
                                  Weighted     Weighted                 Weighted
        Range of                   average      average                  average
        exercise      Number      remaining    exercise     Number      exercise
         price      outstanding  life (years)    price    exercisable     Price
      -----------   -----------  ------------  --------   -----------   --------
      $0.31-$0.40     420,000       10.0       $  0.40          --      $    --
      $1.06-$1.63      70,000        7.3          1.39      40,000         1.38
      $      2.75     156,000        5.6          2.75     128,800         2.75
      $      3.88      14,000        2.4          3.88      14,000         3.88
      $     11.00      10,000        1.0         11.00      10,000        11.00
                      -------                              -------
                      670,000                              192,800
                      -------                              -------

          Pro forma information regarding net income and net income per share,
          as disclosed in Note 3, has been determined as if the Company had
          accounted for its Employee stock-based compensation plans and other
          stock options under the fair value method of SFAS 123. The fair value
          of each option grant is estimated on the date of grant using the
          Black-Scholes option pricing model with the following weighted-average
          assumptions used for grants under the fixed option plans:

                                                 Year ended December 31
                                               -------------------------
                                                2002      2001      2000
                                               ------    -----     -----
          Risk-free interest rate                5.04%    5.42%     5.87%
          Expected dividend yield                   0%       0%        0%
          Expected option life                      5        5         5
          Expected Stock price volatility       67.76%   65.36%    70.42%


     (c)  Employee Stock Purchase Plan

          The Company maintains an employee stock purchase plan. Under the plan,
          certain employees are eligible to purchase an aggregate of not more
          than 125,000 shares of the Company's common stock at 95% of the lower
          of the fair market value at the beginning or the end of the calendar
          year in which the shares are purchased. In 2002 and 2001, 0, and
          22,535 shares were purchased, respectively, through payroll
          withholdings.

(8)  Stabilization Act Grant

     On September 21, 2001, Congress passed and the President signed into law,
     the Air Transportation Safety and System Stabilization Act (the
     Stabilization Act), which provides, among other things, for $5 billion in
     grants to compensate U.S. air carriers for losses incurred by the air
     carriers as a result of the September 11, 2001 terrorist attacks.

                                                                     (Continued)

                                       52

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


     The Company recognized a $1,929,877 grant under the Stabilization Act for
     the year ended December 31, 2001, of which $1,637,846 was received during
     the fourth quarter of 2001. The balance of this amount was received during
     2002. The grant is for the direct losses incurred beginning on September
     11, 2001, resulting from the Federal Aviation Administration grounding of
     all aircraft, and for incremental losses incurred through December 31, 2001
     as the direct result of the attacks. The grant is included in nonoperating
     income in the accompanying statements of operations.

(9)  Loss Per Share

     The following tables provide a reconciliation of the numerators and
     denominators of the basic and diluted loss per share computations for the
     periods presented:

<TABLE>
<CAPTION>
                                                                  Year ended December 31
                      ------------------------------------------------------------------------------------------------------------
                                       2002                                 2001                               2000
                      ------------------------------------  ----------------------------------   ---------------------------------
                                                   Per                                 Per                                  Per
                         Income        Shares      share       Income       Shares     share       Income        Shares    share
                        (number.)     (denom.)     amount     (number.)    (denom.)    amount     (number.)     (denom.)   amount
                      ------------   ----------   --------  -----------  ----------   --------   ----------   ----------  --------
<S>                   <C>             <C>           <C>     <C>           <C>         <C>        <C>           <C>        <C>
Basic income
   (loss) per share
   attributable
   to common
   shareholders       $(10,811,137)   8,698,093   $ (1.24) $(18,633,844)  8,658,330   $  (2.15) $(8,238,833)   8,645,774  $  (0.95)

Effect of dilutive
   securities:
     Stock warrants             --           --        --            --          --         --           --           --        --
     Stock options              --           --        --            --          --         --           --           --        --
                      ------------   ----------   -------  ------------  ----------   --------  -----------   ----------  --------
Diluted income
   (loss) per share
   attributable to
   common
   shareholders       $(10,811,137)   8,698,093   $ (1.24) $(18,633,844)  8,658,330   $  (2.15) $(8,238,833)   8,645,774  $  (0.95)
                      ============   ==========   ======== ============  ==========   ========  ===========   ==========  ========
</TABLE>

     Options excluded from diluted earnings per share because they were
     antidilutive for the years ended December 31, 2002, 2001 and 2000 totaled
     approximately 670,000, 360,000 and 380,000, respectively.

(10) Commitments and Contingencies

     (a)  Transactions with Affiliates

          In 2002, 2001 and 2000, the Company leased one Beechcraft 1900D used
          in airline operations from a company owned by Great Lakes' chairman
          and majority stockholder. Total payments under these leases that the
          Company had with entities that are owned by the Company's chairman
          were $10,000 in 2002, $287,000 in 2001, and $587,000 in 2000. The
          Company returned the aircraft in April 2002. The Company also accrued
          lease payments for charter aircraft and automobiles owned by this
          company in 2002 in the amount of $51,075 for which no payments have
          been made.

