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What Happened To People Express Airlines?

Date: May 15, 2021

By Mark Finlay, Simple Flying

Launched in the corner of Newark Liberty International Airport (EWR) in an abandoned terminal in 1981, People Express was the brainchild of former Texas International Airlines CEO Don Burr. Inspired by Britains Freddie Laker and his low-cost Skytrain flights, People Express offered fares lower than its competitors.

It was able to do this by making its employees owners of the airline. This meant that no matter what your title was, you would help out where ever necessary. Pilots would help load luggage while sales personnel would help out at the check-in counters. This allowed People Express to have one of the highest employee productivity rates in the industry.

People Express used Boeing 737s

Operating using a Boeing 737-100, People Express first flew from Newark to Buffalo, New York before adding flights to Columbus and Cleveland, Ohio, Norfolk, Virginia, and Jacksonville, Florida. By December of 1981, People Express had 42-weekday departures to destinations up and down the east coast and midwest.

Unbundling the various components of air travel People Express allowed passengers to pay for what they wanted and, more importantly, not pay for what they did not want. One carry-on item was free, but if you wanted a checked bag, it would cost you $3. Likewise, the food and drinks that other airlines included in their fares were add-on items with People Express, who charged a dollar for a beer and 50 cents for a can of soda.

People Express gambled that passengers without baggage and those who were not so keen on airline food would be prepared to fly People Express to save big on the airfare. For the first three years in business, it looked like Burr, and the others who set up the airline were right. For once, following the deregulation of the industry, People Express was letting the marketplace dictate the policies and prices. Not only was People Express offering low-cost tickets, but it was also forcing other airlines to cut their ticket prices as well.

People Express took on the big three

Despite its initial success by flying routes with little or no competition in the United States, People Express got too big for its own boots and decided to take on the bigger established airlines. Soon the low-cost carrier was offering flights to Chicago and Dallas despite United Airlines and American Airlines regarding the two cities as belonging to them. When People Express began offering flights to Hartsfield-Jackson Atlanta International Airport (ATL), Delta Air Lines was not too pleased.

In 1983, People Express, much in the same way as Freddie Laker had done, became a household name in air travel when it introduced  $149 one-way flights from Newark Liberty to London Gatwick (LGA) on May 26, 1983. Using a leased former Braniff International Airways Boeing 747-227B People Express flights to London were an instant hit with flights almost always fully booked.

Now on everyone’s radar and having annoyed the big three carriers in the United States, People Express began to learn what it was like to play in the big league. The first lesson for People Express was that American Airlines, United Airlines, and Delta Air Lines do not surrender their home turf easily.

When you take on the big three, you are no longer competing solely on price as they will match your fares dollar for dollar no matter how low you go. You will also find yourself competing with their automated booking systems and codeshare agreements with other airlines. Lastly, and perhaps more importantly, you are competing with their frequent flyer programs.

People Express bought Frontier Airlines

Now fully on the radar and knowing what they were up against, most people expected People Express to back off and concentrate on secondary markets that American, Delta, and United were not interested in. Instead of this, People Express did the opposite, purchasing Denver-based Frontier Airlines for $300 million in 1985.

At the time, Frontier was on its last legs following a bitter fare war with United Airlines and Continental Airlines that Frontier was losing. The move by People Express had analysts wondering had People Express made a brilliant business move or a massive blunder.

Buying Frontier Airlines not only burdened People Express with debt it did not need, but it also alienated Frontier Airlines passengers with its no-frills approach and caused labor struggles with Frontier Airlines employees. With its heavy debt load, People Express decided to change its philosophy and lure lucrative business travelers. Cabins were redesigned to include a first class section, and a frequent flyer program was introduced as People Express looked to copy mainstream carriers.

In the end, massive debt proved to be the downfall of People Express, with the airline forced to work with an investment bank as it looked for a buyer and a way out of trouble. People Express was bought by Texas Air Corporation and merged into Continental Airlines in February 1987. Headed by Frank Lorenzo, Texas Air Corporation paid around $125 million in cash, notes, and assumed all People Express debt.

According to the aviation enthusiast website Planespotters.net, People Express operated a fleet of 17 Boeing 737-100s, five Boeing 737-200s, and ten Boeing 747 aircraft during its brief six-year life span.

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