q Who the F*&@ is PEOPLExpress? – Cranky Flier

Who the F*&@ is PEOPLExpress?

Who the F*&@ Is

Gather ’round, kids, because it’s story time. Today, I’ll tell the story of a once bright star that burnt out quickly. But not everyone believed it burnt out – some thought that it secretly retained its glow, just waiting to be reborn. Now, 25 years later, it’s happening, well, sort of. This is the story of PEOPLExpress, an airline that had its moment in the sun but should never be relaunched. This particular new effort is really comical. If it gets off the ground, it’s going to fail miserably.

People Express

The original PEOPLExpress was started in the 1980s by Don Burr. The guy was a visionary and had the dream of building a touchy-feely kind of no-frills airline where the employees were owners and everyone loved each other (along with cheap fares). It was a big change for a guy who came from a close working relationship with Frank Lorenzo at Texas International. For awhile, it worked brilliantly. Burr opened up shop at then-empty Newark Airport and New Yorkers flocked to the airline to take them all over the US for very little cash on this egalitarian airline. Egalitarian? Yep. Seats all cost the same and you bought your ticket when on the airplane.

The idea truly was brilliant, and Burr built a heck of an airline in record time. His low fare pricing model combined with extra charges for bags, drinks, etc, was well ahead of its time. But like many good things, PEOPLExpress came to an abrupt end. The airline over-extended itself and bought a bunch of airplanes to fuel its rapid growth. It was soon flying 747s to London and looking into mergers and acquisitions. It also started to tinker with its model. The wheels started to come off quickly, though it was really revenue management that was the dagger.

When American pioneered modern revenue management, it could offer low fares to compete with PEOPLExpres (and price being similar, people chose American) while keeping some seats to sell at higher fares in order to keep its flights profitable and full. PEOPLExpress never had a chance, despite many efforts to change its model in order to survive. Just before it would have failed, it sold and was merged into Continental. It was PEOPLExpress that formed the basis for Continental’s highly profitable Newark hub today.

That airline had a mission – it saw an opportunity to bring low fares to a big city market and it was wildly successful before it strayed and failed. And now, someone wants to bring PEOPLExpress back. Will the new one live up to such a lofty and deserving mission?

No freakin’ way.

The newest incarnation of PEOPLExpress is going to be based in Newport News. That’s in southeastern Virginia. Apparently, because Southwest decided to pull AirTran out of Newport News, this new team thinks that means there’s opportunity. Yeah right. There are already two low cost airlines there – Allegiant to Orlando and Frontier with seasonal Denver service. It’s 30 miles away from Norfolk, which has Southwest, and 60 miles away from Richmond, which has JetBlue.

So where exactly is that opportunity? There really isn’t one, but just for kicks, let’s pick apart their value proposition as given on the PEOPLExpress website:

Today’s PEOPLExpress seeks to re-establish convenient nonstop service in markets that have been abandoned by other carriers, or that only offer a “commuter” service option. We also want to simplify the booking and purchase process by including baggage fees and seat assignments without piling on upgrade and ancillary fees, and by keeping our fare structure simple and understandable.

I feel like a kid in a candy store with this kind of statement. I just don’t know where to start. Let’s start with the route selection. In general, markets have been abandoned by other carriers because there isn’t enough demand. If the markets have regional jets operating, again, it’s because there isn’t enough demand for something larger. Now, there are exceptions to this rule, if airlines are willing to look at other models. Allegiant, for example, serves markets that legacy airlines simply wouldn’t be able to touch. So is PEOPLExpress looking at other models? Not really. In fact, the differences in its model versus legacy airlines is going to hinder its chances of success even further.

The airline wants to be a low fare airline (as it says in the press kit, fares will start at $69) BUT it also wants to have no fees for two checked bags or for seat assignments. So it’s going to have a low base fare and low ancillary revenue. That spells disaster.

The airline will also be using 158-seat 737-400 aircraft. That is a lot of seats to fill on flights from places like Newport News, which it is serving due to “few air traffic issues, mild climate, and favorable economic conditions.” The last one is a good reason, but the first two are just downright silly. Where else is the airline going?