                                                                     (Continued)

                                       53

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


     (b)  Nonaircraft Lease Commitments

          The Company leases certain hanger and terminal facilities under
          operating leases, which provide for approximate future noncancelable
          minimum lease payments, as follows:

                      2003                        $  254,405
                      2004                           232,416
                      2005                           232,416
                      2006                           232,416
                      2007                           232,416
                                                  ----------
                                                  $1,184,069
                                                  ==========

     (c)  Litigation

          On February 27, 2002, Finova Capital Corporation ("Finova") filed suit
          against the Company in the United States District Court for the
          District of Arizona. No. Civ. 02-0362 PHX SMM. Finova alleged that the
          Company breached two airplane lease agreements and sought damages,
          costs and attorney's fees. On August 1, 2002, Finova and the Company
          entered into a Settlement Agreement and Covenant Not to Execute on one
          of the aircraft. On November 1, 2002, Finova and the Company entered
          into a Deferral Agreement which provides for the withdrawal of the
          suit and payment of $10,000 per month from October 2002 through March
          2003 and $15,000 per month from April 2003 until the end of the lease
          term on September 30, 2003 for the second aircraft. Finova and the
          Company have agreed that prior to the end of the lease term they will
          negotiate the other outstanding issues regarding the second aircraft.
          The Company has recognized in its accounts the expected cost
          associated with these aircraft.

          The Company is a also a defendant in a lawsuit arising from the
          collision of a small aircraft with one of the Company's Beechcraft
          1900 aircraft in Quincy, Illinois on November 19, 1996. The collision
          occurred at the intersection of two runways as the Company's aircraft
          was landing, and resulted in the death of all 10 passengers and the
          two crewmembers. The Company's insurance carrier is providing for the
          Company's defense in the lawsuit and the Company believes that all
          claims arising from the accident will be adequately covered by
          insurance.

          The Company is a party to other ongoing legal claims and assertions
          arising in the ordinary course of business. Management believes that
          the resolution of these matters will not have a material adverse
          effect on the Company's financial position, results of operations, or
          cash flows.

     (d)  Union Agreements

          The Company's pilots are represented by the International Brotherhood
          of Teamsters. The Agreement with the pilots became amendable October
          30, 2000, and negotiations are continuing. In March 2002, the
          Company's pilots voted to authorize a strike in the event that
          negotiations did not result in an amended contract. The Company's
          flight attendants are also represented by the International
          Brotherhood of Teamsters, and the agreement with the flight attendants
          became amendable April 2002.

                                                                     (Continued)

                                       54

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


(11) Selected Quarterly Financial Data (Unaudited)

     The following presents selected quarterly unaudited financial data for each
     of the years ended December 31, 2002 and 2001 (in thousands, except for per
     share information):

                            First     Second      Third      Fourth
        2002               quarter    quarter    quarter     quarter      Year
---------------------    ----------  ---------  ---------  ----------  ---------
Operating revenues       $ 20,073    $23,140    $22,712    $ 18,804    $ 84,729
Operating income
  (loss)                     (509)     1,785     (2,302)    (10,152)    (11,178)
Net income (loss)          (2,382)     1,477     (4,193)     (5,713)    (10,811)
Net income (loss)
  per share:
    Basic                $  (0.27)   $  0.17    $ (0.48)   $  (0.66)   $  (1.24)
    Diluted                 (0.27)      0.17      (0.48)      (0.66)      (1.24)
Weighted average
  shares outstanding:
    Basic                   8,680      8,680      8,680       8,752       8,698
    Diluted                 8,680      8,680      8,680       8,752       8,698


                                                                     (Continued)

                                       55

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                         Notes to Financial Statements

                       December 31, 2002, 2001, and 2000


                            First      Second      Third     Fourth
          2001             quarter     quarter    quarter    quarter      Year
----------------------   -----------  ---------  ---------  ---------  ---------
Operating revenues       $  27,930    $26,883    $25,224    $21,403    $101,440
Operating income
  (loss)                    (5,791)    (2,761)      (561)    (1,337)    (10,450)
Net income (loss)           (8,628)    (5,097)    (1,873)    (3,036)    (18,634)
Net income (loss)
  per share:
    Basic                $   (1.00)   $ (0.59)   $ (0.22)   $ (0.34)   $  (2.15)
    Diluted                  (1.00)     (0.59)     (0.22)     (0.34)      (2.15)
Weighted average
  shares outstanding:
    Basic                    8,658      8,658      8,658      8,660       8,658
    Diluted                  8,658      8,658      8,658      8,660       8,658

     In the fourth quarter of 2002, the Company entered into a restructuring
     transaction as discussed in Note 2.

     In the second quarter of 2002, the Company recognized a nonoperating gain
     from the recovery of insurance proceeds on a fire.

     The above financial data includes normal recurring adjustments and reflects
     all adjustments which are, in the opinion of management, necessary for a
     fair presentation of such financial data. The Company's business is
     seasonal and, accordingly, interim results are not indicative of results
     for a full year.

                                                                     (Continued)

                                       56

<PAGE>

                           GREAT LAKES AVIATION, LTD.

