MIAMI – I recently needed to fly from ATL to JAX for a family event. It’s a short flight, yes, 41 minutes flying time, but the route is popular enough so that in “normal” non-pandemic days the round-trip flight can cost a bit over US$200.
So, when I booked the ticket, I was surprised to see that the RT fare just a few weeks ago was only US$117. My first reaction after “book now” was “Wow, this is practically PeopleExpress-type fares.
A Low-Cost Option for Everyone
Ah, yes. PeopleExpress Airlines, essentially the granddaddy of today’s low-cost carriers. Although long gone from the tarmacs, PE still holds a fond place in many avgeeks’ hearts. I flew the airline several times, mainly from PIT to EWR to BOS and a few times to Florida.
I loved everything about the airline: the low cost, the gung-ho entrepreneurial attitude, the logo. I even did a presentation on the airline in Marketing class in college, remembering even today the line about the main customer targets for PeopleExpress: people with no money who need to fly, and people who have money, who need to fly, but want to keep their money.
The rise of PeopleExpress was part of the yuppie, Dress for Success, you can have it all attitude of the 80s. Baby boomers were coming into their prime, making money, Wall Street was roaring, the Reagan years beginning, Max Headroom, cola wars, the advent of MTV, and Mary Lou Retton vaulting to perfection.
I was so enamored with the airline that I traveled from home in far western Pennsylvania to EWR to interview for a flight attendant/gate agent job. The airline was hiring 200 people. 200! But when I got there, I found I was one of 500 wannabes in the morning session, with another 500 coming that afternoon.
Repeated the next day and more cattle car interviews in Pittsburgh, Philadelphia, Miami, and Los Angeles. Sadly, I was not among the lucky 200. And it shows how many people wanted to be a part of the PeopleExpress experience.
The 1978 Airline Deregulation Act
But PE was really all about deregulation. The 1978 Airline Deregulation Act removed, among other things, government control over routes, fares and market entry of new airlines. Prior to that, the feds dictated which airlines could fly which routes and how much they had to charge the customer.
Thus, marketing focused on things other than price: Braniff famously painted its planes in unusual colors, airline ads talked about the prettiness of their flight attendants and the quality of their in-flight meals. The exotic destinations they flew to. Things like that.
With deregulation, anyone with the financial backing could start an airline. And entrepreneurs realized there was a huge untapped market of people who wanted to fly but had never been able to afford the government-mandated fares. Thus a door was opened for an airline like PeopleExpress – a door that is still open today for the myriad of low-cost carriers we know and love around the world.
Into this opportunity stepped Don Burr and others who had resigned from Frank Lorenzo’s Texas International Airline. Inspired by Freddie Laker who had gained international attention in the 1970s with forays into low-cost travel in Europe, the group leased space at Newark International Airport’s North Terminal.
PeopleExpress Launches Boeing 737 Service
On April 30, 1980, exactly one month after Ronald Reagan was shot, People Express launched with Boeing 737 flights from Newark to Buffalo, Norfolk, and Columbus. Jacksonville and Cleveland followed soon after, and by December, the airline had 42 daily departures from EWR to those destination plus Baltimore/Washington, Boston Logan, Burlington, Sarasota-Bradenton, Syracuse Hancock, and Palm Beach, plus some flights around the periphery of the hub-and-spokes.
The basic idea for PeopleExpress was simple: acquire a cheap plane, say a Boeing 737-200, put it on short haul, underserved, but high potential routes, charge US$35 a seat, and fill the plane to near 100% capacity. Operating with quick turnarounds, more like a Greyhound bus than an airline, such a venture could turn close to a 100% profit margin.
Employees would be paid half of what they would make at other airlines, and they would have to purchase US$100 in company stock. Employee ownership of stock, it was reasoned, would incent each employee to work harder to ensure company success, raising the stock price, and thus enriching themselves in the process. Profit sharing was huge at PE.
The airline’s airport employees would also be trained in a second job, typically as a flight attendant, so that there would be staffing flexibility to ensure quality service, and that no employee would end up in “a rut.”
