Story of two airlines that had high hopes for no-frills
When airline regulations were scaled back, two newcomers to the industry took off after the same idea. People Express and New York Air flew as no-frills discount carriers.Skip to next paragraph
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It has become apparent that what worked for one didn't work for the other. People Express is still a hefty discounter, and now it's winging passengers to and from London for a price almost half what other airlines charge. New York Air , meanwhile, is going after the business crowd - with separate lounges for its passengers, free newspapers, and a just-started New York-to-Washington shuttle. For these services, it is charging 50 percent more for tickets than it did a year ago.
The differing strategies seem to be working for these Big Apple neighbors. First-quarter profits at People totaled $2.1 million. And New York Air - for the first time since it started in late 1980 - has been flying in the black these past few months.
People Express is moving aggressively ahead with its no-frills operation, and there seems to be plenty of demand for it. Robert McAdoo, chief financial officer of the Newark, N.J.-based airline, says the $149 economy seats, one way from Newark to London, are already ''almost booked for the summer.'' First-class seats, at $439 one way, are moving more slowly.
Analysts see the international route as a ''natural extension'' of People's present business philosophy. ''They don't need to do it,'' says Mark Daugherty, a Dean Witter Reynolds analyst, ''but they've realized they have so much traffic pouring into Newark from all their outlying (midsize) cities, it's just a natural extension to link those cities which don't have good air service to Europe through their hub.''
It wasn't as if the executives at this airline had always been hankering for the international life, People Express president Donald Burr explained in an interview here last week. The new route ''just came along and we saw it as a good opportunity.''
When the Civil Aeronautics Board established the Newark-London route, it was originally awarded to Air Florida, although last December People Express applied to be the backup line in case the deal fell through. When Air Florida pulled out , the slot went to People. Five days a week for at least the next two years the airline will have one daily flight going to and from London. Mr. Burr says the overseas route will account for about 10 percent of 1983 revenues.
The new route is the most noticeable area of expansion for People Express, but other signs, like the addition of 37 planes (all used) to its fleet over the next two years, and its continued Northeast expansion to such midsize cities as Portland, Maine, and Atlantic City, N.J., show the airline is not standing still.
Neither is its stock. Trading at about $40 a share, ''the stock has taken on a super growth-stock image,'' points out Ron Moreno, an airline analyst with Smith Barney, Harris Upham. ''It's a bit overdone,'' he adds.