People Express Airlines represented a new way of doing business, a new way of running an airline, and a new challenge to entrenched and large corporations. Begun in the early 1980s, after the federal government deregulated the airline industry, the company became a highly successful and profitable organization quickly, then fell into hard times and eventually was sold to one of its competitors. The entire episode took less than seven years. Its former employees are generally still loyal to the charismatic founder, Donald Burr, but the changes that the company brought to the industry have been largely left behind. This research examines the company's structure and environment and seeks to determine why it was unable to sustain long-term success.
When People Express began operations in 1981, the airline industry had only recently been deregulated. It was in a state of upheaval with many new entrants, most of whom would not survive their first year of operation, and giants such as United and American jockeying for domination. Airline travel at this point was essentially a commodity, with price being the overwhelming determining factor as to which carrier customers selected. In addition to price, travelers were interested in on time service and convenience (based on the destination cities served by an airline). There were several types of service available on board most flights, including first class, where passengers received free alcoholic drinks and free in-flight movies (when available). Baggage service was included in the price of the passenger's ticket. Nonalcoholic drinks and food service was provided on most long distance flights.
People Express sought to establish a new market niche that emphasized price, but also provided less value for that price. The airline avoided first-class seats, and provided few free amenities in-flight. The theory was that customers would pay only for those services that they received, ...