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Saturday, July 04, 1998
Reno Air opens year leaner
The low-cost airline begins its eighth year of business after slashing 15 percent of its work force.
By Tom Gardner
Associated Press
RENO -- Empty cubicles, vacant offices and hollow rooms abound in Reno Air's corporate headquarters.
A $12.3 million loss in 1997, followed by a new boss in February, have resulted in 330 pink slips. The low-cost airline has slashed about 15 percent of the work force as it began its seventh year on Wednesday.
The remaining executives -- half as many as there were six months ago -- have ridden the latest Reno Air roller coaster to the bottom of a long drop, but see the track going upward ahead.
"We're re-establishing Reno Air," said Bev Grear, senior vice president of operations. "We grew at a rapid speed, scatteredly. We just lost sight of what was going on.
"Costs got out of control, the product deteriorated, on-time went down the tubes, the aircraft were filthy."
Former President Robert Reding sometimes piloted the planes, but apparently overlooked dirty carpets, slow departures and declining passenger numbers before he was sacked in February.
Reno Air hired Joseph O'Gorman as its chairman, president and chief executive officer Feb. 19, four months after he retired as executive vice president of fleet operations with United Airlines.
He made profitability, based on service, his priority.
Despite a first-quarter loss of $7.1 million on the heels of last year's disaster, he said the airline is now headed the right way.
"We are comfortable as a management team that we will be profitable for the full year," he said. "I hope that is a ray of light for our shareholders."
Reno Air took off July 1, 1992, with 150 employees, just slightly more people than boarded its only flight, linking Reno with Seattle and Los Angeles.
It's now up to 28 aircraft, 2,050 employees and 15 cities, mostly on the West Coast.
It will be 14 cities and only Colorado Springs, Colo., Oklahoma City and Chicago outside the West Coast after Atlanta is dropped next week.
Last year's 1.34 million passengers were up slightly from 1.27 million the year before, but the load factor of 64.6 percent was well below the 70.9 percent break-even point.
"When Joe O'Gorman was hired as chairman in February, he came in and assessed where we were successful and where, somehow, our perspective may have slipped," Grear said.
"What we feel is we lost sight of our product -- what the customer sees -- on-time performance, the cleanliness of our aircraft and their interaction with our employees."
There also were short-lived ventures outside its West Coast base. Reno Air began service to Minneapolis-St. Paul and Kansas City, Mo., in April 1993, only to scrap it two months later.
"We literally have been in and out of 37 markets in five years," Grear said. "Here today, gone tomorrow. So the loyalty of your customer also becomes much lower."
Stability is key to Reno Air's rebirth, according to Joanne Smith, senior vice president of marketing and planning.
"We need to publish a schedule that people can get comfortable with, a consistent schedule that will be profitable for us," she said. "It's giving the customers time to know who you are and to have some confidence in your schedule. That's important."
The company also is working to restore the confidence of its employees following union talks last year, then this year's deep cuts. O'Gorman and the other officers are meeting with each employee. Concerns also can be voiced on a telephone hot line.
Edward J. Starkman, an airline analyst with SBC Warburg Dillon Read in Washington, D.C., thinks the changes bode well for Reno Air stock, which his company gives its second highest rating, "outperform."
"O'Gorman is a nuts and bolts operating executive. He's probably the right guy for them. I think they're well through this process of getting it fixed.
"Virtually every airline in the country is making money hand over fist," he said. "There is no reason Reno shouldn't be."
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