Grounded: The Turbulent History of People Express Airlines

Post originally Published November 13, 2023 || Last Updated November 13, 2023

See how everyone can now afford to fly Business Class and book 5 Star Hotels with Mighty Travels Premium! Get started for free.

Grounded: The Turbulent History of People Express Airlines - The Rise of A Maverick Airline

People Express Airlines burst onto the scene in 1981 as a daring upstart that challenged the dominance of major legacy carriers. Founded by airline industry veteran Don Burr, People Express was a different breed of airline focused on no-frills budget travel.

At a time when flying was still seen as a luxury experience reserved for the privileged few, People Express aimed to make air travel affordable and accessible to the masses. They stripped away amenities like assigned seating, in-flight meals, and first class service. Fares were deeply discounted, with seats going for as little as $23 on some routes.

This spartan approach allowed People Express to operate at a lower cost structure than the major airlines. With lean operations and low overheads, they were able to turn profits even while undercutting competitors on price.
People Express also innovated operationally. They optimized aircraft turnaround times, keeping planes in the air earning revenue rather than sitting idle on the ground. Check-in and boarding processes were streamlined to get passengers onto planes faster.

The airline grew rapidly, adding new planes and destinations to meet booming demand. In 1983, just two years after launch, People Express was flying to 17 cities and carrying over 2 million passengers annually.

Part of the airline's success stemmed from cultivating a unique corporate culture. Employees were given profit sharing, open communication, and opportunities to provide input. This generated immense loyalty and productivity. As the airline grew, this employee-centric culture was a key asset.
People Express flew in the face of convention and established new norms for air travel. Their simplified, low-cost model proved that budget tickets did not have to mean a stripped-down flying experience. Their novel employee culture showed that companies could thrive by engaging staff and giving them a stake in success.

The maverick airline won over legions of travelers seeking affordable airfares and a more relaxed way to fly. Their meteoric growth worried the major airlines, who were forced to respond by rolling out their own low-cost brands. People Express brought competition to a complacent industry andlaid the groundwork for today's budget carriers.

What else is in this post?

  1. Grounded: The Turbulent History of People Express Airlines - The Rise of A Maverick Airline
  2. Grounded: The Turbulent History of People Express Airlines - A New Breed of Low-Cost Carrier
  3. Grounded: The Turbulent History of People Express Airlines - Breaking the Mold of Traditional Airlines
  4. Grounded: The Turbulent History of People Express Airlines - Rapid Expansion Led to Growing Pains
  5. Grounded: The Turbulent History of People Express Airlines - Employee Ownership Model Backfires
  6. Grounded: The Turbulent History of People Express Airlines - Failed Merger with Frontier Sealed Their Fate
  7. Grounded: The Turbulent History of People Express Airlines - Collapse Under Weight of Ambitious Growth
  8. Grounded: The Turbulent History of People Express Airlines - Legacy as a Pioneer of Budget Travel

Grounded: The Turbulent History of People Express Airlines - A New Breed of Low-Cost Carrier

People Express disrupted the status quo of the airline industry by pioneering a new breed of low-cost carrier. At a time when flying was prohibitively expensive for many, People Express made air travel accessible to the masses. They stripped away frills and amenities that added cost but little value to passengers. An allocated seat, in-flight meal and smiling flight attendant may have made travelers feel pampered, but People Express correctly realized these were luxuries people would forgo for cheaper fares.

They optimized operations for low-cost efficiency. Quick aircraft turnarounds kept planes profitable in the air rather than wasting time on the ground. Streamlined check-in and boarding got passengers on planes faster. People Express gave passengers control over their own experience - want an assigned seat? A meal? Checked baggage? Fine - but be prepared to pay extra for these "perks" that were once included. Unbundling services aligned costs more directly with consumption.
While some established airlines dabbled in low-cost brands, People Express was exclusively committed to budget travel. They did not have to manage two conflicting business models spread across a fleet of varied aircraft. Everything People Express did was optimized for high-efficiency and low-fares.
People Express recognized that low-cost did not have to mean low-quality. Their approach was spartan yet smart. They eliminated superfluous services but maintained high operational standards. Aircraft were new and well-maintained. People Express brought discount fares to underserved airports giving communities access to expanded air travel options.

