People Express

Airlines:
Rise and Decline

Presented By:
Group No. 3
Salini Burnwal PGP 10106
Kashish Baranwal PGP 10210
Preeti Jha PGP 10222
Ramani Giri PGP 10224
Sakshi Tawar PGP 10227
Vaishnavi Kumbhare PGP 10243

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People Express
 Donald C Burr incorporated People’s Express in 1980 with Gerald Gitner and Melrose Dawsey

 He entered the highly competitive airline industry after the deregulations in 1978

 Was built with the motive of freedom and trust among employees

 By 1983, it was cited as a highly successful and innovative business venture

 By 1985, it’s revenue reached nearly $1 billion and had around 1000 employees

 But by 1986, the company started facing bankruptcy

 On Sept 15, 1986 the company was sold to Texas Air Corporation

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Donald C Burr
Was a graduate from Harvard Business School

Joined as an analyst in National Aviation Corporation and in 1972 became the President of the
company

In 1973, joined Texas International Airlines as Chairman of Executive Committee

By 1976 became the Chief Operating Officer and by 1979 the President

In January 1980 he resigned and founded People Express

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 The Strategy
01. 02. 03. 04. 05.

The six precepts as
introduced by Burr &
his team:
• Service & Commitment
to the growth and
development of our
people
• To be the best provider
of air transportation
• To provide the highest
quality of leadership
• To serve as a role model
for others
• Simplicity
• Maximization of profits
Two parameters in
People Express
• Take care of people
• Take care of customers
The purpose of the
company:
• MABW: Making A
Better World
• Becoming the leading
institution for
constructive change in
the world
The method of
emphasizing the
company purpose:
• To get people to own
the precepts through
rigorous teaching
• To get people to
internalize PE’s
direction in their own
terms
Strategy in terms of
growth and benefits:
• Growth in order to reach
and surpass the limit of
“critical mass”, as
quickly as possible
• Growth helping people
develop by ensuring
expanding opportunities
and new challenges
• People development
leading to further
growth, thus, the above
two factors reinforcing
each other

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SWOT Analysis

Strengths Weaknesses Opportunities Threats

› Lean cost structure
› low fuel cost
› One fleet type – Boeing
737 saved on fuel, training,
maintenance
› Overworked employees
› Understaffing
› Management hierarchy
› Recruitment standards
› Senior managers frustration
› Low cost airplane business
could beat competitors
› New routes airlines
› Explore new opportunities
in travel business
› Competitors threat in price
war
› Employees unhappiness
and morale
› External threats like fuel
price rise

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PE’s Strategic Responses
Acquiring Frontier
› Frontier Airlines: a struggling, full-service
regional carrier based in Denver of the US
› Bought to build up presence in west US
› Gained extensive west route system for PE
› Offered yield management system, frequent
flyer programs, & management team to PE
› Frontier immediately started losing money
› Dramatic impact on the employees due to
clash of cultures
Other Steps
Acquisition of Britt Airways, a large ‹
midwestern regional commuter carrier
Acquisition of Provincetown-Boston, a ‹
small commuter line serving northeast and
Florida
Upscaling their services to approximate the ‹
competition offers of more conveniences,
like a first class-section, in-flight services,
VIP lounges, frequent flyer service, and
such
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Decline & Fall

PE’s rapidly increasing financial problems and loss of market share

all over the country became starkly evident by 1986

Other airlines continued to entice customers away from PE with low fares and
more amenities

Frontier was put into bankruptcy, services were discontinued on some routes, and a number
of aircrafts were sold or leased

Finally, on September 14th of 1986, PE’s board of directors decided to accept Frank Lorenzo’s offer to
purchase PE for $125 million and Frontier Airlines for $176 million

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Recommendations
Measures PE could have taken to prevent its take-over

Re-focus on maintaining the value that PE

offered to its customers and the airline
Introducing and implementing a generic industry, and preserving the company culture
organizational structure to bring in a level of
control to the expanding workforce in an
environment that promotes freedom in
decision making

Focus on developing self route system and

Cutting down and limiting expenses, like yield management system instead of taking
delaying further development of Newark the step of acquiring Frontier with a focus on
Hub, and get services of professional finance the same
consultants

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THANK
YOU