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  • People Express: A Case Study

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    Akanksha Tyagi
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    People Express was founded by Don Burr in 1981 as a low-cost airline, adopting an informal management structure where employees had flexibility and stock options. It grew rapidly until 1985 when it began acquiring other airlines. However, as it grew larger, Burr became less accessible to employees and unaddressed grievances led to declining morale. When Burr fired a vocal critic in 1986, employee turnover increased sharply, hurting productivity and profits. By 1987, People Express was near bankruptcy, suggesting Burr's informal culture did not scale well as the company grew larger.

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    People Express was founded by Don Burr in 1981 as a low-cost airline, adopting an informal management structure where employees had flexibility and stock options. It grew rapidly until 1985 when it began acquiring other airlines. However, as it grew larger, Burr became less accessible to employees and unaddressed grievances led to declining morale. When Burr fired a vocal critic in 1986, employee turnover increased sharply, hurting productivity and profits. By 1987, People Express was near bankruptcy, suggesting Burr's informal culture did not scale well as the company grew larger.

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    32 views1 page

    People Express: A Case Study

    Uploaded by

    Akanksha Tyagi
    People Express was founded by Don Burr in 1981 as a low-cost airline, adopting an informal management structure where employees had flexibility and stock options. It grew rapidly until 1985 when it began acquiring other airlines. However, as it grew larger, Burr became less accessible to employees and unaddressed grievances led to declining morale. When Burr fired a vocal critic in 1986, employee turnover increased sharply, hurting productivity and profits. By 1987, People Express was near bankruptcy, suggesting Burr's informal culture did not scale well as the company grew larger.

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    People Express: A Case Study.

    People Express was founded by Don Burr, who resigned from Frank Lorenzo's “Texas
    International” to do so. Burr was influenced by British airline entrepreneur Freddie Laker, whose
    forays into low-cost air travel had attracted much press in the 1970s. Terminal space was leased
    at Newark Airport's long-abandoned North Terminal.

    People Express (PEx) was launched on April 30, 1981 with service from Newark to Buffalo,
    Columbus, and Norfolk Virginia.

    People Express grew rapidly, adding flights to Florida by the end of the year.

    Donald Burr designed “People Express” as a low-cost Airline. Even the day to day management
    was unique. The employees of “People Express’ were encouraged to interact informally and there
    was no definite organizational chart for flow of command and power. The employees were
    encouraged to walk into their superior’s office and solve problems as and when necessary. There
    was also complete job rotation and sharing and everybody had to be prepared to take up any
    others job if needed. Thus, even the pilots were expected to help with the loading of baggage in
    case of need.

    The employees were also given stock options and they were encouraged to plan and develop their
    career with People Express on a long-term basis. The new model became extremely popular and
    People express started making huge profits till 1985.

    In 1985, People Express bought out Denver-based Frontier Airlines. The combined company
    became the United States' fifth largest airline, with flights to most major U.S. cities, as well as an
    additional transatlantic route to Brussels. During this period, People Express also purchased
    Midwest commuter carrier Britt Airways and Provincetown-Boston Airlines (PBA), a regional
    airline with route networks in New England and Florida.

    The new environment in the office created lot of stress due to changes in the workspace. The
    original employees of People Express found out that Donald Burr was no more readily available
    for interaction. In fact, many of the grievances of several employees in various departments
    remained unheeded. People started airing complaints and grievances in public and there were lot
    of policing done by the corporate office to find out who were the source of dissatisfaction.

    One of the founder employees of the company Ms. Hellinger got an opportunity to speak to
    Donald Burr and express her feelings about what was happening in People Express. She was very
    critical about Donald Burrs lack of accessibility and his disinterest in the grievances of the
    employees. Donald Burr retaliated by firing the employee in March 1986. This event had an
    extremely negative effect on employee morale and there was high labor turnover in the next few
    months. The productivity of the company took a nose dive and so did the profitability.
    By the beginning of 1987 People Express was already a sick company on the verge of
    bankruptcy.

    Question:

    1) Want do you think went wrong with Donald Burrs dream of having a real peoples company?

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