Little effect in Vegas expected from cuts at airline

Monday, April 10, 2000 | 11:20 a.m.

American Airlines' expected cancellation of the routes it inherited when it acquired Reno Air shouldn't lead to higher fares between Las Vegas and Reno, an analyst says.

Fort Worth, Texas-based American, operated by AMR Corp., plans to announce today that it will discontinue 12 Las Vegas flights and 17 Reno flights by July 2. Rep. Jim Gibbons, R-Nev., learned of the plan Friday and said he was disappointed that there will be fewer flights and fewer competitors on routes to Nevada.

"At a time when we are trying to expand on Nevada's tourist-based economy, our potential visitors are about to face fewer flight options and potentially higher airline ticket prices when traveling to Nevada," said Gibbons, a former airline pilot.

But Mike Boyd, an airline analyst with the Evergreen, Colo.-based Boyd Group, said he had expected American to scale back in Nevada because the company's initial deal to buy Reno Air didn't make sense.

"The Reno Air acquisition made no sense at all for American," Boyd said. "It's cost them about $500 million between the purchase price, having to deal with pilot issues and the expenses of pulling back now."

American acquired Reno Air in November 1998 for $174 million and said last May that it would continue to operate all Reno Air routes.

Jim Higgins, an airline analyst for Donaldson, Lufkin & Jenrette, said the move makes perfect sense to American.

"They bought Reno Air because it offered ready-made capacity to West Coast markets they didn't have," Higgins said. "They're now redeploying the Reno (Air) assets to markets where they have better revenue opportunities. It seems like a no-brainer for American."

The Las Vegas routes affected by the cutback include flights to Reno; Oklahoma City; Colorado Springs, Colo. and Orange County, Calif. The cutback of 12 flights represents about 2.7 percent of the total number of flights from McCarran International Airport.

Increased and new service by Southwest, America West, National, Continental, Legend, Allegiant and Virgin Atlantic between January and June will bring in more flights and passengers than what the city is losing in the American cutback.

Airline traffic at McCarran, in fact, has grown substantially over the past year with daily departures up 13.5 percent to 436 flights.

Boyd also said he doesn't expect fares to increase between Las Vegas and Reno, even though the route will be dominated by one carrier, Southwest.

"Southwest does not play the let's-see-how-much-we-can-gouge-them game with fares," Boyd said.

But because Southwest is such a strong competitor, he doesn't expect any other airlines to jump into the Las Vegas-Reno market.

"When you're the high school varsity, you don't go out and challenge the Dallas Cowboys," Boyd said.

Roz Santangelo, a spokeswoman for Southwest in Las Vegas, said the airline has 10 daily round-trip flights between Las Vegas and Reno. Las Vegas routes to Oklahoma City, Colorado Springs and Orange County are served by America West.

Santangelo said she does not expect Southwest to raise its fares in the wake of the pullout by American. She also said she does not expect Southwest to add more flights between Las Vegas and Reno since aircraft the company recently acquired have been committed to other routes, including nonstop service between Las Vegas and Albany, N.Y. later this year.

Boyd was critical of the American acquisition of Reno Air when it was announced and reiterated that airline mergers usually result in consumers getting less.

"When you have a merger, you have fewer flights, fewer choices and fewer jobs," he said.

American hasn't announced any change in the status of its reservation center in Las Vegas. The company has about 325 employees at the center, which was opened by Reno Air and was part of the American acquisition.

Boyd speculated that the airline would leave the center open because the company needs the resource somewhere and Las Vegas has been attractive for the company because of its pool of workers willing to work unusual shift hours.