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30 and Counting: People Express

Posted February 5, 2008 by Brett Avery

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This month we remember the first flight of People Express, out of Newark Airport in April 1981. Before People went bust nearly six years later, its introduction of super-low prices changed the airline industry forever.

The 30-second brief: Seizing an opportunity presented by the Airline Deregulation Act of 1978, a handful of executives led by Donald Burr leave Texas International Airlines to revolutionize the industry. They seek to challenge “legacy” carriers that bear expensive union contracts, rely on layers of specialized employees, and provide a plethora of perks. Union-free People Express offers no-frills service and fares so low they often beat driving. While People revolutionizes flying, it transforms Newark Airport into a burgeoning gateway to the state and nation.

Why EWR?
Although closer to Manhattan, Newark has had bad karma, in part because it’s tougher to reach than JFK, which flew 22.5 million passengers in 1977, and LaGuardia, which flew 15 million. The carriers at Newark (7.3 million passengers flown), chiefly Eastern and United, have served a patchwork of cities with point-to-point flights and no nonstop international flights until TWA connected to London-Heathrow in 1978, prompting Alan Sagner, chairman of the Port Authority, to call Newark “comfortably uncrowded.”

Airlines before deregulation: The Civil Aeronautics Board set airfares, approved airlines entering the U.S. market, and divvied up routes. Flying cost big bucks, but despite sliding airline profits, the pampering continued to be top-shelf.

The People Express business plan: 1. Buy used planes at deep discounts. 2. Lean workforce + mandatory employee stock purchase = no unions. 3. Price fares as a commodity. Slogan: “Flying that costs less than driving.” 4. Hub-and-spoke system—local airports connect to a central airport (EWR) offering long-distance flights. 5. Minimize plane time at gates by selling tickets onboard. 6. Charge for extras—checked bags $3 each, coffee 50¢—but peanuts are free!

People’s first home: Newark’s original North Terminal, used for occasional charter flights and all but forgotten following the 1973 reconfiguration of the airport from one terminal to three.

First in flight: April 30, 1981, to Buffalo, Norfolk, and Columbus—$23, $23, and $35 respectively (nights and weekends).

The competition:
$99, $82, and $146 respectively.

Quick success: People Express flies its millionth passenger in January 1982 and turns a profit the following December. It vigorously adds new U.S. routes, before the May 1983 introduction of its London-Gatwick connection for $149 one way. By late 1984 it’s the nation’s tenth largest airline.

Let my People come: “The fares are suicidal, fratricidal, and genocidal,” senior vice president Monte Lazarus of largest competitor United gripes to Time in February 1985. Meanwhile, back at the ranch: People Express boasts 5.7 million Newark passengers in 1983; that December, EWR’s monthly passenger load surpasses LaGuardia’s.

Partners in arms, part 1:
People Express begins flying to Houston-Hobby, where it connects with low-cost comrade Southwest Airlines.

Partners in arms, part 2: Burr tells Business Week in early 1985 that People will “pull back and consolidate.” Instead, it plunges into a November purchase of Denver-based Frontier Airlines, an old-style union-and-frills carrier. Paying off that $300 million price tears apart People.

Goliath eats David: Continental Airlines owner Texas Air announces a September 1986 deal to buy People for $297 million. As of February 1, 1987, People Express ceases to exist.

EWR now: Repeated road projects have finally caught up with traffic. In 1996 the AirTrain monorail tied into the Northeast Corridor served by Amtrak and NJ Transit. A new international wing has revitalized Terminal B, and Terminal C has added gates. By 2005 EWR was flying about 33 million passengers annually and ranked 22nd in the world.

 

April in NJ, 1976–2006

April 21, 1978: At its 93rd graduation ceremony, 24-year-old Sharon McDonald of Irvington becomes the New Jersey State Police Academy’s first African-American woman and first mother to graduate.

April 11, 1980: Thirteen-year state Assembly vet David Friedland and his father, Jacob, are found guilty on a variety of conspiracy and tax fraud charges related to a $4 million Teamsters loan and secret $1 million Swiss bank account.

April 15, 1980: The country’s first mandatory regional recycling program begins in Monmouth County when seven communities and Fort Monmouth begin separating newspapers from garbage, saving an estimated 8 percent per year in trash disposal costs.

April 20, 1980: The Ocean Grove Camp Meeting Association ends its 111-year ban on Sunday swimming by unlocking public gates leading to the beach at this onetime summer spot for ministers.

April 15, 1982: The state Public Utilities Commission approves a rate increase for New Jersey Bell that includes doubling the cost of pay-phone calls to 20 cents.

April 19, 1984: U.S. District Court judge Herbert J. Stern orders New York City to immediately halt dumping at one of its largest landfills, to prevent the contamination of New Jersey beaches with medical waste, including used hypodermic needles.

April 21, 1986: Frenzied fans tear into cushions and bend the frames of about 1,000 seats at the Brendan T. Byrne Arena about two hours into an Ozzy Osborne concert.

April 24, 1986: A report published in the New England Journal of Medicine states that the use of synthetic interferon, manufactured by Hoffmann-La  Roche in Nutley, resulted in complete remissions in 13 of 17 patients with a form of adult leukemia.

April 15, 1987: Governor Thomas Kean signs legislation instituting a three-year jail term for anyone convicted of selling drugs within 1,000 feet of a public school.

April 15, 1988: Margaret Kelly Michaels, a 26-year-old former day-care worker, is found guilty on 115 counts in a case of sexual abuse reported at the Wee Care Day Nursery in Maplewood. (Kelly will spend five years in prison before an appeals court overturns her convictions.)

April 29, 1991: Baltusrol Golf Club announces a revised membership policy that accepts women and actively solicits minority members to protect its role as host of the 1993 U.S. Open golf championship.

April 7, 1994: Emergency warnings sound at the Salem 1 nuclear plant in Lower Alloways Creek, after its staff tries to remove weed clogs from water intakes and mistakenly reduces power generation, causing a pressure rise that spills radioactive water in the reactor building.

April 29, 1994: Once called the “Darth Vader of capitalism” by U.S. Attorney Michael Chertoff, flamboyant electronics retailer Eddie Antar, founder of the Crazy Eddie retail appliance chain, is sentenced to 12½ years in prison and ordered to repay $120 million for securities fraud.

April 9, 1996: Montclair’s George Walker becomes the first African-American recipient of the Pulitzer Prize in music, for his composition Lilacs.

April 1, 1997: Ending a 160-year dispute, an arbiter appointed by the U.S. Supreme Court determines that 22-½ of Ellis Island’s 27-½ acres, which include many unused buildings, fall within New Jersey’s jurisdiction for development and taxation.

April 7, 1997: Moments after the attorney general rules illegal their effort to implement school vouchers using public money to send their students to Boonton High School, Lincoln Park officials announce that they will pursue the project with private funding.

April 2, 1999: Police and FBI agents charge the 30-year-old Aberdeen resident David L. Smith with writing and releasing the Melissa computer virus, which disabled e-mail systems worldwide.

April 13, 2004: Publisher Herbert Axelrod of Deal, a benefactor of the New Jersey Symphony Orchestra and perhaps best known for his 2003 sale to the orchestra of antique Italian string instruments, is indicted by the U.S. Attorney’s Office on charges that he hid hundreds of thousands of dollars in Swiss bank accounts.


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