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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2004

OR

For the transition period from              to             

Commission File No. 0-23224

GREAT LAKES AVIATION, LTD.

(Exact name of registrant as specified in its charter)

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

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

As of September 30, 2004, 14,071,970 shares of Common Stock of the registrant were issued and outstanding.

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GREAT LAKES AVIATION, LTD.

FORM 10-Q

For the Quarterly Period Ended September 30, 2004

INDEX

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Cautionary Statement Regarding 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 Quarterly Report on Form 10-Q 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 none of the statements contained in this Quarterly Report on Form 10-Q or 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 that are 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:

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.

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PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

GREAT LAKES AVIATION, LTD.

Balance Sheets

See condensed notes to financial statements.

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GREAT LAKES AVIATION, LTD.

Statements of Operations

For the Three and Nine Months Ended September 30, 2004 and September 30, 2003

(Unaudited)

See condensed notes to financial statements.

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GREAT LAKES AVIATION, LTD.

Statements of Cash Flows

For the Nine Months Ended September 30,

(Unaudited)

See condensed notes to financial statements.

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GREAT LAKES AVIATION, LTD.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

General

The financial statements included herein have been prepared by Great Lakes Aviation, Ltd. (the “Company”), without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted pursuant to the rules and regulations of the SEC. The information furnished in the Company’s financial statements includes normal recurring adjustments and reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of such financial statements. The Company’s business is seasonal and, accordingly, interim results are not necessarily indicative of results for a full year. However, the Company believes that the disclosures in this report are adequate to make the information presented not misleading. The accompanying financial statements should be read in conjunction with the Company’s financial statements for the year ended December 31, 2003 and the notes that were included in the Company’s 2003 Annual Report on Form 10-K filed with the SEC.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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 utilized by the Company include ticket revenue, government air service subsidies, depreciable lives, impairment and obsolescence and lease termination costs. Actual results could differ from those estimates.

The Company assesses its routes and the usefulness of its flight equipment and evaluates its aircraft on a continuing basis to determine if there has been an impairment to their remaining values under provisions of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. If the Company determines that the total of the future discounted cash flows is less than the carrying value of an aircraft or group of aircraft, a loss will be recognized for the difference between the fair value and the carrying value of that aircraft or group of aircraft.

NOTE 1. Liquidity and Going Concern

In an audit opinion report dated March 10, 2004 on the Company’s financial statements for the fiscal year ended December 31, 2003, the Company’s independent auditors included an explanatory paragraph stating (i) that the Company suffered significant losses in the years ended December 31, 2002 and 2001 and (ii) that, as of December 31, 2003, the Company had liabilities in excess of assets. As a result, the Company’s independent auditors indicated in the explanatory paragraph that these matters raised substantial doubt about the Company’s ability to continue as a going concern.

At November 11, 2004, the company has made the 2004 scheduled payments due its major creditor, Raytheon Aircraft Credit Corporation, in 2004 under the December 31, 2002 Restructuring Agreement. The Company anticipates amending the schedule for certain payments missed in 2003 to provide for payment in future periods.

Concurrently, the Company is in arrears and is negotiating with creditors that have provided financing for the Company’s Brasilia aircraft to restructure the Company’s remaining debt and lease obligations. The Company has informal agreements with these aircraft creditors to make reduced payments while negotiating revised payment schedules which will be based on current cash flows. As of November 12, 2004, the Company is current with it payments under these informal agreements.

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GREAT LAKES AVIATION, LTD.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

The Company cannot determine with a high degree of confidence that, in the future, the Company will be able to generate cash flows sufficient to satisfy the outstanding arrearages or regain compliance with the Company’s aircraft debt and lease agreements. In the event that the Company is unable to (i) satisfy the outstanding arrearages, negotiate terms for restructuring the arrearages, or obtain alternative debt and lease financing and (ii) make payments on all debt and lease obligations in a timely manner, one or more of the Company’s debt obligations may be accelerated, thereby forcing the Company to seek legal protection from its creditors or discontinue operations.

