Reno Air to be acquired by American Airlines

Sandra Chereb

Thursday, Nov. 19, 1998 | 4:24 a.m.

RENO, Nev. -- Reno Air on Thursday announced its intended buyout by American Airlines in a move that caps a roller-coaster existence for the 6-year-old, low-fare carrier.

The $124 million deal calls for American to acquire all outstanding common shares of Reno Air for $7.75 cents per share.

The acquisition is subject to government approvals and approval by shareholders, said Stephen Jackson, Reno Air's chief financial officer.

"It's considered to be a very good transaction for the shareholders," Jackson said, adding that a stockholder's meeting would be held in the coming months.

Jackson said plans call for Reno Air to continue to operate as an independent subsidiary of American Airlines after the merger, until American determines how it will integrate operations.

American, based in Forth Worth, Texas, sees the merger as a means to increase its West Coast presence and to better compete with rivals United and Southwest.

American's parent company, AMR Corp., said it will make a stock-buy offer for Reno Air no later than Wednesday.

"The acquisition of Reno Air by American Airlines is the right decision for our shareholders, our employees and the communities we serve," Joseph O'Gorman, Reno Air president, chairman and CEO, said in a written statement.

"This merger will complement and enhance American's global airline network. The transaction will provide stability to our employees and offer our customers access to the world's largest network of airlines," he said.

American said it expects to hire all of Reno Air's 2,000 employees.

Reno Air linked up with American in 1993 in a marketing partnership involving frequent flyer programs.

The proposed merger comes as Reno Air has struggled to regain its financial footing following a disastrous 1997 that saw losses of $12.3 million and resulted in a management shakeup and drastic cost-cutting measures.

O'Gorman took the helm of the airline in February. Under his tenure the company has cut 330 jobs, or 15 percent of the workforce, and eliminated service to six unprofitable cities.

Those efforts apparently paid off. In September, Reno Air reported $12.5 million income, the most profitable quarter in its six-year history.