PEOPLExpress plans to initially serve destinations in Florida, New England, the Great Lakes, and MidAtlantic regions. We have identified service routes through Pittsburg [sic], PA, Providence, RI, Newark, NJ and West Palm Beach, FL. Additionally, we have plans to serve Orlando, FL, Boston, MA, and many cities abandoned by other carriers. Specific route structures will be shared at a later date.

So it’s primarily short haul flying in the east, but just to clarify, those other cities are potential focus cities. Pittsburgh, for example, will start with several frequencies early on. Yeah, that makes sense. Everyone remember Skybus? It had very low fares plus a low demand hub (Columbus) and it didn’t work there. PEOPLExpress wants to do the same thing but without the ancillary revenue that Skybus generated. This all spells financial disaster on so many levels.

In fact, I see almost nothing that works here. It’s just more of the same tired, recycled ideas that many an entrepreneur has tried in the past. Those have all been followed by failure. So will this airline even get off the ground? It’s unclear.

I tried to get in touch with PEOPLExpress using the email address on the website, but I received no response.

I want to know if any funding has been secured. (I don’t believe so.) I’m also really curious to know how the airline thinks it will start flying this summer when it doesn’t even have the structure in place to try for FAA approval. Maybe it will outsource flying to another airline as you see with companies like Direct Air. But again, I received no response so I have no clue.

To sum this whole thing up, this is not a good idea at all. It’s just like many other efforts which have come and gone quickly. The only reason this one is getting more press is because it’s using a familiar name.

Update 2/20 @ 1013a: Aspire has an interview with these guys that sheds light on a lot. It looks like the money man is Bill Hambrecht, who was so enamored with his initial investment in the original PEOPLExpress (which lost a ton of money) that he threw a bunch of money away building Vanguard in its image. (Remember that mess of an airline?) Now he’s going for the trifecta.

[Photo via Wikimedia user Eduard Marmet/CC 3.0]

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45 comments on “Who the F*&@ is PEOPLExpress?

  1. One would think these guys have no aviation experience based on the 158 seats in a 737-400. This means they have to staff 1 extra FA just for 8 seats, I doubt the revenue off of 8 passengers will offset the FA cost.

    Amazing. Whats even worse is that these outfits set up shop in towns that lost/ recently lost meaningful service. Insert knife then twist.

  2. Cranky,

    You forgot all the revenue they’re going to get from their alliance with Air Gumbo and Avatar Airlines. That’ll push ’em over the top!

    1. Dont forget the feed from Family’s 747-100 shuttle between IAD/TEB/ORH. Maybe get Baltia in the mix too..back-fill the demand to St. Pete (Russia) in winter. Now we have the cornerstones for the new Feeble Airlines InterLining, or FAIL alliance. Their logo can be a pile of money on fire.

      1. And, they can connect with “The Coast” out of PDX, and Crystal Air out of JAX, and Northern Air out of SYR, oh, and Gumbo Airlines out of MSY.

        Major fail. (But will they have paid entertainers on the plane?)

  3. The original PeopleExpress started at a time when people who couldn’t afford to travel by air and used trains and buses. They packed PeopleExpress since they could now afford to travel by air. Move forward to today and that isn’t really the case anymore.

    I read they were going to start with 12 flights out of Newport News, well that is not exactly ‘express’ type of service unless they only flew to two cities.

    The original PeopleExpress used those 747’s to Europe and between EWR-LaX/SFO, so maybe California will start seeing 747’s to Newport News one day.

    I wish them well, but maybe a better name would have been Air Navy or Air Ship Building since that is pretty much what the city is known for.

    Taking an old airline name and bringing it back has worked well in the past. Just ask Braniff2, Braniff3, PanAm2, Western2, and the jury is still out on Frontier2.

  4. I don’t know whether AirTran made money at PHF or not. I certainly can’t blame SWA for dropping it.

    Most of the “good” traffic is in Norfolk and Virginia Beach, and fighting through the tunnel to get across is a fate worse than death!