The Company continues to negotiate with the Company’s primary aircraft lender related to its Beechcraft aircraft, Raytheon Aircraft Credit Corporation (“Raytheon”), regarding a potential further restructuring of the Company’s debt financing with Raytheon. Concurrently, the Company is negotiating with creditors that have provided financing for the Company’s Brasilia aircraft to restructure the Company’s remaining debt and lease obligations. The Company has informal agreements with it aircraft creditors to make reduced payments while negotiating revised payment schedules which will be based on current cash flows. As of November 12, 2004, the Company is current with it payments under these informal agreements.

The Company’s financial statements included in this Quarterly Report on Form 10-Q have been prepared under the assumption 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.

NOTE 2. Aircraft

The following table presents a summary of the Company’s operating aircraft as of September 30, 2004 and December 31, 2003:

Return of Beechcraft 1900D Aircraft. During the first six months of 2004, the Company returned two owned Beechcraft 1900D aircraft to Raytheon Aircraft Credit Corporation (“Raytheon”), with a net book value on the Company’s books of $4.9 million, in exchange for the cancellation and extinguishment of two promissory notes. As a result, the Company reduced its outstanding aircraft debt and accrued interest by $7.6 million and recognized a non-cash gain from the extinguishment of debt in the amount of $2.6 million during the first six months of 2004. The Company also returned the last leased Beechcraft 1900D aircraft and two leased Beechcraft 1900C aircraft to Raytheon in exchange for the cancellation and extinguishment of outstanding operating lease obligations. As a result, the Company reduced its outstanding accrued lease obligations by $1.4 million and recognized a non-cash gain from the termination of leases in the amount of $1.4 million. There were no planes returned during the third quarter.

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GREAT LAKES AVIATION, LTD.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

Return of Embraer Brasilia Model 120 Aircraft. On November 1, 2003, an aircraft operating lease (the “FINOVA Lease”) between the Company and FINOVA Capital Corporation (“FINOVA”) for one Embraer Brasilia Model 120 aircraft terminated by the lease’s own terms. In January 2004, the Company returned the Embraer Brasilia aircraft to FINOVA.

The Company remains liable for all outstanding lease payments, together with accrued penalty interest, that are due and payable under the terms of the FINOVA Lease. During the first nine months of 2004, the Company made payments of $104,000 against the balance of the outstanding lease payments. As of September 30, 2004, the aggregate amount of outstanding lease payments and accrued penalty interest owed by the Company under the FINOVA Lease was $1.4 million.

NOTE 3. Notes Payable and Long-Term Debt

At September 30, 2004, the Company was in arrears with respect to almost all of the Company’s aircraft debt and lease obligations. Furthermore, the Company is uncertain that, during the remainder of the Company’s fiscal year 2004, the Company will be able to generate cash flow sufficient to satisfy the outstanding arrearages or regain compliance with the Company’s aircraft debt and lease agreements. Therefore, the amounts of the Company’s long-term debt that would otherwise be contractually due and payable after one year are reflected on the Company’s balance sheets as “long-term debt classified as current.”

The amount of long-term debt classified as current also includes additional amounts of debt carried by the Company on its books pursuant to the provisions of the Statement of Financial Accounting Standards No. 15, Accounting by Debtors and Creditors for Troubled Debt Restructuring (“SFAS No. 15”).

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GREAT LAKES AVIATION, LTD.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

The following table sets forth, as of September 30, 2004 and December 31, 2003, the amounts of the Company’s long-term debt, the amounts of current maturities of long-term debt, the amounts of long-term debt classified as current and the additional amounts of debt carried by the Company on its books pursuant to SFAS No. 15:

Reduction of Debt Balances due to Cash Payments. During the first nine months of 2004, the Company made principal payments in the aggregate amount of $5.6 million against the Company’s outstanding debt balances. In addition, in accordance with SFAS No. 15, interest of $2.4 million paid during the first nine months of 2004 on debt obligations owed by the Company to Raytheon was applied against the carrying balances of the debt on the Company’s books.

Reduction of Debt Balances due to Return of Beechcraft 1900D Aircraft. During the first six months of 2004, the Company returned two owned Beechcraft 1900D aircraft to Raytheon in exchange for the cancellation and extinguishment of two promissory notes. As a result, the Company reduced its outstanding long-term aircraft debt by $6.6 million. No aircraft were returned during the third quarter.

