Remembering People Express- The First Ultra-Low Cost Carrier

By | July 31, 2009

PEOPLExpress Airlines (Newark 1986)

We’ve been really enjoying this history kick we’ve been on of late. So, newsflash…July 31st, 1986….

The Associated Press reports that Newark-based People Express will eliminate service to eight cities and change its pricing structure and policies, as well as lese eight 727-200 aircraft to another airline. It was the largest reduction in service thus far for the then five-year old carrier.

On April 30th, 1981, People Express was launched out of Newark. On May 26th, 1983, they began their first international service to Gatwick Airport, with a leased 747.

To quote Wikipedia, “The airline used a simplified fare structure whereby all seats on a given route were offered at the same price, with slight differences between “Peak” and “Off-Peak” fares. All seats were in economy class, with the exception of “Premium Class” seating on overseas flights. Fares were paid on the flight. Passengers were permitted to bring one carry-on bag for free, while each checked bag was charged a fee of $3.00. People Express was the first United States airline to charge a fee for each checked bag. PEx also charged modest amounts for customers wishing food or beverages. Sodas cost 50 cents per can, honey-roasted peanuts and Rachel’s brownies (also 50 cents), and the “famous” People Express “snak-pak” (an assortment of cheeses, crackers and salami) for $2.”

The idea was this…

Take a 737 airplane that’s got 118 seats. Put it on a short hop; say, Buffalo to New York – about an hour’s trip. Charge thirty-five dollars a ticket, less than the cost of driving, and that gets you $4,130. The fixed costs of the fuel, crew, and other essentials-total about $2000 or so, which gives you have over $2,000 gross profit per hour; a profit margin of nearly 100 percent” – Courtesy

In an article, Matt Keegan remembers his job in college working for People Express. Their Reservations Department was staffed by college students from all over New York and New Jersey. They had no computer system and opted not to pay fees to be part of Apollo or Galileo, the major agency systems.

Outside of Reservations, employees were cross-trained in a secondary task. The idea was simple. Allow employees to move back and forth between jobs. The move required employees to buy stock in the company at lower than market prices, which would supplement the lower-than-industry standard wages and motivate them to succeed.

But People Express expanded too fast, the practices which had made it a success as a small airline, doomed it as a large one. In September of 1986, People Express was bought out, ironically by the very people their founders had left to start the airline. People Express was merged into Continental, which soon after filed for bankruptcy.

For more classic pictures of People Express, check out Below, we present a four-part news report on People Express, courtesy of Youtube.