                             Schedule II - Valuation

                             December 31, 2002, 2001


                                                        Additions
                                                      ------------
                                        Balance at     Charged to
                                       Beginning of     costs and     Balance at
          Classification                 year (1)       expenses     end of year
-------------------------------------  ------------    ----------    -----------
2002 Inventory and equipment reserves   $6,565,809      $451,328     $7,017,137
2001 Inventory and equipment reserves    6,319,979       245,830      6,565,809
2000 Inventory and equipment reserves    6,220,854        99,125      6,319,979

----------
(1)  Balance includes adjustment in 1998 of $3,516,510 related to Brasilia
     aircraft inventory.

     All other schedules for which provision is made in the applicable
     accounting regulations of the Securities and Exchange Commission have been
     omitted as not required, not applicable or the information required has
     been included elsewhere in the financial statements and related notes.


                                       57

<PAGE>

                                    PART III

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     None.

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table provides information with respect to the Company's
directors and executive officers as of March 15, 2003. Each executive officer
has been appointed to serve until his successor is duly appointed by the Board
of Directors or his earlier removal or resignation from office. Each director
has been elected to serve a one-year term expiring in 2003 and until his or her
successor has been duly elected and qualified.

Name                       Age          Title
----                       ---          -----
Douglas G. Voss            48           Chairman of the Board of Directors
Charles R. Howell IV       45           Chief Executive Officer
Michael L. Tuinstra        49           Treasurer
Christopher C. Wilken      32           Controller
James A. Frazier           44           Vice President-Customer Service
Gayle R. Brandt            43           Director
Vernon A. Mickelson        76           Director
John Reardon               57           Director
Ivan L. Simpson            52           Director

     Douglas G. Voss. Mr. Voss co-founded the Company in 1979 and served in the
position of Chief Executive Officer from the Company's inception until December
31, 2002. Mr. Voss has served as a director of the Company since the Company's
inception. Mr. Voss became a pilot in 1974 and holds both an Airline Transport
Pilot Certificate and an Airframe and Powerplant Mechanic Certificate. Mr. Voss
is a graduate of Colorado Aero Tech. In 1977 and 1978, Mr. Voss was employed as
a mechanic for a subsidiary of Executive Beechcraft, Inc. Mr. Voss has also
served the Company in a number of operational positions, including Director of
Maintenance and Director of Operations.

     Charles R. Howell IV. Mr. Howell became the Chief Executive Officer of the
Company on December 31, 2002. Mr. Howell served as Chief Operating Officer from
August 2002 until December 31, 2002. Prior to joining the Company, Mr. Howell
was the President and Chief Executive Officer of Corporate Airlines, Inc., a
Nashville-based airline that he co-founded in 1996.

     Michael L. Tuinstra. Mr. Tuinstra became the Company's Treasurer in January
2002. From August 1998 to January 2002 Mr. Tuinstra served as the Company's
Director of Purchasing and Inventory Control, and prior to this, from August
1998 until April 1999, he was the Company's budget and financial analyst. From
June 1995 until August 1998 Mr. Tuinstra was self employed and was a financial
consultant.

     Christopher C. Wilken. Mr. Wilken became the Company's Controller in
January 2002. Mr. Wilken has served the Company in various positions since
November 1987. From March 1999 until January 2002 Mr. Wilken was the Company's
Director of Planning and Financial Analysis, and from August 1996 to March 1999,
he was the Company's Manager of Market Planning. Mr. Wilken is also a commercial
pilot with instructor's ratings and holds airframe and powerplant mechanic's
ratings with inspection authorization.



                                       58

<PAGE>

     James A. Frazier. Mr. Frazier joined Great Lakes in March 1990 as Director
of Stations and was promoted to his present position of Vice President of
Customer Service in March 1992.

     Gayle R. Brandt. Ms. Brandt has been a director of the Company since
December 1996. Ms. Brandt has held various positions with the Company since its
inception including assisting in the management of the Spirit Lake Airport from
1978 through 1992, Station Agent and Station Manager responsible for all airline
reservations from 1982 through 1985, Airline Accounts Receivable and Revenue
Accounting Manager from 1985 through 1989, Airline Executive Office Receptionist
from 1989 through 1996 and Director of Airport Services and Airport Manager from
June 1996 through 2001. Ms. Brandt is currently the Director of Aviation for
Leading Edge Aviation, Inc.

     Vernon A. Mickelson. Mr. Mickelson became a director of the Company in
January 1994. For more than the past ten years, Mr. Mickelson has been
self-employed as a consultant and has provided services to the Company
concerning matters involving FAA regulatory compliance and maintenance quality
control. Mr. Mickelson has worked in the aviation industry since 1949, primarily
in the field of aircraft maintenance. From 1973 to 1988, Mr. Mickelson was
employed by the FAA as a supervisor of FAA maintenance and avionics inspectors
operating in the State of Iowa.

     John Reardon. Mr. Reardon has been a director of the Company since May
2002. Mr. Reardon has over 30 years of business consulting experience,
addressing operational and financial issues and governmental and
business-to-business relations. Since March 2001, Mr. Reardon has been the
Director Executive Education Services and Executive MBA Programs at Colorado
State University, College of Business. Mr. Reardon served as Chief Executive
Officer of the Wyoming State Business Council from October 1998 to July 2000.
From April 1994 to October 1998 Mr. Reardon was the Chief Operating Officer,
Director of Global Operations for the International Development Research
Council, a global trade and learning association for Fortune 500 and Global 1000
senior level executives.