Addition of Engine Note. With respect to the physical condition of the Beechcraft 1900D aircraft that have been returned to Raytheon, the Company is responsible for costs of repair and refurbishment to satisfy certain aircraft return conditions as set forth in the Restructuring Agreement that was executed by and between the

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GREAT LAKES AVIATION, LTD.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

Company and Raytheon on December 31, 2002. Accordingly, as of December 31, 2003, the Company had recognized an accrued liability of $2.3 million for such expenditures. A Group A Engine Overhaul Note (the “Engine Note”), which sets forth the terms for repayment of the $2.3 million liability, has been executed by the Company, and during the first quarter of 2004 the Company reflected the previous $2.3 million accrued liability as a long-term note payable.

Under the terms of the Engine Note, payments of principal will be made in 60 equal monthly installments. Interest, payable monthly, accrues on the outstanding principal balance of the Engine Note at the per annum rate of LIBOR plus 400 basis points. The Company made principal payments totaling $75,455 against the Engine Note during the first nine months of 2004. As of November 12, 2004, the Company is current with its payments under the Engine Note.

NOTE 4. Stock Option Plans

In 1993, the Company adopted the Great Lakes Aviation, Ltd. 1993 Stock Option Plan and the Great Lakes Aviation, Ltd. 1993 Director Stock Option Plan (collectively, the “Plans”). The Plans permitted stock options in the aggregate of 1,300,000 shares of the Company’s common stock to be granted to key employees, officers and directors of the Company. Pursuant to their terms, both Plans expired on October 31, 2003, and no options may be granted after October 31, 2003. However, all outstanding options that were granted under the Plans will remain in effect until such outstanding options have either expired or been cancelled.

Both of the Plans were fixed stock option plans. Therefore, in accounting for the Plans, the Company has applied the accounting treatment prescribed by the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and Related Interpretations (“APB Opinion No. 25”). Accordingly, no compensation costs have been recognized for the Plans, as exercise prices were at least equal to the fair market value of the Company’s common stock on the various dates of option grants.

The Company has elected the pro forma disclosure option under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”). Pro forma net profit and pro forma net loss per share have been provided as if SFAS No. 123 were adopted for all stock-based compensation plans.

The pro forma information in the following table shows the effect of determining the compensation expense for the Company’s Plans in accordance with SFAS No. 123:

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GREAT LAKES AVIATION, LTD.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

As required, the pro forma disclosures above are based on options granted since January 1, 1995. Consequently, the effects of applying SFAS No. 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 of the options.

NOTE 5: Other

At June 30, 2004, the Company was obligated to the Transportation Security Administration for $2.5 million, representing collections from passengers for security fees and amounts due from the Company for aviation security infrastructure fees. On August 11, 2004, the Company restructured this obligation into a note that requires the Company to pay the amount owed in 36 monthly payments beginning in August 2004. At September 30, 2004, the Company was current on this obligation.

On October 29, 2004, the Company received a settlement payment in the amount of $650,000 for a claim associated with the May 14, 2002 hangar fire at Grand Island Nebraska, which will be recognized in the fourth quarter 2004.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company

The Company is a regional airline operating as an independent carrier and as a code share partner with United Air Lines, Inc. (“United Air Lines” or “United”) and Frontier Airlines, Inc. (“Frontier Airlines” or “Frontier”). As of November 1, 2004, the Company served 31 destinations in nine states to and from Denver, Colorado and three destinations in three states to and from Phoenix, Arizona. The Company also served Brookings and Huron, South Dakota to and from Minneapolis, Minnesota. Service to and from these three cities was discontinued September 1, 2004.

General information about the Company can be found at www.greatlakesav.com. The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as any amendments and exhibits to those reports, are available free of charge through the Company’s web site as soon as reasonably practicable after the Company has filed such reports with, or furnished them to, the United States Securities and Exchange Commission (the “SEC”). Information on the Company’s web site is not incorporated into, nor a part of, this Quarterly Report on Form 10-Q or any of the Company’s other filings with the SEC.

Current Year Developments

Increased Frequency to Certain Destinations. During the first quarter of 2004, the Company seasonally increased the number of its regularly scheduled flights to certain destinations in New Mexico, Wyoming and Arizona.