  5. Based on the comments you quote from the website, this really sounds like the case of an entrepreneur in a different industry whose general frustrations with air travel finally tipped when his home town’s air connections were reduced. The entrepreneur then dives in without fully understanding the complexities of actually running an airline. I wish them the best, but I’m skeptical they will succeed.

  6. Hmmm….PeopleExpress on an old 734 or Megabus with free wifi…..

    This is ridiculous. I see Spirit coming to PHF but that’s about it. It’s not a big market. People drive to ORF and RIC, and occasionally even IAD for international.

    Megabus has several dailies to Richmond, Washington, and onward connections to the northeast. Southwest BWI-ORF is one of its most successful BWI routes cause its short and they price it fairly ($99 roundtrip incl tax). WN even forces US to price match on DCA-ORF. Point being this market is adequately served, so better support existing air service then create more which won’t last long term.

  7. I concur that the chances of their being successful in today’s airline industry and general economic climate are pretty darn slim, assuming that they could even conjure up the funding that will be required. Then again, they do have a nice website, but so did that other pie-in-the-sky airline, “Crystal Airways”, the all-757 outfit from a few years ago with the TPA hub, that never actually materialized… Want to be a millionare in the airline business? Start off with 100 millions and then watch it dwindle..

  8. Has anybody talked to the folks at United about this? I would have thought they owned the rights to the People Express name and logo.

  9. Wow, blast from the past! I flew PEOPLExpress from LGW to EWR in ’84 on my first ever trip to the US. I was up front in their “premium” cabin (assume this was the beginning of the end of the airline). Remember my dad paying for our meal by credit card which was really weird. It wasn’t a great experience but I think it was incredibly cheap.

    This re-birth sounds completely bizarre especially lack of ancillary revenues which surely are becoming a permanent source of airline profits.

    BTW if I am not mistaken, the photo looks very much like the south terminal satellite at LGW, with the north terminal being constructed in the background!

  10. A tip of the old hat to Patrick Henry and his fine field there in Newport News/Williamsburg: “I know not what course others may follow, but as for me, give me liberty….!”

    Seems like a real opportunity for an ad account to beat all! Besides Patrick Henry’s call, perhaps a little “carry me back to olde Virgini..,” well, be a little correct there, I hope, how about a little shout out for the Lees of Virginia, Robert E., et, al., and the Commonwealth’s famous Presidents, like Washington and Jefferson. Portraits of them on the tail of every plane. Maybe even call the airline, Presidential…oh, been there, done that, huh? Colonial? That too?

    Well, whatever. People, it is. Be careful designing the logo. Pat Robertson’s right there to critique. Happy Presidents Day!

  11. Just added this to the post, but Aspire has some more info in an interview with these guys.

    The money man looks to be Bill Hambrecht who not only lost a bunch in the original PEOPLExpress, but he tried to follow it up by losing another bunch of money with Vanguard. (You guys remember that mess?) Apparently, he’s going for the trifecta.

    1. I don’t know what is more disappointing – the fact that the PeoplExpress team really doesn’t “get it” or the fact that down at the bottom Aspire is starting to think that this is credible. Kind of hurts their consulting street cred.

  12. As you pointed out Brett there is just so much wrong with this whole thing. In addition to all you have listed I can’t imagine those 737-400s are going to be all that fuel efficient. Allegiant can do it because their model is built around leveraging their relatively inefficient, but dirt cheap, airframes. IF they get off the ground I am sure we’ll be hearing about them leaving a bunch of customers high and dry when they fold “abruptly.”

  13. Cranky you’re such a pessimist.

    There is a way this might work. If the airline does not overextend itself and sticks to a few profitable niche routes, sets up codeshares with several larger airlines to feed their networks, and introduces market-level ancillary charges, then they might be successful. Of course the two largest factors are 1) how much money does Bill Hambrecht have, and 2) what will fuel prices do? I give them a 50-50 shot at success.