     Ivan L. Simpson. Mr. Simpson became a director of the Company in 1997. Mr.
Simpson co-founded the Company in 1979, and served in various operational roles
through 1987, including: Chief Pilot, Director of Security, and most recently,
Vice President and Director of Operations. He has been employed as an Airline
Transport Pilot for American Airlines since 1987. Mr. Simpson holds an Airline
Transport Pilot Certificate and is Type rated in the Boeing 757/767 aircraft.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Commission and provide the Company
with copies of such reports. Based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons,
the Company believes that, during the last fiscal year, its directors and
executive officers filed all reports on a timely basis.

Item 11. EXECUTIVE COMPENSATION

     The following table discloses the annual and long-term compensation
received in each of the last three fiscal years by (i) all persons serving in
the capacity of Chief Executive Officer of the Company during the last fiscal
year, (ii) the Company's dour most highly compensated executive officers, in
addition to the Chief Executive Officer, serving at the end of the last fiscal
year whose salary and incentive compensation exceeded $100,000 in the last
fiscal year, and (iii) any executive officer of the Company who resigned during
the last fiscal year whose salary and incentive compensation exceeded $100,000
in the last fiscal year. Such persons are referred to as the "Named Executive
Officers."


                                       59

<PAGE>

                           Summary Compensation Table

                                                                    Long-Term
                                                                   Compensation
                                                                      Awards
                                                                   ------------
                                           Annual Compensation      Securities
                                          ---------------------     Underlying
Name and Principal Position               Fiscal Year    Salary     Options(#)
----------------------------------------  -----------    ------     ----------

Charles R. Howell IV(1) ...............      2002      $  37,042     200,000
     Chief Executive Officer

Douglas G. Voss(2) ....................      2002      $  69,895     200,000
     Chairman of the Board of Directors      2001      $ 129,615          --
     Former Chief Executive Officer          2000      $ 175,000          --


(1) Mr. Howell served as Chief Operating Officer of the Company from August 2002
to December 31, 2002, at which time he was elected Chief Executive Officer.

(2) Mr. Voss served as Chief Executive Officer of the Company until December 31,
2002.


The following table summarizes stock option grants during the fiscal year ended
December 31, 2002 to the Named Executive Officers and certain other information
relative to such options.

                        Option Grants in Last Fiscal Year
                               (Individual grants)

<TABLE>
<CAPTION>
                                                                           Potential Realizable
                                      Percent of                             Value at Assumed
                         Number of       Total                             Annual Rates of Stock
                        Securities      Options                           Price Appreciation For
                        Underlying    Granted to                             Options Terms(1)
                          Options    Employees In  Exercise  Expiration   ----------------------
         Name             Granted     Fiscal Year    Price      Date         5%       10%
----------------------  ----------   ------------  --------  -----------  --------  ------------
<S>                      <C>           <C>          <C>       <C>          <C>       <C>
Charles R. Howell IV      200,000         50.0%      $0.40    12/31/2012   $ -0-     $ -0-

Douglas G. Voss           200,000         50.0%      $0.40    12/31/2012   $ -0-     $ -0-

</TABLE>

(1) The 5% and 10% assumed rates of aciation are mandated by the rules of
the Commission and do not represent the Company's estimate or projection of the
future Common Stock price.

The following table sets forth information concerning the unexercised options
held by the Named Executive Officers as of December 31, 2002 No options were
exercised by the Named Executive Officers during fiscal year 2002.


                                       60

<PAGE>

                          Fiscal Year-End Option Values

                          Number of Securities
                                Underlying          Value of In-the Money
                            Options at FY-End        Options at FY-End(1)
        Name            Exercisable/Unexercisable  Exercisable/Unexercisable
----------------------- -------------------------  -------------------------

Douglas G. Voss             80,000 / 220,000(2)          $ -0- / $ -0-
Charles R. Howell IV          -0-  / 200,000             $ -0- / $ -0-

(1)  Market value of underlying securities at fiscal year end minus the exercise
     price.

(2)  On December 31, 2002, the Company granted Mr. Voss an option to purchase
     200,000 shares of Common Stock. On July 1, 1998, the Company granted Mr.
     Voss an option to purchase 100,000 shares of Common Stock. In connection
     with such grant, the Company's Compensation Committee received a
     Competitive Review of the Executive Compensation Program for the Chief
     Executive Officer, stating that the options granted to Mr. Voss were
     competitive and appropriate in light of comparable companies, particularly
     given the Company's improving performance and the fact that Mr. Voss does
     not receive any form of short term incentives.

Employment Agreements

     On December 31, 2002 the Company entered into employment agreements with
Mr. Voss and Mr. Howell, appointing them Chairman of the Board of Directors and
Chief Executive Officer, respectively. The agreements entitle each executive to
receive a base salary of $120,000 annually and to participate in the Company's
compensation and benefit plans. The agreements expire on December 30, 2004, and
in the event of a termination of the executive's employment by the Company,
other than for "cause," or by the executive for "good reason" the executive will
continue to be paid their salary for the remainder of the contract. As part of
these agreements, Messrs. Voss and Howell each received stock options to
purchase 200,000 shares of the Company's common stock at an exercise price of
$0.40 per share. The options vest ratably on the first and second anniversary
date of the employment agreements.