Discontinuation of Air Service to Certain Destinations. During the first quarter of 2004, the Company discontinued all operations at Vernal and Moab, Utah and Casper, Wyoming. In April 2004, the Company discontinued all operations at Wichita, Kansas. In July 2004, the Company discontinued all operations at Norfolk, Nebraska. On August 23, 2004, the Company discontinued all operations at Rapid City, South Dakota.

Changes in Levels of Air Passenger Service to Certain Destinations. During the first quarter of 2004, the Company upgraded its air passenger services to three cities in Wyoming by converting one daily round-trip for each of the destinations from a 19-passenger Beechcraft 1900D aircraft to a 30-passenger Embraer Brasilia Model 120 aircraft.

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Essential Air Services Contracts. The following table, based on estimated annual flights presents a summary of the Company’s Essential Air Service Contracts as of October 24, 2004:

The Company anticipates finalizing amounts due from the Department of Transportation for closed Essential Air Service contracts in late 2004 or early 2005, and the Company does not believe that a significant adjustment to revenue will result from such finalization.

Fleet Management Program^TM. In April 2004, the Company entered into a five-year Term Cost Plan^TM Agreement (the “FMP Contract”) with Pratt & Whitney Canada Corp. (“P&WC”) under which P&WC will supply the Company with certain engine maintenance services under a Fleet Management Program.^TM The Company has entered into the FMP Contract to comply with certain aircraft maintenance requirements that are set forth in the Restructuring Agreement between the Company and Raytheon Aircraft Credit Corporation dated as of December 31, 2002. Under the terms of the FMP Contract, the engines for all 30 of the Company’s Beechcraft 1900D aircraft will be overhauled over the next two and one-half years. Monthly amounts to be paid by the Company will be based on the total number of Beechcraft 1900D engine operating hours at a fixed contractual rate. Such monthly payments will continue throughout the five-year term of the FMP Contract.

Starting April 1, 2004, maintenance expense is recognized under the FMP Contract based on the monthly amounts to be paid to P&WC. For the three months ended September 30, 2004, the Company recognized total expense of $1.2 million, and since initiation of the FMP Contract the Company has recognized total expense of $2.4 million. The Company received eight overhauled engines from P&WC during the third quarter of 2004.

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The FMP Contract may be cancelled by either party on three months prior written notice. In such event, the FMP Contract provides for a payment to, or receipt from, P&WC of the difference between amounts the Company has paid to P&WC and the cost of maintenance performed by P&WC.

Results of Operations for the Three Months Ended September 30, 2004 and 2003

The following table sets forth certain financial information regarding the Company’s results of operations for the three months ended September 30, 2004 and 2003:

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Selected Operating Data

The following table sets forth certain selected operating data regarding the Company’s operations for the three months ended September 30, 2004 and 2003:

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Comparison of Third Quarter 2004 to Third Quarter 2003

Passenger Revenues. Passenger revenues were $15.0 million in the third quarter of 2004, an increase of 9.8% from $13.7 million in the third quarter of 2003. The $1.3 million increase in passenger revenues is primarily attributable to a 3.3% increase in revenue passenger miles during the third quarter of 2004, along with an increase in passenger yield of 6.5%. The Company’s available seat mile (“ASM”) capacity for the third quarter of 2004 decreased 3.7% over the ASM capacity for the third quarter of 2003 as a result of an decrease in the number of the Company’s regularly scheduled flights.

Public Service Revenues. At September 30, 2004, the Company served 21 communities on a subsidized basis under the U.S. Department of Transportation Essential Air Service Program (the “EAS Program”). Public service revenues earned through the EAS Program decreased 33.0% to $4.9 million during the third quarter of 2004, as compared to $7.4 million during the third quarter of 2003. The reduction in public service revenue was due primarily to a 25% reduction in the number of communities served by the Company under the EAS Program along with an adjustment of $1.2 million during the 2003 period to record increased EAS revenues for prior periods as older open EAS contract negotiations reach finalization. There were no adjustments to the EAS receivable during the third quarter.

Other Revenues. Other revenues were $0.2 million during the third quarter of 2004, an increase of 9.7% from the third quarter of 2003. This increase is primarily attributable to additional charters provided in the third quarter of 2004 over third quarter of 2003.

Operating Expenses. Total operating expenses were $18.6 million, or 22.6 cents per ASM, in the third quarter of 2004 as compared to $17.7 million, or 20.7 cents per ASM, in the third quarter of 2003.