    1. You call it pessimism, I call it realism. A few thoughts on your suggestions for how it might work.

      If the airline does not overextend itself and sticks to a few profitable niche routes

      It has already talked about a pretty aggressive growth schedule, but even without that, you assume is a profitable niche being targeted here. I don’t think that’s the case.

      sets up codeshares with several larger airlines to feed their networks

      This will absolutely not happen. Forget about labor having an absolute fit if their airline decided to codeshare with someone else like this. The big airlines have no interest in supporting a new entrant that’s only going to lower fares and make the market unprofitable for everyone. You won’t see big airlines talking to this airline at all.

      introduces market-level ancillary charges

      The airline has already said no bag fees – going for an old-school type of model here that will not work out.

  14. Now, are they still going to sell tickets on board? That’d be sweet if they could get it past the TSA, but I doubt it.

    PeopleExpress the old one also had some really great people management ideas that were amazingly idealistic, but that won’t be coming back.

  15. This sounds like Vision airlines expansion, & contraction in the northwest Florida area, V.P.S. Lot’s of issues. Load issues, Unpaid fees, Terible customer service.

  16. As a PHF neighbor who routinely drives to ORF, RIC or even WAS-area for departures on my preferred carriers, I will be curiously watching.
    From what I could tell, AirTran had a reasonable business from PHF, though with SWA already at ORF, and AirTran at all three, since they seemed intent on keeping two, it made sense that PHF drew the short straw.

  17. Any chance they could fly those 734’s out of Groton-New London (GON), with its 5,000 ft runway? If not there, maybe another airport nearby?

    I’m thinking of an Electric Boat / General Dynamics / Navy shuttle between the Groton area and the naval bases in Hampton Roads. Should probably try the same thing with San Diego.

    Beyond that, that’s the only real advantage I see to being based in Newport News, and even that is a stretch. As someone who has lived in the area, I can tell you that going through the tunnels from Cheaspeake/Norfolk/Va Beach (the big population centers of the area; Chesapeake and Virginia Beach are among the state’s biggest cities) to Newport News is a huge PITA, with massive backups and snarls.

    To me, this would make much more sense out of ORF. More competition there, but the competition is there for a reason, as that is where the pax (and much of the Navy business) are.

  18. Has anybody thought to ask them if they own the rights to the name and logo? Wouldn’t that have been acquired by Lorenzo and ended up being owned by first Continental and now United?

    1. You have to use a trademark to keep it. This is why you saw US Air and others name their commuter airlines after airlines that they acquired.

      CO probably could sue over the use of the double face logo under copyright law, but not trademark law. I doubt they see a value in using their resources this way.

  19. I’ve lurked here, but this thread inspired me. As a guy who flew Peoplexpress, the new one is boned, but I wonder: can the hardships of U.S. airlines bottom? Despite rich nitwits wasting money on huge jets in small cities with no revenue base or fees, there may be room for a new mainline carrier if it had discipline. Unless oil goes below 60USD for good, jets are losers and the jet fleet is aging and chugging fuel. A turboprop model like the DHC-8 would save on human and machine costs, take one-third less Jet-A out to 800nm, and the Q400 cruises at 93% the speed of an E170. They would buy planes for specific routes and not implode from over-expansion like Peoplexpress. They would only fly nonstop and have a unique hub out of an underused airport like SAT or a unused one like ILG. That’s what Porter does and what JetBlue does with big planes. In short, they would run it like a commuter or a Canadian bush carrier, with humility and a smile. I’m just a mainline mechanic, but if I could afford a Q100 and the right people, I’d be in. I hope a rich nitwit steals my business model from this post!

    1. Thanks for stepping out from the shadows and commenting. This sounds a lot like the ExpressJet model from 2007/08 but with different airplanes, and if you’ve been lurking for awhile, you know that I was a big fan. The ERJs don’t work, especially with fuel where it is, but of course, ExpressJet didn’t have a choice at the time. If you start over, then you can pick from a clean slate.