Compensation Committee Interlocks and Insider Participation

     Messrs. Mickelson and Simpson comprised the Compensation Committee for
purposes of setting compensation levels for 2002. No member of the Compensation
Committee was an officer or employee of the Company or its subsidiary during the
fiscal year ended December 31, 2002. Mr. Simpson was an officer and employee of
the Company from 1979 through 1987. No executive officer of the Company served
as a member of the compensation committee or the board of directors of another
entity, one of whose executive officers served on the Company's Compensation
Committee or Board during the fiscal year ended December 31, 2002.

Compensation of Directors

     Directors of the Company who are not employees of the Company participate
in the Company's 1993 Director Stock Option Plan, receive $1,000 for each
meeting of the Board or a meeting of a committee of the Board attended (not to
exceed $1,000 per day) and are reimbursed for out-of-pocket expenses incurred on
behalf of the Company.


                                       61

<PAGE>

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table contains certain information as of March 31, 2003
regarding the beneficial ownership of the Common Stock by (i) each person known
to the Company to own beneficially five percent or more of the Common Stock,
(ii) each director of the Company, (iii) each executive officer of the Company
named in the summary compensation table and (iv) all directors and executive
officers of the Company as a group. Any shares that are subject to an option or
a warrant exercisable within 60 days are reflected in the following table and
are deemed to be outstanding for the purpose of computing the percentage of
Common Stock owned by the option or warrant holder but are not deemed to be
outstanding for the purpose of computing the percentage of Common Stock owned by
any other person. Unless otherwise indicated, each person in the table has sole
voting and investment power as to the shares shown. Unless otherwise indicated,
the address for each listed shareholder is c/o Great Lakes Aviation, Ltd., 1022
Airport Parkway, Cheyenne, Wyoming 82001.

<TABLE>
<CAPTION>
                                                Amount and Nature           Percentage of
                                             of Beneficial Ownership(1)   Outstanding Stock
                                             --------------------------   -----------------
<S>                                                 <C>                       <C>
Douglas G. Voss .............................       5,659,245(2)(3)              40.0%

Raytheon Aircraft Credit Corporation ........       5,371,980                    38.2%
10511 E. Central Avenue
Wichita, Kansas  67206

Gayle R. Brandt .............................       2,159,755(2)(3)              15.4%
1218 Summer Circle Drive
Okoboji, Iowa  51355

Iowa Great Lakes Flyers, Inc. ...............         879,245(4)                  6.3%
1965 330th Street
Spencer, Iowa  51301

Tennenbaum & Co., LLC .......................         858,400(5)                  6.1%
1999 Avenue of the Stars, 32nd Floor
Los Angeles, California  90067

Michael E. Tennenbaum .......................         858,400(6)                  6.1%
1999 Avenue of the Stars, 32nd Floor
Los Angeles, California  90067

Vernon A. Mickelson .........................          36,000(7)                    *
1209 3rd Avenue West
Spencer, Iowa  51301

Ivan L. Simpson .............................          13,450(8)                    *
21261 North Bay Drive
Spirit Lake, Iowa  51360

Charles R. Howell IV ........................               0                       *

John Reardon ................................               0                       *

All directors and officers as a group .......       5,775,975                    40.6%
 (9 persons) (9)

--------------------
</TABLE>


                                       62

<PAGE>

*    Indicates ownership of less than 1% of the outstanding shares of Common
     Stock.

(1)  The securities "beneficially owned" by a person are determined in
     accordance with the definition of "beneficial ownership" set forth in the
     regulations of the Securities and Exchange Commission (the "Commission")
     and accordingly, may include securities owned by or for, among others, the
     spouse, children or certain other relatives of such person as well as other
     securities as to which the person has or shares voting or investment power
     or has the right to acquire within 60 days of March 31, 2003. The same
     shares may be beneficially owned by more than one person.

(2)  Ms. Brandt has granted to Mr. Voss an irrevocable proxy to vote her shares
     of Common Stock (the "Shares") until June 28, 2010. Mr. Voss and Ms. Brandt
     have also entered into a Shareholder Buy-Sell Agreement (the "Agreement")
     with respect to the Shares. The term of the Agreement (the "Term") is until
     June 28, 2010 or until such time as Ms. Brandt does not own any Shares or
     the Company is dissolved or liquidated. Pursuant to the Agreement, Ms.
     Brandt could not sell any Shares until June 28, 1999, at which time she was
     able to sell 470,000 Shares and an additional 235,000 Shares in each year
     thereafter. Mr. Voss, however, has been granted a right of first refusal to
     purchase for the market price any Shares which Ms. Brandt desires to so
     sell. The Agreement also provides Mr. Voss the option to purchase any
     Shares at any time during the Term for the market price of shares of Common
     Stock. The Agreement provides that in any transaction in which Mr. Voss
     sells greater than 5% of his shares of Common Stock, Mr. Voss has the right
     to compel Ms. Brandt to include the Shares held by her in such transaction
     on the same terms as the shares of Common Stock of Mr. Voss. In turn, Ms.
     Brandt has the right to have her Shares included by Mr. Voss in any such
     transaction on a pro rata basis. The Agreement also provides Mr. Voss with
     the right to purchase the Shares at the market price upon the death of Ms.
     Brandt or upon an involuntary disposition of the Shares held by Ms. Brandt.
     Pursuant to the Agreement, Mr. Voss will vote all shares of Common Stock
     beneficially owned by him (including the Shares) for the election of Ms.
     Brandt to the Board.