Budget travel was not just about penny pinching - it provided freedom. Families could now afford airfare for vacations previously out of reach. Visiting distant loved ones became possible a few times a year rather than once a decade. People Express made the world more accessible.

Grounded: The Turbulent History of People Express Airlines - Breaking the Mold of Traditional Airlines

Grounded: The Turbulent History of People Express Airlines

People Express upended the complacent airline industry by breaking the mold of traditional carriers. Legacy airlines followed an outdated playbook - high fares for a full-service experience. First class luxury came with a premium price tag. People Express recognized that most travelers just wanted to get from point A to point B cheaply and comfortably. They didn't need a three course meal and champagne to enjoy their flight. People Express tailored the experience around what customers really valued.
The major airlines were resistant to change, afraid of alienating their core business flyers. They assumed budget travelers were too price conscious and would never remain loyal. People Express proved them wrong by building avid customer support around their simplified flying experience. Travelers enthusiastically embraced People Express and the brand became synonymous with low fares.

People Express stripped away layers of bureaucracy weighing down the majors. With far fewer management layers, they could respond nimbly to market opportunities. Staff were empowered to address customer needs without working through cumbersome hierarchies. This agile approach allowed People Express to expand rapidly.
The major airlines depended on set industry relationships - airplane manufacturers, unions, airports. People Express didn't play by the unwritten rules. They negotiated aggressive deals on planes and airport gates that the establishment deemed unreasonable. People Express wasn't afraid to challenge accepted industry practices.

While the major carriers focused on winning business traffic between major hubs, People Express targeted underserved cities. Legacy airlines were neglecting smaller markets and tourist destinations where demand was viewed as too sparse to justify their large aircrafts' capacity. People Express built a lean operation that could profitably serve these overlooked routes other airlines were missing.
People Express marketed themselves in a fun, informal way that broke from the serious, corporate image of incumbents. Their offbeat approach resonated with budget travelers who saw major airlines as stuffy and intimidating. People Express made air travel feel accessible.
The major airlines were caught flat-footed by budget carriers and were slow to respond. For too long they dismissed the threat, assuming business flyers would never accept no-frills service. People Express proved them wrong by offering incredibly low fares that tempted travelers away. They woke up the industry and demonstrated an appetite for cheap, simple air travel.

Grounded: The Turbulent History of People Express Airlines - Rapid Expansion Led to Growing Pains

By 1983, just two years after launch, People Express was flying to 17 cities and booked 2 million passengers that year. They added new planes and destinations at a frenzied pace. But the airline's infrastructure was not keeping up.
People Express originally handled all reservations internally. But systems were soon overwhelmed as bookings ballooned. Frustrated customers endured excruciatingly long hold times only to find flights sold out. People Express finally relented and began booking through external travel agents to alleviate pressure. But damage was done as early technology and process problems soured public perception.
The airline was plagued by delays and cancellations as the fleet rapidly grew more diverse and complex. Maintenance workloads became unmanageable with planes grounded awaiting repairs. Crew scheduling was overwhelmed juggling pilots and flight attendants across an ever-growing route map. Despite adding staff, People Express struggled to maintain operational integrity.
Rapid growth also strained People Express's unique culture. Early employees took pride in the airline's informal approach. But as the workforce ballooned to over 5,000 in just a couple years, it was impossible to maintain close cultural ties. New hires did not have the same emotional investment. People Express lost its small company ethos.

Service and hospitality declined as harried staff got overwhelmed by never-ending queues and delays. The airline's reputation took a hit as the travel experience deteriorated. People Express fell victim to its own success as surging demand outstripped the infrastructure needed to manage it.
Most dangerously, People Express expanded before fully understanding its cost structure. Fares were set too low to be sustainable. People Express wrongly assumed that increased scale would drive enough efficiency gains to deliver profitability. But costs failed to decline fast enough.

As losses mounted, People Express desperately tried scaling back expansion plans and raising fares. But neither efforts could make up for earlier miscalculations. The airline took on massive debt to finance rapid growth. But promised efficiencies never materialized at the needed pace.

