The drive from downtown Waterloo to CID is less than 1 hour. If it weren't for easy access (all interstate) to CID, ALO could actually be a good market on it's own. The metro area is over 100,000, John Deere has a very large operation, along with the University of Northern Iowa (enrollment 12000-15000).
Waterloo was actually a frequent business destination for me for a number of months, but I never, ever flew to Waterloo... I always flew to Cedar Rapids instead. Most of the people in the area drive to Cedar Rapids to fly anyway. There are just many more flights (not to mention many more rental cars) available at Cedar Rapids. IMHO cutting Waterloo isn't going to hurt too much.