(3)  Mr. Voss is the beneficial owner of 2,628,245 shares of Common Stock, which
     includes 80,000 shares of Common Stock subject to currently exercisable
     options. Ms. Brandt is the record owner of 2,151,755 shares of Common Stock
     and 8,000 shares of Common Stock subject to currently exercisable options.
     The 2,151,755 shares of Common Stock owned by Ms. Brandt and the shares of
     Common Stock owned by Iowa Great Lakes Flyers, Inc. are included in the
     5,659,245 shares of Common Stock reported by Mr. Voss.

(4)  Beneficial ownership of all 879,245 shares of Common Stock is shared with
     Douglas G. Voss.

(5)  Beneficial ownership of all 858,400 shares of Common Stock is shared with
     Michael E. Tennenbaum.

(6)  Beneficial ownership of all 858,400 shares of Common Stock is shared with
     Tennenbaum & Co., LLC.

(7)  Includes 29,000 shares of Common Stock subject to currently exercisable
     options.

(8)  Includes 13,000 shares of Common Stock subject to current exercisable
     options.

(9)  Includes an aggregate of 186,800 shares of Common Stock subject to
     currently exercisable options.

Equity Compensation Plan Information

     The following table provides information as of the end of the most recently
completed fiscal year with respect to compensation plans under which the
Company's equity securities are authorized for issuance.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                                                            Number of securities
                               Number of securities                                       remaining available for
                                 to be issued upon                                      future issuance under equity
                                    exercise of          Weighted-average exercise     compensation plans (excluding
                               outstanding options,    price of outstanding options,      securities reflected in
       Plan category          warrants and rights (a)     warrants and rights (b)             column (a)) (c)
----------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                         <C>                      <C>
Equity compensation plans
  approved by security holders        670,000                     $ 1.28                          655,537 (1)
----------------------------------------------------------------------------------------------------------------------
Equity compensation plans
  not approved by security
  holders                               -0-                           --                            -0-
----------------------------------------------------------------------------------------------------------------------
           Total                      670,000                     $ 1.28                          655,537 (1)
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  Represents (a) 25,537 shares remaining available for issuance under the
     Company's Employee Stock Purchase Plan, (b) options to purchase 400,000
     shares remaining available for issuance under the Company's 1993 Stock
     Option Plan, and (c) options to purchase 230,000 shares remaining available
     for issuance under the Company's 1993 Director Stock Option Plan.


Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Raytheon Aircraft Credit Corporation owns 5,371,980 shares of common stock
of the Company, representing 38.2% of the shares of common stock outstanding as
of March 31, 2003. The Company issued the


                                       63

<PAGE>

shares to Raytheon as partial consideration for a series of transactions that
included restructured finance terms for aircraft promissory notes, termination
of aircraft operating leases, aircraft purchases, aircraft returns, modified
aircraft operating leases and other debt restructuring. See "Business" for a
description of the Restructuring Agreement, including certain continuing rights
and obligations of the parties.

     Douglas G. Voss is the sole owner of Iowa Great Lakes Flyers, Inc.
("Flyers"), a corporation that owns and operates four-passenger and
six-passenger aircraft, a fleet of rental cars and until April 2002, one
Beechcraft 1900D aircraft that are leased to the Company. The Company believes
that its leases with Flyers are on terms no less favorable to the Company than
would be similar transactions with unaffiliated third parties. In conjunction
with these leases the Company made a payment of $10,000 during 2002 to Flyers.
Additionally, from time to time Flyers loans funds to the Company on a short
term basis. As of April 1, 2003, the Company had a net outstanding balance of
$251,487 due to Flyers.

Item 14. CONTROLS AND PROCEDURES.

     Within 90 days of filing this report, an evaluation was performed under the
supervision and with the participation of the Company's management, including
the Chief Executive Officer and Treasurer, of the effectiveness of the design
and operation of the Company's disclosure controls and procedures. Based on that
evaluation, the Company's management, including the Chief Executive Officer and
Treasurer, concluded that the Company's disclosure controls and procedures were
effective in ensuring that material information relating to the Company with
respect to the period covered by this report were made known to them. There have
been no significant changes in the Company's informal controls or in other
factors that could significantly affect internal controls subsequent to the date
of such evaluation.


                                       64

<PAGE>

                                     PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  Reports on Form 8-K. During the fourth quarter ended December 31, 2002, the
     Company filed no reports on Form 8-K with the Securities and Exchange
     Commission.