Grounded: The Turbulent History of People Express Airlines - Employee Ownership Model Backfires

A core part of the People Express ethos was employee ownership. Staff shared directly in profits and could provide feedback to shape airline decisions. This was central for motivating employees and driving productivity. But as People Express rapidly expanded, the employee ownership model began to break down.

Early hires took immense pride in their jobs because they had literal buy-in to the airline's success. They went the extra mile knowing it directly benefited themselves as shareholders. But maintaining this culture proved impossible during People Express's exponential growth spurt.

As the workforce ballooned tenfold in just a couple years it became impossible to preserve the close cultural identity that drove engagement. New employees did not have the same emotional investment in the airline's success. To many, it was just another job. People Express lost its personal touch.
Worse still, employees soon realized their ownership stakes were rapidly diluting. As more shares got divvied up amongst thousands of new hires, employees saw their portion of the pie shrinking. Suddenly, working extra hard didn't move the needle on personal wealth. This damaged morale and motivation.

Employees also began questioning management's decisions as losses mounted and the airline's viability was threatened. The open communication People Express touted as a strength became a liability as staff aired doubts and grievances rather than pulling together.

To turn things around, Don Burr tried reclaiming more authority to stabilize operations. But this upset workers who saw their voice diminished. Burr failed to balance employee empowerment with strong central leadership. The flattened hierarchy People Express prided as progressive began to work against it.
The employee ownership model was engulfed in a vicious cycle. New employees lacked the cultural buy-in that drove productivity. Veterans felt diluted and disillusioned. Management tried recentralizing authority, upsetting staff who wanted input.

People Express had been emboldened to expand rapidly because its employees went the extra mile. But the employee ownership model did not scale. The airline took on massive new costs and complexity while losing the cultural edge that enabled lean operations.

Grounded: The Turbulent History of People Express Airlines - Failed Merger with Frontier Sealed Their Fate

In a desperate gambit to survive, People Express attempted a merger with fellow upstart Frontier Airlines in late 1985. At first, the deal seemed like a perfect pairing - two young, scrappy budget airlines joining forces. But clashes in corporate culture and business strategy doomed the merger from the start. Ultimately, Frontier would abandon the deal, stripping assets from People Express and leaving it a hollow shell that soon collapsed.
Despite both being budget carriers, Frontier and People Express had divergent philosophies. Frontier focused on keeping costs low through simplicity - offering cheap point-to-point flights with minimal amenities. People Express pioneered cheap fares too, but with a more ambitious vision of democratizing air travel through innovation and employee empowerment.

Where Frontier saw budget flying as an end in itself, People Express saw it as a means to an end. Frontier's minimalist approach maximized profits by stripping away benefits passengers might enjoy. People Express stripped frills to make air travel affordable, but still cared deeply about customer experience within those constraints.
These clashing strategies became a constant source of tension. People Express staff bristled as Frontier eliminated the little flourishes they took pride in providing. Frontier sawPeople Express's approach as bleeding inefficiency. They clashed over where to trim costs versus where to preserve some humanity.
Culturally, the airlines were also warring opposites. Frontier followed a traditional command-and-control management structure. People Express famously promoted open communication and employee ownership. Staff were used to having a voice in decisions and bristled as Frontier executives asserted authority.

Frontier soon deemed People Express essentially unmanageable. They accusationed the employee-centric culture of driving inefficiencies that were sinking the merged airline. Less than a year into the merger, Frontier halted integration efforts.

In a disastrous move, Frontier began stripping People Express's most valuable assets for itself. Gates and landing slots at major airports were assimilated into Frontier's route network. A dozen of People Express's newest jets were repainted in Frontier livery. Even the Newark headquarters was claimed by Frontier.
The picked-over remnants of People Express were then sold to Continental Airlines for a paltry $14 million. Continental quickly disposed of remaining assets and ceased People Express operations for good. At the time of sale, People Express had lost nearly $100 million in the previous quarter alone.
The failed merger was the death blow. In their desperation to survive, People Express gambled on a deal with Frontier that proved to be a wolf in sheep's clothing. Clashing corporate strategies and culture created an unworkable environment. Frontier cannibalized People Express's most valuable assets before casting aside the remains.