One of the things that made flying PeopleExpress different was its simplified fare structure. Every seat on the plane cost the same fare. There was only coach offered (at first) and the money was collected by flight attendants on the plane. Remembering that this was in the days before the wide use of debit cards, you can imagine that there was a lot of cash on board each flight.
One carryon bag was permitted for free, but the airline was the first in the U.S. to charge for each checked bag at US$3 each. Also, small amounts were charged on board for food and drink, with 50-cent sodas, US$1 beers, and US$2 “snak-paks” sold.
PeopleExpress Trans-Atlantic Flights
On May 26, 1983, PE went trans-Atlantic offering US$149 one-way flights from EWR to London Gatwick (LGW) on a leased Boeing 747-227B formerly operated by Braniff Airways. The route was an instant success with all scheduled flights selling out within 24 hours. A slightly more expensive “premium class” was offered on these Boeing 747 flights. And, eventually, in 1986, PE offered a true first-class experience on its Boeing 747s.
In its first full year of operation, 1982, PE flew slightly over 1.5 billion passenger-revenue miles. By 1985, that number had increased to nearly 11 billion PRM. That is mind-boggling growth.
Now remember what we stated above, PE’s basic mission of short haul, quick turn flights on underserved routes. That business plan is what led to the airline’s booming success. But then things happened.
Determined to keep expanding and build a national presence, in 1985 PE bought Frontier Airlines based in Denver and connected that hub to EWR with B747 flights. PE also bought out two commuter airlines, Britt Airways in the U.S. Midwest and Provincetown-Boston Airlines which flew in New England and Florida.
The airline also increased its service to legacy carrier hubs, attempting to undercut the entrenched airlines and move in on their territory. You can imagine that this did not go well.
Debts Amount for PeopleExpress
The buying spree sent the airline deep into debt. And, furthermore, the legacy carriers had become savvy in their offerings and were becoming more competitive with PeopleExpress pricing and service levels. Some even undercut PE pricing to hold on to their customers at any cost. And the cultural differences with Frontier – requiring a change from being a full-service carrier to being a discount airline with a no-frills mentality – caused turmoil and alienated passengers and employees.
The carrier also had no computer reservation system and opted not to pay the fees on United’s Apollo or American’s SABRE reservations systems. Thus, travel agents were all but useless to PeopleExpress. It is estimated that this caused an average of 6,000 people per day to miss out on PE’s flights.
The debt pressure forced PeopleExpress to change its philosophy and pursue higher-paying business travelers. First class cabins were introduced across the board, a frequent flyer program was introduced, and the flat fare system was abandoned in favor of the revenue management pricing we see today.
This caused a tremendous culture change within the airline, and travelers who had loved the airline in its younger exuberant early years now watched as PeopleExpress transformed into just another debt-laden airline. I remember the actual sadness I felt reading the constant stream of newspaper articles detailing the deepening troubles of the airline.
Sale to Texas Air
Eventually the cultural differences with Frontier and impossible debt were too much to overcome, and by June 1986, the airline was working with an investment bank to seek a buyer for part of all its assets and debt. As it turned out, PE sold, ironically, to Frank Lorenzo’s Texas Air Corporation for US$125m in cash, notes, and assumed debt.
Texas Air also purchased the Frontier subsidiary for US$175m, and rolled both into Continental Airlines, which was also owned by Texas Air. PeopleExpress ceased to exist as a carrier on February 1, 1987. Continental maintained the hub at Newark until it was acquired by United in 2010.
Legacy of PeopleExpress
One can debate endlessly what might have happened had PeopleExpress remained true to its original plan. Could it have survived by being a niche player flying primarily on secondary routes? Had it not acquired Frontier, could it have remained solvent and thrived into the 90s? Perhaps.
Other low-cost carriers, most notably Southwest (WN), found a pathway to success. But the 80s were not about restraint. We were Born in the USA and anything was possible for us. Until it wasn’t. And the legacy of PeopleExpress reflects the ideals and, ultimately, the realities of its time.
All photos: PeopleExpress, Wiki Commons, Author
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