(b)  Exhibits

     3.1     Amended and Restated Articles of Incorporation.(1)

     3.2     Amended and Restated Bylaws.(1)

     4.1     Specimen Common Stock Certificate.(1)

     10.1    Standard Ground Handling Agreement, dated April 3, 1991, by and
             between United Air Lines, Inc. and the Company.(1)

     10.2    United Express Interline Agreement, dated February 28, 1992, by
             and between United Air Lines, Inc. and the Company.(1)

     10.3    Airport/Airport Facilities Lease Agreement, dated November 1,
             1989, by and between Minneapolis-St. Paul Airport and the
             Company.(1)

     10.4    Great Lakes Aviation, Ltd. 1993 Stock Option Plan.(1)

     10.5    1993 Director Stock Option Plan.(1)

     10.6    Great Lakes Aviation, Ltd. Employee Stock Purchase Plan.(1)

     10.7*   Restructuring Agreement, dated December 31, 2002, by and between
             Raytheon Aircraft Credit Corporation and the Company.

     10.8*   Group A Return Conditions Note, dated December 31, 2002, issued
             by the Company to Raytheon Aircraft Credit Corporation.

     10.9*   Form of Promissory Note, dated December 31, 2002, issued by the
             Company to Raytheon Aircraft Credit Corporation.

     10.10*  Form of Security Agreement, dated December 31, 2002, by and
             between Raytheon Aircraft Credit Corporation and the Company.

     10.11*  Form of First Amendment to Lease Agreement, dated December 31,
             2002, by and between Raytheon Aircraft Credit Corporation and
             the Company.

     10.12*  Deferral Note, dated December 31, 2002, issued by the Company to
             Raytheon Aircraft Credit Corporation.


                                       65

<PAGE>


     10.13*  Senior Note, dated December 31, 2002, issued by the Company to
             Raytheon Aircraft Credit Corporation.

     10.14*  Subordinated Note, dated December 31, 2002, issued by the
             Company to Raytheon Aircraft Credit Corporation.

     10.15*  Security Agreement, dated December 31, 2002, by and between
             Raytheon Aircraft Credit Corporation and the Company.

     10.16*  Fourth Amendment to Security Agreement, dated December 31, 2002,
             by and between Raytheon Aircraft Credit Corporation and the
             Company.

     10.17*  Amended and Restated Security Agreement, dated December 31, 2002
             by and between Raytheon Credit Corporation and the Company.

     10.18*  Form of Lockup Agreement, dated December 31, 2002.

     10.19*  Press Release, dated December 31, 2002.

     10.20*  Settlement Agreement and Covenant Not to Execute, dated August
             1, 2002, by and between Finova Capital Corporation and the
             Company.

     10.21*  Deferral Agreement, dated November 1, 2002, by and between
             Finova Capital Corporation and the Company.

     10.22*  Employment Agreement, dated December 31, 2002, by and between
             Douglas G. Voss and the Company.

     10.23*  Employment Agreement, dated December 31, 2002, by and between
             Charles R. Howell IV and the Company.

     10.24*  Letter Agreement, dated April 11, 2003, by and between Boeing
             Capital Corporation and the Company.

     23.1*   Consent of KPMG LLP

     99.1*   Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
             Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

     99.2*   Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
             Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1) Incorporated by reference to the Company's Registration Statement on Form
S-1, Registration No. 33-71180.

*Filed herewith.


                                       66

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                         GREAT LAKES AVIATION, LTD.

Dated: April 15, 2003                    By /s/ Charles R. Howell IV
                                            ------------------------------------
                                             Charles R. Howell IV,
                                             Chief Executive Officer
                                             (Principal Executive Officer)

                                         By /s/ Michael L. Tuinstra
                                            ------------------------------------
                                             Michael L. Tuinstra
                                             Treasurer
                                             (Principal Accounting and Financial
                                             Officer)

KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below hereby constitutes and appoints Douglas G. Voss, Charles R. Howell IV and
Michael L. Tuinstra, and each of them individually, his or her true and lawful
agent, proxy and attorney-in-fact, with full power of substitution and
resubstitution. for such individual and in such individual's name, place and
stead, in any and all capacities, to act on, sign and file with the Securities
and Exchange Commission any and all amendments to this report together with all
schedules and exhibits thereto and to take any and all actions which may be
necessary or appropriate in connection therewith, and each such individual
hereby approves, ratifies and confirms all that such agents, proxies and
attorneys-in-fact, any of them or any of his or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

Signature                         Title                                           Date

<S>                               <C>                                             <C>
/s/ Douglas G. Voss               Chairman of the Board and Director              April 15, 2003
-------------------------------
Douglas G. Voss

/s/ Charles R. Howell IV          Chief Executive Officer                         April 15, 2003
-------------------------------   (Principal Executive Officer)
Charles R. Howell IV

/s/ Michael L. Tuinstra           Treasurer                                       April 15, 2003
-------------------------------   (Principal Accounting and Financial Officer)
Michael L. Tuinstra

/s/ Gayle R. Brandt               Director                                        April 15, 2003
-------------------------------
Gayle R. Brandt

/s/ Vernon A. Mickelson           Director                                        April 15, 2003
-------------------------------
Vernon A. Mickelson

/s/ John Reardon                  Director                                        April 15, 2003
-------------------------------
John Reardon

/s/ Ivan L. Simpson               Director                                        April 15, 2003
-------------------------------
Ivan L. Simpson

</TABLE>


                                       67

<PAGE>

                                 CERTIFICATIONS

CERTIFICATION PURSUANT TO RULE 13a-14

     I, Charles R. Howell IV, Chief Executive Officer of Great Lakes Aviation,
Ltd., certify that:

     1.   I have reviewed this annual report on Form 10-K of Great Lakes
          Aviation, Ltd.;

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this annual report;

     4.   The registrant's other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
          and we have:

          a)   designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;

          b)   evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          c)   presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of registrant's board of directors (or persons
          performing the equivalent functions):

          a)   all significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

          b)   any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

     6.   The registrant's other certifying officers and I have indicated in
          this annual report whether or not there were significant changes in
          internal controls or in other factors that could significantly affect
          internal controls subsequent to the date of our most recent
          evaluation, including any corrective actions with regard to
          significant deficiencies and material weaknesses.

