Great Lakes Aviation, Ltd. (OTCMKTS:GLUX) is possibly one of the smallest companies I have ever looked at. The company’s current market capitalization is $8.5 million and the company has an average daily volume of only 12,000 shares. What’s more, Great Lakes is a penny stock, trading at $0.95 as I write this.

Great Lakes

Great Lakes Aviation, Ltd. (OTCMKTS:GLUX) is a regional airline operating from hubs in Albuquerque, Denver, Los Angeles, Las Vegas, Minneapolis and Phoenix. The company is an independent carrier and a code share partner with United Airlines and Frontier Airlines. This multiple code share allows customers to book flights and share rewards through partners. The company flies to 46 airports and has a fleet of six aircraft.

Great Lakes’ stock tradings

At its current share price of $0.95, Great Lakes Aviation, Ltd. (OTCMKTS:GLUX) is trading well below its book value per share, which was $4.24 at the end of the second fiscal quarter. However, the company lacks cash on its balance sheet and has a small pile of debt, around $26 million at the end of the second fiscal quarter. That said, this debt pile was 13%, or $4 million lower than it was during the same period last year. Still, the rest of the balance sheet looks relatively clean and at the end of the second quarter, Great Lakes’ current ratio was 2.3, and excluding inventories the quick ratio was 1.5.

So, what’s Great Lakes Aviation, Ltd. (OTCMKTS:GLUX)’ outlook? Well, the company reported a loss of the first half of this year but is not burning cash, as after adding back in non-cash charges, free cash flow was around the breakeven level. Actually, for the past four years the trend has been much the same and the company appears to be treading water.

That said, Great Lakes did report EPS of $0.32 for 2012, indicating that the company is currently trading at a trailing-12-month P/E of 3. However, the company’s four-year EPS growth rate is approximately -15% and as I have already mentioned cash generation is just enough to cover costs.

Great Lakes’ traffic statistics

Unfortunately, it would appear that things are going to get worse before they get better for Great Lakes Aviation, Ltd. (OTCMKTS:GLUX). At the beginning of this month the company reported dismal traffic figures for September, with both year-to-date and monthly traffic statistics down compared to the previous period. In particular, the company reported that year-to-date passenger numbers were down 13% and revenue passenger miles collapsed 21%. In addition, the company’s load factor fell 460 bps, to only 39.1% for September this year. In comparison, Delta reported a load factor of 81.5% for domestic flights during September this year – a September record for Delta.

So, it’s unlikely that Great Lakes Aviation, Ltd. (OTCMKTS:GLUX) will stage a recovery any time soon. Actually, considering the aggressive price wars currently underway amongst U.S. domestic carriers, it is not unreasonable to suggest that Great Lakes will be unable to stage a recovery without a complete overhaul.

Still, as the company is currently trading at a significant discount to its book value per share and is cash flow natural the stock could yield rewards for those who are patient and willing to wait for a re-rating.