Grounded: The Turbulent History of People Express Airlines - Collapse Under Weight of Ambitious Growth

People Express flew too close to the sun with their rapid expansion. The young airline took on ambitious growth before fully understanding the intricacies of their cost structure. This would prove their fatal flaw.

At first, People Express was disciplined. They launched with just three planes serving three cities. This allowed them to nail down profitable operations on a small scale before expanding. But soon ambition got the better of them. Intoxicated by early successes, People Express accelerated expansion efforts to keep pace with booming customer demand.

Between 1983 and 1986, People Express ballooned from serving 5 cities to 53 cities, while the fleet quadrupled. Passenger numbers exploded fifteen-fold to over 10 million annually. It was a staggering growth pace that would have challenged even well-established carriers.

But People Express was still a toddler struggling to balance. Their infrastructure was not ready to handle the load. Maintenance struggled to service four times as many aircraft types. The reservation system buckled under surging call volumes. Staffing levels failed to keep up, leaving crews overworked and travelers facing endless queues.

This rapid expansion came before People Express fully understood their cost structure. When launching, they set fares very low, assuming increased scale would drive enough efficiency to deliver profitability down the line. But costs failed to decline quickly enough.

As the network and fleet mushroomed in size, operating expenses shot upwards. Aircraft acquisition and maintenance alone jumped 500% between 1983 and 1985. Airport gate and slot fees surged with each new destination added. Staffing levels doubled, though pay was modest.

People Express wrongly assumed that boosted scale would automatically generate improved cost efficiency to offset spending growth. But the core structure of their operations was not tuned to enable this. Costs came down too gradually.
By 1986, it was clear fares had been seriously underpriced given the actual cost realities of expanded operations. People Express was bleeding cash with expenses far outpacing revenues. They desperately tried stemming losses by scaling back growth plans and raising ticket prices.

But it was too little too late to correct earlier miscalculations. The massive debts incurred during People Express's wild expansion spree crippled them. Interest payments alone reached $1 million per month by 1986. They racked up $50 million in losses that year.

Grounded: The Turbulent History of People Express Airlines - Legacy as a Pioneer of Budget Travel

People Express forever changed the landscape of air travel by pioneering the budget carrier model. While various major airlines have come and gone over the decades, the budget airline concept People Express innovated remains a fixture today. Their bold vision made airfare affordable for the average traveler.
In the early 1980s, the airline industry catered exclusively to affluent business travelers. Flying was seen as a luxury experience rather than basic transportation. People Express recognized that costs could be drastically reduced by stripping away extravagant amenities business flyers had come to expect. They realized that an allocated seat, modest snack and friendly service was all many Americans really needed. People Express designed the entire travel experience around providing exceptional value at an everyday price point.

By singularly focusing on keeping base fares incredibly low, People Express democratized air travel. Middle class families could now afford tickets for vacation getaways to Florida or California that were previously out of reach. Visiting loved ones cross-country a few times a year became feasible for ordinary Americans. People Express made the world more accessible by making airfare attainable for the masses.
While People Express tragically collapsed under the weight of their wild ambitions, the business model they pioneered lives on. In the US, prominent modern budget carriers like Spirit, Allegiant and Frontier can directly trace their roots to People Express. In Europe, RyanAir and EasyJet's success follows the template People Express laid out.

Around the globe, budget airlines continue bringing down the baseline cost of air travel. Short hop flights that once ran hundreds of dollars now cost a fraction of that. Roundtrip tickets from Los Angeles to New York have dropped from over $1000 to regularly available for under $200. People Express sparked a budget fare revolution that rages on.
Even network carriers were forced to respond with low cost offerings to compete. Most now operate no-frills basic economy products aping the budget experience. And amenities once considered standard like checked bags, seat selection or in-flight meals now come at an add-on charge. People Express made unbundling services that add cost but little value to most travelers the new normal.

See how everyone can now afford to fly Business Class and book 5 Star Hotels with Mighty Travels Premium! Get started for free.