Dated:   April 15, 2003                  /s/ Charles R. Howell IV
                                         ---------------------------------------
                                         Charles R. Howell IV
                                         Chief Executive Officer



                                       68

<PAGE>

CERTIFICATION PURSUANT TO RULE 13a-14

     I, Michael L. Tuinstra, Treasurer (Principal Accounting and Financial
Officer) of Great Lakes Aviation, Ltd., certify that:

     1.   I have reviewed this annual report on Form 10-K of Great Lakes
          Aviation, Ltd.;

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this annual report;

     4.   The registrant's other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
          and we have:

          a)   designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;

          b)   evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

          c)   presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of registrant's board of directors (or persons
          performing the equivalent functions):

          a)   all significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

          b)   any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

     6.   The registrant's other certifying officers and I have indicated in
          this annual report whether or not there were significant changes in
          internal controls or in other factors that could significantly affect
          internal controls subsequent to the date of our most recent
          evaluation, including any corrective actions with regard to
          significant deficiencies and material weaknesses.

Dated:    April 15, 2003                 /s/ Michael L. Tuinstra
                                         ---------------------------------------
                                         Michael L. Tuinstra
                                         Treasurer


                                       69

<PAGE>

                                  EXHIBIT INDEX

3.1      Amended and Restated Articles of Incorporation.(1)

3.2      Amended and Restated Bylaws.(1)

4.1      Specimen Common Stock Certificate.(1)

10.1     Standard Ground Handling Agreement, dated April 3, 1991, by and between
         United Air Lines, Inc. and the Company.(1)

10.2     United Express Interline Agreement, dated February 28, 1992, by and
         between United Air Lines, Inc. and the Company.(1)

10.3     Airport/Airport Facilities Lease Agreement, dated November 1, 1989, by
         and between Minneapolis-St. Paul Airport and the Company.(1)

10.4     Great Lakes Aviation, Ltd. 1993 Stock Option Plan.(1)

10.5     1993 Director Stock Option Plan.(1)

10.6     Great Lakes Aviation, Ltd. Employee Stock Purchase Plan.(1)

10.7*    Restructuring Agreement, dated December 31, 2002, by and between
         Raytheon Aircraft Credit Corporation and the Company.

10.8*    Group A Return Conditions Note, dated December 31, 2002, issued by the
         Company to Raytheon Aircraft Credit Corporation.

10.9*    Form of Promissory Note, dated December 31, 2002, issued by the Company
         to Raytheon Aircraft Credit Corporation.

10.10*   Form of Security Agreement, dated December 31, 2002, by and between
         Raytheon Aircraft Credit Corporation and the Company.

10.11*   Form of First Amendment to Lease Agreement, dated December 31, 2002, by
         and between Raytheon Aircraft Credit Corporation and the Company.

10.12*   Deferral Note, dated December 31, 2002, issued by the Company to
         Raytheon Aircraft Credit Corporation.

10.13*   Senior Note, dated December 31, 2002, issued by the Company to Raytheon
         Aircraft Credit Corporation.

10.14*   Subordinated Note, dated December 31, 2002, issued by the Company to
         Raytheon Aircraft Credit Corporation.

10.15*   Security Agreement, dated December 31, 2002, by and between Raytheon
         Aircraft Credit Corporation and the Company.


                                       70

<PAGE>

10.16*   Fourth Amendment to Security Agreement, dated December 31, 2002, by and
         between Raytheon Aircraft Credit Corporation and the Company.

10.17*   Amended and Restated Security Agreement, dated December 31, 2002 by and
         between Raytheon Credit Corporation and the Company.

10.18*   Form of Lockup Agreement, dated December 31, 2002.

10.19*   Press Release, dated December 31, 2002.

10.20*   Settlement Agreement and Covenant Not to Execute, dated August 1, 2002,
         by and between Finova Capital Corporation and the Company.

10.21*   Deferral Agreement, dated November 1, 2002, by and between Finova
         Capital Corporation and the Company.

10.22*   Employment Agreement, dated December 31, 2002, by and between Douglas
         G. Voss and the Company.

10.23*   Employment Agreement, dated December 31, 2002, by and between Charles
         R. Howell IV and the Company.

10.24*   Letter Agreement, dated April 11, 2003, by and between Boeing Capital
         Corporation and the Company.

23.1*    Consent of KPMG LLP

99.1*    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2*    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002.

(1) Incorporated by reference to the Company's Registration Statement on Form
S-1, Registration No. 33-71180.

 *  Filed herewith.
                                       71