The Rebel Airline With a Cause
WHY YOU SHOULD CARE
The no-frills U.S. carrier made air travel widely affordable, and the impact of its radical business practices — including being first to charge for checked bags — is still being felt today.
Revolutionaries tend to die young. PEOPLExpress didn’t survive beyond age 5.
Are you not familiar with the rebel U.S. airline with the communist name, the love child that free enterprise spawned after the Airline Deregulation Act of 1978? Emerging from the ashes of a government-controlled airline system, the largely forgotten renegade is worthy of an esteemed place in the annals of the global aviation industry.
He flew the airline as often as twice a week on $19 one-way flights between Newark and Boston.
“PEOPLE democratized air travel, and opened the boarding gates to anyone who had a few dollars in their pocket to ride a plane,” says George Hobica, founder of Airfarewatchdog.com, who flew the airline as often as twice a week on $19 one-way flights between Newark and Boston.
Launched in early 1981, PEOPLExpress grew swiftly from a fleet of six used Lufthansa jets operating out of an abandoned Newark Airport terminal into the fifth-largest U.S. carrier, before being snuffed out by massive debt. In the process, it became the U.S. industry’s first-ever fare warrior and made air travel affordable for tens of millions of Americans for whom boarding a plane, even for a short flight, was then a luxury beyond imagination.
It was a feat any future startup U.S. airline is likely to find insurmountable. Deregulation’s opponents warned the day would come when the “free market” would be dominated by a few merged carriers. Today, after the absorption of Northwest by Delta, Continental by United, and now US Airways by American, all in the span of four years, those three airlines and Southwest control nearly 75 percent of the entire U.S. market — and American surpassed Delta as the world’s largest airline.
“PEOPLE spawned many no-frills imitators, but the problem is history is littered with the corpses of niche airlines,” Hobica says. “Very few small airlines survive very long.”
To understand PEOPLExpress, you must understand the arcane system from which it sprang a mere 33 years ago.
Airline deregulation ranks as one of Jimmy Carter’s crowning achievements amid a largely turbulent presidency. TWA and Pan Am may have ruled the domestic and international skies in their day, but the Civil Aeronautics Board (CAB) had them and every other U.S. airline on a thick kite string in the most oppressive regulatory framework to which any U.S. industry has been subjected.
You just called in for a seat and paid your fare on the plane, like paying a conductor on a train.
Aiming to ensure small markets got affordable airline service, the CAB gave airlines access to the heavy-volume routes — so they would use the profits from the one to support the losses on the other. It then acted like a public utility commission — and governed every single route, fare and flight schedule of every airline in America. To wit: Fares nationwide were set and published once a month — and changed very little the next.
Enter PEOPLExpress, which seized on every opportunity as deregulation unfolded and federal control over routes and fares faded away. It was founded by Don Burr, an executive with early upstart carrier Texas International, who modeled the airline on the ideas of British airline entrepreneur Freddie Laker, a 1970s discount airline pioneer.
Within a year of starting service in the U.S. Northeast, PEOPLExpress launched a $99 fare from Newark to California — a quarter the cost of competitors’. That $198 round-trip wasn’t cheap by today’s standards ($480 in 2014 dollars). Still, it was far less than the $600+ round-trip cost on major airlines, which translates to nearly $8,000 in 2014 dollars to fly a family of four from New York to Disneyland and back. PEOPLExpress also offered a then-astounding $298 round-trip fare between Newark and London.
Among its breakthroughs, PEOPLExpress was the first airline to charge for sodas — and for checked bags, at a cost of $3 each. So began the age of passengers carting everything they could onboard — and the joke that the airline should be called “People’s Republic of China Express,” since chickens and other livestock might soon share cabin space.
Its reservation system was beyond loose. You just called in for a seat and paid your fare on the plane, like paying a conductor on a train. That required PEOPLExpress to overbook up to 200 percent for anticipated no-shows, bump scores of passengers off of many flights, and earn the common nickname “PEOPLE Distress.”
And still, passengers came in droves. In its first eight months of service through Dec. 31, 1981, PEOPLExpress boarded an estimated 950,000 passengers — more than half of whom had never flown on an airplane before.
But the overnight success carried the seed of the airline’s demise. PEOPLExpress expanded rapidly with a non-union workforce; it cross-trained employees, so a hairy-knuckled mechanic might get free travel doubling as a flight attendant collecting 50 cents for sodas. Then it convinced investors to overpay to acquire Frontier Airlines, a struggling unionized carrier. Its computerized ticketing system didn’t merge well with PEOPLExpress’ easy-breezy operations, and the business took on massive debt in the process. By 1986, PEOPLExpress was filing for bankruptcy and eventually merged with Continental Airlines.
PEOPLExpress may yet fly again, though. Attesting to the difficulty of launching a new airline, a new Newport News, Virginia-based discount carrier founded under that name in April 2011 by one of the original airline’s managers has faced a lengthy certification process. It’s now seeking to close on the purchase of an unnamed existing carrier, and hopes to begin service as early as May, says Michael Morisi, its founder and board member.
Says Morisi: “We’re going to bring back low fares and stimulate the market.” If the revived carrier includes time-traveling $19 fares, we’ll be packing a bag.
This OZY encore was originally published Jan. 17, 2014.