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The people at People Express say 'bye to a dream. Hopes of `owner-manager' employees slip as line bows out to mistakes, competition

By Staff writer of The Christian Science Monitor / January 26, 1987

Newark, N.J.

It was only last summer that Troy Hopper began to realize the company he loved to work for - People Express - might not survive the airline wars after all. New York stock analysts had been saying it for a long time, and the newspapers had been describing its financial problems. But it wasn't then a pleasant thought for the lanky, sandy-blond young man from St. Louis. It isn't any better now.

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Mr. Hopper has accepted the fact that this Sunday, People Express, which pioneered no-frills flights and ultra-low fares for millions, will cease to exist.

It was People's low fares that threw the airline industry into a five-year battle for survival. With People pitted against the rest of the industry, its acquisition by archrival Continental (headed by airline czar Frank Lorenzo) was hastened by management mistakes that sapped money and morale.

Yet the debacle of People Express and its subsequent acquisition is much more than a corporate takeover story. It is, rather, a story of failed ideals on a massive scale.

``Sure it hurts a little bit to see something you love disappear,'' says Hopper, an accountant and customer service manager. ``The dream is over. That's why a lot of us came here in the first place, to be a part of something unconventional.''

What was the dream at People Express? Why did cleaving to it both build and eventually destroy the company? The flawed dream

More than anything the ``dream'' of People Express was that every employee would be an owner-manager. As owner-managers (each owning a significant chunk of People's stock and a share of the profits), the company, they were told, would thrive because of their hard work, small salaries, and no overtime pay.

To build a company made up entirely of owner-managers was the corporate philosophy of People Express chairman Donald C. Burr. Everybody at the company had at least two different jobs - called ``cross-fertilization'' by Mr. Burr. The aim was to encourage innovation and creativity.

In 1983, after less than three years of operation, the airline began to receive newspaper and magazine write-ups aglow with news of the company's ``humane'' management system. It served to further attract eager, idealistic young people like Troy Hopper.

Burr's alma mater, the Harvard Business School, was similarly agog over its alumnus for putting in place such a radical and apparently profitable management structure. It made a great case study to teach aspiring business managers and was cited extensively in books like ``In Search of Excellence'' and ``Re-Inventing the Corporation.'' The corporate plan

Along with the owner-manager philosophy came the corporate game plan: across-the-board, ultra-low air fares - and no frills. No frills meant no advance reservations; a $3 charge to check a bag; paying for tickets on board; no meals or snacks; and 50 cents for a cup of coffee.

Low fares also meant a need to fill the airplanes. That need resulted in frequent overselling of flights, which often angered customers. The airline also operates out of its hub at the decrepit North Terminal in Newark, where, this time of year, passengers are forced to tromp through snow and up the wet steps of a mobile ramp to get to the door of aircraft.

Fliers, however, were thrilled to see $19 fares from Newark to Buffalo. But those little inconveniences nagged customers, especially since other airlines eventually learned how to compete with People on ticket prices while maintaining amenities.

Both People's philosophy and its operating plan met with initial success. Originally the company was just three airplanes flying between small cities like Buffalo and Newark. Soon, it had grown to 22 planes flying to the smaller Eastern cities.

That was a manageable size. Burr was the corporation's head cheerleader, leading by example and keeping a charismatic fire glowing under employees. By 1983, a good year for the entire industry, profits were looking up. Shortcomings noted

In retrospect, business management experts, industry analysts, and other observers say Burr's management philosophy was not adaptable to a really large company. But that is what the airline rapidly became when it expanded in '83, buying 50 planes from Braniff when that line went belly up.

Until then, People had avoided competing directly with major carriers by flying to smaller cities, but with the new planes came word from Burr that the company was now ready to battle head to head with United, American, Eastern, at the bigger cities they controlled.