In the meantime, Don Burr had concluded that he wanted to run his own airline, in his own way. Burr had basic philosophical differences with Lorenzo about how to treat employees and people in general. Labor strife at Texas International was increasing due to Lorenzo’s business practices.
Bun – left Texas Air Corporation, taking with him several other executives, and launched his own airline on April 30, 1981. He named it People Express. People Express made its headquarters in an old abandoned terminal at Newark, and began operations with hand-me-down 737-100s purchased from Lufthansa. The airplanes were reconfigured for high density, one-class seating. The first routes of the new airline were from Newark to Buffalo, Columbus, and Norfolk.
From the early days of commercial passenger service there had been a certain cache and attempt at elegance and elitism in the airlines’ treatment of passengers. And although Texas International had dispensed with many of the historical amenities of airline travel, the extreme People Express approach was a shock. With the exception of wartime, nobody in the early 1980s had ever seen anything like it.
There were no meals, no free beverages (coffee was $.50), and no free checked baggage. Passenger baggage that had been checked, for a charge of $3.00 (a substantial amount in 1980s money), was not even transferred to connecting carriers. This required connecting passengers to pick up their bags upon deplaning and carry them to their next departure point. People Express distinguished itself in other ways. Fares were the lowest in the industry, perhaps ever. Greyhound Bus Lines lost business to People Express.
Equality was the order of the day—there were no vice-presidents and no secretaries. Nontechnical employees were cross-trained in most jobs and were required to lend a hand where necessary, and there were no nine-to-five days. It was difficult to distinguish the pilots’ uniforms from those worn by cabin stewards. In the 1980s, People Express had an air of the communistic People’s Republic except for one noticeable difference—it was clearly profitable.
People Express began operations during one of the most turbulent economic times in memory. Interest rates, fuel prices, recession, and the air traffic controllers strike all combined to test the new theories of deregulation. In spite of the difficult economic situation, both New York Air and People Express began to thrive, and that was instructive. The no-frills concept took flying to the masses, where the main consideration was price. The effects of deregulation, good and bad, were beginning to be defined.
We will return to the People Express phenomenon later in this chapter.
<i People Express is clearly the archetypical deregulation success story and the most spectacular of my babies. It is the case that makes me the proudest, w
Alfred Kahn, Professor of Political Economy, Cornell University, Time Magazine, 13 Jan 1986