An Analysis of People Express Airlines: Rise and Decline

Topics: Airline, Avianca, Northwest Airlines Pages: 14 (4639 words) Published: July 26, 2009
An Analysis of People Express Airlines: Rise and Decline

Group Project

Strategy is defined as the process of positioning the organization in the competitive environment and implementing actions to compete successfully. The premise behind the strategy of People Express was to focus on the people, both the customers as well as the employees. Employees were referred to as “People”, and the passengers were referred to as “Customers”. Examples of strategies implemented by People Express early in the process include:

• Create an exciting and rewarding place to work. Donald C. Burr, founder and CEO, believed that this strategy would produce high quality employees who would perform at a level above their competitors. For example, the case states that: o “The competitive business strategy was to provide outstanding service by highly motivated people…(p.2) o Burr believed in allowing his employees the freedom to make decisions and implement programs, without supervision, as long as they fell in line with the established precepts. “…if they are internally motivated, they understand the objectives, they understand where they are headed, then they can create the environment, they can manipulate the environment in the best possible sense and therefore serve our customers in the best possible way.” (p. 3) o “Giving people freedom and trusting them to act consistently with the philosophy led to PE’s practice of naming all its people “managers”. (p. 3) This was Burr’s way of getting his employees to be more committed in the company’s success and think of it as more than a job. o “Therefore PE’s recruiters (mostly experienced CSMs) looked for people who were bright, educated, well-groomed, mature, articulate, assertive, creative, energetic, conscientious, and hard working. They had to be good team players, willing to do different things, and ambitious in achieving personal development. (p. 7) o People Express believed in cross-utilization. “No one was assigned to do the same work all the time, as it was a founding premise that this was inherently contrary to personal growth and development.” (p. 7)

• Provide customers with superior flight options at much lower prices than all of their competitors. The focus was on attracting customers that may not normally fly, due to the high prices of other airlines, and customers who were looking for a great deal. For example, the case states that: o “The competitive business strategy was ….. to take advantage of deregulation by offering unrestricted, greatly reduced prices, and convenient flight schedules. (p.2) o In order to provide their customer with the best options, the airline would have to continue to grow. “…Burr saw growth in the interest of the customers…because it provided more and better opportunities for people to travel with excellent service and low costs.” (p.4) o “People Express had the lowest cost per seat mile of any airline (5.4 cents verses 9.2 cents for the industry)” (p. 9) o “The company bought used aircraft at low prices from other carriers, then ripped out galleys and first-class cabins to add more low-priced seats.” (p. 5) o Compensation, being one of the largest costs, had to be controlled. “…PE used roughly 50 people to staff each aircraft, about half those needed by the competition.” (p.7) Also, “PE designed its compensation strategy to reward people for good results and to minimize cost for the company.” (p. 8) o “It flew underserved, low density routes mainly dominated by local and regional carriers.” (p.14)

People Express began with a strategy that was focused on the people. However, that focus was lost for some time, as the airline began to grow at such a fast past. In order to gain back that focus, People Express had to introduce new strategies. Examples of strategies implemented by People Express latter in the process include:...
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