Reno Air seeks merger partner

Thursday, Oct. 29, 1998 | 10:51 a.m.

Reno Air, the Reno-based regional air carrier with a growing presence at McCarran International Airport in Las Vegas, is looking for a partner -- or a buyer.

Company executives told the Wall Street Journal the company's "long-term viability is risky" and that "we've never found a niche that works."

Reno Air Chief Executive Officer Joe O'Gorman said he is looking for a partner to keep the airline flying.

Mike Boyd of The Boyd Group, an Evergreen, Colo.-based company that analyzes the airline industry, said the problem with Reno Air is that it doesn't bring much to a business relationship that prospective partners don't already have.

"They have planes, seats and routes in California where you have a little something called Southwest Airlines that offers low fares and great service," Boyd said. "Would you want to compete against that?"

But he said the most repeated rumor is that Dallas-based American Airlines is considering acquiring Reno Air and operating it as an airline within an airline, similar to the way United Airlines operates Shuttle by United.

But Boyd pointed out that American purchased Air California to get a foothold in San Francisco, then scaled back flights. The company also lost its primary West Coast traffic feed in 1993 when it closed its hub in San Jose, Calif., due to competitive pressure from Southwest and Reno Air.

"Reno Air's best value is as a stand-alone airline," Boyd said. "They've had a special (marketing) relationship with American so it could happen."

Boyd also mentioned Alaska Airlines as a potential suitor, but Alaska already operates routes similar to Reno Air's.

In addition to having some code-share agreements with American, Reno Air last week announced a joint marketing agreement with Canadian Airlines, which is 33 percent owned by American's parent company, AMR Corp.

The company also has code-share arrangements with Hawaiian and Qantas airlines and plans to enter an agreement with Midwest Express next year.

Reno Air has 25 daily flights at McCarran and by passenger volume is the No. 5 carrier in Las Vegas, according to the airport.

The company will run its primary reservation center at 500 E. Warm Springs Road when it closes its Reno center on Dec. 10. The Las Vegas center has 160 work stations in a 32,000-square-foot business park setting. Capacity at the building is 300 per shift. It opened in April 1997 prior to a major Las Vegas service expansion and is capable of handling more than 20,000 calls a day.

While revenue was down for Reno Air in its third quarter, earnings were up. The company reported net income of $13.3 million or 78 cents a share on revenues of $101.1 million for the period ending Sept. 30. During the same quarter a year earlier, the company reported net income of $4.8 million or 39 cents on revenue of $105.2 million.