      The Q400 is fast, but if you’re looking for real cost savings, I believe the slower ATR72 is even better. Of course, it’s a trade off with speed, but it all depends on your stage lengths.

      The only missing piece for me is a tie-in to a frequent flier program. That makes a big difference in getting the biz traveler on board.

      1. Wow, you replied, neat. The most salient thing you wrote was: “the ERJs don’t work”. They do, people don’t slag Embraer as the Junglejet now, but if fuel costs exceeds labor, forget them and the CRJs. Bombardier is working on its even-bigger CSeries, but there’s a revolt by those who want either the Q400 extended to 90 seats or its power-plant in a tri-motor (think Trislander on steroids) or quad-motor (like the B377 or CL44). For a business plan, I was thinking of Cape Air or Island Air with their own flier programs and in-flight magazines and labor deals but no contractor or holding company. American Eagle has ATR72s, but I think they’re underpowered and the Q400 single-engine emergency margins are far better. By the way, I live in Delaware and mostly work at PHL. For a whole year, Delta flew 2 CRJ200 round-trips daily on ILG-ATL, whined the flights were half-empty, and left. If they had done just 1 Q300 round-trip daily, they would’ve always had a full profitable plane of lawyers and investors! There must be a better way, right?

        1. I didn’t mean to suggest that the ERJs don’t work in general – I just meant for the purposes of an airline like this. The costs would be too high for this type of operation, so I think we agree on this.

          Cape Air and Island Air are a little different in that I think they have a much higher component of leisure travel. That has changed with Cape Air as it has started picking up more EAS service, but Cape Air also partners with JetBlue and I think Continental still, no? Island Air has frequent flier partners as well now. Not suggesting they need to adopt another airline’s program, but they need earning and redemption to be able to attract fliers from other airlines. (And giving elite perks to members in those programs would help as well.)

          As for American, the ATR72s they have (and are retiring) are the older versions. The new ATR72-600 is supposed to be a very capable airplane. A lot of airlines must be impressed because they’re ordering them.

  20. Interesting posts. I looked up Bombardier sales, they did DHC8-100s in Q, but only made 2 and also ended Q200 and Q300. Air New Zealand just bet it all on ATR72-600 and it has a notably short takeoff, but it’s ATR’s whole business and the other makers in that role are Antonov and Xian. No way a U.S. airline buys Ukraine or China due to politics and marketing. Also, ATR and Xian use PW127, while Q400 has PW150, boss of props. It’s a different engine and underutilized. Even if I was rich, you couldn’t pay me to fly CRJs or ERJs at 60USD oil, much less 100USD. Crossing continents or oceans by jet is fine, but someone will build a bigger prop if we’re past peak oil or Iran screws up. Regarding business plans, there’s a lot of business types on Cape at BOS. When I think leisure, I found this blog back on “Who the eff is Allegiant”. Say I’m rich, do the paperwork, hire some smart civilized people with the right HR oversight, and base several Q400s at ILG on once-a-day non-stop round-trips. If we do a decent job, won’t the mainline carriers come to us about code-sharing and lounge access? Of course!

  21. This brings back some memories. After immigrating to the US in 1983, I had to return to the UK for a funeral in February 1984, Orlando to Manchester. I think I flew either Delta or Eastern to JFK, then took a shuttle bus to EWR, to get a PEOPLExpress flight to LGW. I had a booked seat, I think, and paid at the gate, or at check in; I believe it was $149 one-way to LGW. I bought a meal basket on board, $7; but I think the soft drinks were free.

    I recall one of the Managers on board introducing all of the other Managers, which I thought strange until I learned more about the airline afterwards. With all of the Managers, I wondered who would be doing the actual work; turns out they all did, and they worked hard and were pleasant and conscientious.

  22. I Think “California Paciffic” has a better chance of getting airborne than “People Express”. I Think People Express isn’t going anywhere, there is no way they are going to be-able to compete on the east coast. If they do manage to get airborne i don’t think it will happen until at least late 2015.

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Cranky Flier