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30 Years Ago: People Express Merged Into Continental Airlines

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30 Years Ago: People Express Merged Into Continental Airlines

30 Years Ago: People Express Merged Into Continental Airlines
February 06
13:38 2017

MIAMI — Who said that flying in this day and age does not offer some amount of nostalgia that flyers back in the 1980s relished?

Sure, today’s college student, seated in 13B, may be wearing sweat pants instead of a coat and tie, but he may have just taken advantage of a recent Spirit deal—“What Will He Tweet Next”—in which roundtrip airfares were as low as $70. Even if he paid for a cup of coffee and to check a bag, it can still be a very good deal compared to other airlines.

Sure, People Express may not have had cheeky ads like Spirit, but it had something else in common with today’s Ultra-Low-Cost-Carriers (ULCC) like Spirit and Frontier—the cost of airfare is/was typically much cheaper than its competitors.

People Express quickly became known for slashing airfares and making it more affordable to fly; for example, it was praised by Philadelphia Daily News in September 1983 when the airline announced it would begin flying five daily round-trip flights between Newark and Houston at 70% less than the existing ticket prices.

Cheap right?

Guess, what? People Express has a little bit more in common with today’s ULCC.

Customers had to pay extra for soft drinks and snacks on-board. Plus, if they wanted to fly with more than a garment bag and one piece of luggage, it would cost them $3 for each additional bag.

People Express was a bit of a different airline and embraced it. All other airlines in its ads were referred to as “ordinary airlines” because People Express believed that it was “the first airline that’s smart enough to respect your intelligence.”

When a customer purchased a ticket on People Express, they just got a ticket at a low price as well as the ability to bring on a carry-on and personal item. However, if they wanted any other frills, they had to pay for it, which basically made it an unbundled fare.

Even when its came to its employees, the airline was different. There were no unions, and it offered a bit of a different culture. Many people who were recruited to join the company did not have much, if any, airline experience, and the employees also rotated and performed other jobs in addition to their normal jobs.

Even with an unorthodox work culture, people jumped on the People Express bandwagon, and it became the fifth largest airline in the United States by early-1986, and it was one of the first airlines to offer customers an unbundled fare.

The Beginnings


People Express was born in the wake of the Airline Deregulation Act of 1978, which spurred the creation of more than 150 new air carriers, although most of these did not survive more than a few years.

In 1980, several former key people from Texas International Airlines (TIA) came together through a joint-venture to form People Express.

The airline was based out of Newark, and commenced operations on April 20, 1981 to Buffalo, Columbus, and Norfolk. Over the next several months, the airline continued to grow more, focusing on avoiding head-to-head competition with larger carriers and keeping its fares low.

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The airline had a simple fare structure in which all seats were offered at the same price other than when flights were at off-peak times.

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In May 1983, People Express started transatlantic service; it launched flights between Newark and London with a leased Boeing 747.

(Credits: Jon Proctor)

(Credits: Jon Proctor)

Once again, the airline made headlines as tickets started at just $149 one-way, and the airline was filling its flights left and right.

The Challenges


People Express was growing rapidly, and was planning to have a fleet of 76 aircraft by 1985. Donald Burr, the CEO and founder of People Express, believed that growth was key, but analysts began to focus more on how the growth was going to push the airline further into debt and cause issues in the long run.

But the low fares helped stimulate demand for air travel immensely. For example, Harold Pareti, People Express’s president and chief operating officer, told the New York Times in 1984 “that when the airline began to fly to Boston in 1981, airlines on the New York-Boston route carried 1.4 million passengers a year. [in 1984], 3.8 million [began flying] the route.”

The airline began entering into larger markets such as Chicago, Los Angeles, and Minneapolis/St. Paul all from Newark; this meant it began going head to head with bigger carriers, which marked a significant change in the carrier’s strategy.

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When the airline commenced Newark-Chicago service in 1984, other airlines such as American and United started matching People Express’ fares, but not just out of Newark. Both airlines matched People Express’ fares on their own flights to Chicago from LaGuardia, Kennedy, Islip, and White Plains, and they offered many more flights than People Express, which posed a challenge for the carrier.