Salaries, Wages and Benefits. Salaries, wages and benefits were $5.4 million in the third quarter of 2004, a decrease of 0.8% from $5.4 million in the third quarter of 2003.

Aircraft Fuel Expense. Aircraft fuel expense was $3.7 million, or 4.5 cents per ASM, in the third quarter of 2004. In comparison, the Company’s aircraft fuel expense for the third quarter of 2003 was $3.0 million, or 3.5 cents per ASM. The 22.1% increase in the Company’s aircraft fuel expense is primarily attributable to the 34.4% increase in average cost of fuel, which was partially offset by fuel consumption savings resulting from the July 2003 termination of mail service and the 9.5% reduction in departures.

Aircraft Maintenance, Materials and Component Repair Expense. Aircraft maintenance, materials and component repair expense was $2.8 million during the third quarter of 2004, a decrease of 3.1% from $2.9 million during the third quarter of 2003. The decrease in aircraft maintenance expense is primarily attributable to the cost of returning aircraft in accordance with contractual requirements in 2003.

Depreciation and Amortization. Depreciation and amortization expense during the third quarter of 2004 was $1.6 million, or 2.0 cents per ASM, which was a decrease of 18.1% from $2.0 million, or 2.3 cents per ASM, in the third quarter of 2003. The decrease in depreciation expense is primarily attributable to the return of four surplus Beechcraft 1900D aircraft to Raytheon Aircraft Credit Corporation (“Raytheon”) during 2003, and two during the first half of 2004, in accordance with the Company’s 2002 Restructuring Agreement with Raytheon and a reduction in depreciation related to rotable parts inventory.

Aircraft Rental. Aircraft lease expense was $0.4 million during the third quarter of 2004, a decrease of 45.0% from $0.8 million in the third quarter of 2003. The decrease in aircraft lease expense is primarily attributable to the expiration of an aircraft lease for one Embraer Brasilia Model 120 on November 1, 2003 and the subsequent return of the aircraft to the lessor, FINOVA Capital Corporation, in January 2004, along with the return of one surplus Beechraft 1900D aircraft and two surplus Beechcraft 1900C aircraft to Raytheon during the first half of 2004, in accordance with the Company’s 2002 Restructuring Agreement with Raytheon.

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Other Rentals and Landing Fees Expense. Other rentals and landing fees expense was $1.3 million during the third quarter of 2004, an increase of 148.0% from $0.5 million during the third quarter of 2003. The increase in rentals and landing fees expense is attributable to a credit of $0.8 million received for annual rate adjustments at Denver International Airport in 2003 for 2002. The 2003 credit of $0.7 million was received in the second quarter of 2004.

Other Operating Expenses. Other operating expenses were $3.3 million, or 4.0 cents per ASM, during the third quarter of 2004, an increase of 6.9% from $3.1 million, or 3.6 cents per ASM, during the third quarter of 2003. The increase in other operating expenses is primarily due to an increase of approximately $0.3 million in security expense primarily due to the Aviation Security Infrastructure waving fees for the third quarter of 2003.

Interest Expense. Contractual interest expense of $1.4 million was incurred during the third quarter of 2004, of which $1.1 million was applied against restructured Raytheon debt in accordance with SFAS No. 15. The net interest cost of $0.3 million compares to the $0.8 million of net interest cost in the 2003 period. The decrease of $0.5 million, or 64.3%, between the periods was primarily the result of (i) a $0.3 million expense reduction attributable to the extinguishment of $18.7 million in debt for six debt-financed aircraft that were returned to Raytheon during 2003 and 2004 and (ii) decreases in variable interest rates, along with a reduction of Embraer interest accruals for prior period penalty interest of $0.2 million.

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

Gain on Extinguishment of Debt. During the third quarter of 2003, the Company recognized a $1.8 million non-cash gain on extinguishment of debt as a result of the return of two debt-financed Beechcraft 1900D aircraft to Raytheon. See “Raytheon Aircraft Credit Corporation” below.

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Results of Operations for the Nine Months Ended September 30, 2004 and 2003

The following table sets forth certain financial information regarding the Company’s results of operations for the nine months ended September 30, 2004 and 2003: