People Express

Topics: Airline, Frank Lorenzo, Management Pages: 41 (11741 words) Published: July 2, 2011
Harvard Business School

Rev. September 14, 1993

People Express Airlines: Rise and Decline
I guess the single predominant reason that I cared about starting a new company was to try and develop a better way for people to work together . . . that's where the name People Express came from. Most organizations believe that humans are generally bad and you have to control them and watch them and make sure they work. At People Express, people will be trusted to do a job until they prove they definitely won't. Donald C. Burr Founder, CEO People Express Airlines Under mounting pressure to permit more competition, Congress deregulated the airline industry in 1978. By December 31, 1981, restrictions on new entrants, new routes, and fares had been phased out. These events provided a "unique moment in history," and provided the impetus for hundreds of entrepreneurs to start new airlines, among them Donald C. Burr. Though most failed in the first year, Burr did not. Having graduated from the Harvard Business School in 1965, Burr studied the aviation industry as an analyst for National Aviation Corporation, a closed-end investment company specializing in airlines, aerospace, and venture capital. In 1972, at the age of 31, he became president. In 1973 he joined Texas International Airlines (TI) as chairman of its executive committee—in 1976 he became chief operating officer—and in 1979 president. In January 1980, six months later, he handed his resignation to Frank Lorenzo, TI's chairman and CEO, and set off to found People Express (PE). He was joined immediately by two associates— Gerald Gitner and Melrose Dawsey and later by 12 others. In April 1981 PE began service. By 1983, it had been widely cited as the model of a highly innovative and successful business venture. In 1984, the British magazine The Economist named PE the fastest growing corporation in U.S. history. In 1985, its revenues were nearly $1 billion. By the end of 1986, however, it was facing possible bankruptcy.

Philip Holland prepared this case under the supervision of Professor Michael Beer as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Sections of this case were based on prior work done by Debra Whitestone, author of "People Express (A)," HBS No. 493-103, Judith Leff, author of an earlier draft, and G. Bruce Friesen, author of the original section on the changing industry. Copyright © 1990 by the President and Fellows of Harvard College. To order copies, call (617) 495-6117 or write the Publishing Division, Harvard Business School, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.


This document is authorized for use only in Diploma in Organisational Leadership by Eleanor Duta from March 2010 to September 2010.


People Express Airlines: Rise and Decline

On Monday evening, September 15, 1986, Donald Burr announced to more than 1,000 PE employees (henceforth referred to, in keeping with Burr's philosophy, not as employees, but as people) crowded in the amphitheater of the company's former reservation center, that the airline had been sold to Texas Air Corporation. For many in the audience, the announcement meant the end of a wonderful venture, a time of hope, and the belief that with high commitment, a commitment flowing from an organization built on the concepts of "freedom" and "trust," a group of people could change a piece of the world for the better.

People Express: Strategy
The competitive business strategy was to provide outstanding service by highly motivated people and to take advantage of deregulation by offering unrestricted, greatly reduced prices, and convenient flight schedules. This would attract both...
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