With airlines trying to out-price People Express and still make money, many airlines started investing a lot of focus into developing stronger revenue management systems. This immensely hurt People Express due to its basic fare structure.

Airline Acquisitions


In October 1985, it was announced that People Express would purchase Frontier Holdings for $300 million dollars. At the same time, Texas Air Corporation also bid to purchase Frontier for a lower price, but the labor unions at Frontier and others backed the People Express deal which meant that Burr defeated his former colleague Frank Lorenzo. Plus, Denver was believed to be a good location for People Express to focus on growing in the western half of the United States.

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After its acquisition of Frontier, the carrier faced many issues trying to integrate Frontier’s employees as they were unionized. The airline was also challenged with trying to switch the former Frontier customers to the no-frills state of mind.

Also in 1985, People Express acquired Britt Airways and Provincetown-Boston Airlines; these acquisitions opened up more of the midwest, New England, and Florida for the carrier.

Trying to integrate the carriers was costing the airline a lot of money, and the airline was feeling more pressure from the debt it added to the books with its acquisitions. The airline clearly over stretched itself growth wise, and it became known as “People Distress.”

So, the airline changed its philosophy once again.

Although the airline was known as the “backpacker’s airline,” the airline started going after business travelers. It began offering first class service on its transatlantic, transcontinental, and Newark/Denver flights operated with 747s, and the airline also began installing first class on its other aircraft.

People Express also added a frequent-flyer program and switched to a more traditional form of pricing like its competitors were using. However, the airline continued to feel more pressure from its debt, and it was still facing many issues trying to integrate Frontier.

Flying into the Sunset


The airline attempted to sell Frontier to United in 1986, but the deal fell through. However, the airline continued to search for a buyer to buy all of itself or just parts.

In August 1986, Frontier Airlines filed for bankruptcy and ceased operations. The following month, Texas Air Corporation purchased People Express and also gained Frontier’s assets. Both carriers (and New York Air) were merged into Continental, and it helped strengthen Continental’s route network quite a bit as the airline emerged from bankruptcy just a few months earlier.

On February 1, 1987, Frontier, New York Air, and People Express ceased to exist as they were officially part of Continental Airlines.

The Distress Continues


Even with the three carriers being merged on February 1st, Continental faced many issues in the proceeding months.

They had to integrate more than 300 jets, maintenance schedules, service standards, and employees. In a Chicago Tribune story from 1988, it points out that when the carriers merged that the “fleets had 32 galley arrangements and 75 seating arrangements that complicated the training of flight attendants and scheduling of crews.” Plus, there were many weather problems that caused lots of operational issues.

The airlines’ costs rose as it tried to integrating the airlines, and it had to raise fairs to try to re-coup some of the loss; this caused the airline to lose its low-fare image.

By mid-1988, things started looking up for Continental. The FAA deemed that the airline was operating within safety standards, revenue was up, and it was able to move into a new home in Terminal C at Newark.

A Failed Attempt to Take Off Again


Back in February 2012, People Express was founded by Michael Morisi who once worked for the original People Express back in the 1980s, but the two airlines were unrelated.

However, they did share some similarities. The new People Express was also planning to target no-frills, budget flyers, and the airline made a home at Newport News/Williamsburg International Airport.

The airline had some trouble getting off the ground initially with getting an operating certificate. When it commenced operations, it would be operated by Vision Airlines doing business as People Express. On June 30, 2014, the airline took to the skies flying between Newport News and Newark, NJ with Boeing 737-400s.

The airline added several destinations over the next few months, but on September 26, 2014, the airline announced that it would have to suspend operations. It targeted to be back in the air by October 16, but the date came and passed. It was announced that the airline was evicted from Newport News/Williamsburg International Airport on November 12 as the airline owed $100,000 in passenger facility charges to the airport, and it never took to the skies again.

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A Global Review of Commercial Flight since 1994: the leading Commercial Aviation publication in North America and 35 nations worldwide. Based in Miami, Florida.

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