People Express is different.
Its fares are the lowest in the airline industry. Its employes are well scrubbed and may be the most polite. It doesn't have pilots or flight attendants or mechanics because they are called flight managers or customer service managers or maintenance managers. Its executive offices -- if a rabbit warren can be called executive offices -- do not have secretaries, which means the chief financial officer's phone often goes unanswered.
The question is whether a company that expands from nothing to the nation's 12th-largest airline in less than five years can function effectively without some accoutrements of corporate America.
Wall Street is skeptical. "They sort of work on teamwork and all the rest of it, and have not had the normal structured management," said Robert J. Joedicke, analyst for Shearson Lehman Bros. Inc. "It may work in smaller companies, but I think it gets harder and harder to carry out a business in that type of system when you get up around $1 billion in revenues." The loosely structured management "is why I'm not an investor in People Express," he said.
Donald C. Burr, 44, People Express chairman, president and author of the company's Six Precepts, said, "All I can do is point you to the record. I don't know anybody who has grown to over $1 billion in the time People Express has . When you say, 'Can you do it?' all I can say is that nobody else has."
In February, the vultures gathered. People Express was almost out of cash. It had suffered an $8.9 million loss in the last quarter of 1984 and was en route to an $18.8 million loss for the first quarter of this year.
Executives at other airlines nodded their heads knowingly. As one said, "You're gonna' manage a corporation that size and you don't have a secretary? I mean that's loony-type cultism."
So People Express, the king of the low fares, went through a cost-reduction program. Free coffee was abolished in the executive rabbit warren as a symbolic gesture, and a program was instituted to hire part-time college students to run the check-in counters so customer service managers could spend more time as flight attendants, which is what they really are.
Some employes who had started to build lives in "out stations" (meaning anywhere other than Newark) were recalled. Some quit. Others grumbled to reporters that the People Express stock they are required to buy was going down. All employes are salaried, and thus earn no overtime.
Now, People Express claims to have turned it around. Burr said there is $125 million cash on hand. The two bad quarters "were directly attributable to the strategic decision to grow to critical mass," he said. "Now we have the critical mass."
The problems that produced the fourth-quarter deficit resulted in a $3.7 million loss for the year -- People's first loss in three years. For the first six months of this year, its net loss was $10.9 million, indicating a second-quarter recovery. People's debt today is about $350 million, and it is offering $50 million in debentures, Burr said.
George James of Airline Economics Inc. in Washington said that People had 90 percent more capacity in the first half of this year than it did for the same period last year, the fastest growth of any major airline. The second-fastest growth -- 62 percent -- was Continental Airlines, a subsidiary of Texas Air Corp. and, like People, a nonunion airline.
When People began flying in April 1981, it had 250 employes; now it has 4,000. People started with three airplanes; now it has 73.
People started with service from Newark to three cities; now it serves 49, including two in Europe.
From May through December of its first year, People carried 952,101 passengers; in August of 1985, it carried 1.31 million passengers.
Burr is seeking to grow another way, by acquiring Frontier Airlines. If People's application is approved by the Transportation Department, Burr will have snatched Frontier from Texas Air Chairman Frank Lorenzo, Burr's former boss and present competitor.
People will put up $100 million, and the rest of the $300 milllion purchase price will come from Frontier, which had set aside funds under a previous plan to take itself private.
The acquisition will make People a big-league player in the West, as it now is in the East. Frontier is based in Denver, where United Airlines has a fortress and where Continental has at least a fort. The fare wars involving two low-cost carriers -- People and Continental -- and the nation's largest -- United -- should be worthy of the Old West.
However, Frontier is a heavily unionized company whose employes call themselves pilots and mechanics. In a rambling interview in the August issue of Inc. magazine, Burr said, "Unions are antithetical to the competitive business strategy of People Express, which depends on freely able people producing in a freely able environment. You don't have that with a union."
Asked about that, Burr said, "I'm not antiunion . . . All I've ever said is that I hope to be able to create an environment at People Express that would obviate the need for one. I'd resign if we had one. That would be the ultimate humiliation for me, for my people to come and tell me they need to be protected from me . . . "
According to Burr and his lieutenants, Frontier will be operated as a separate entity, not integrated into the management philosophy that finds customer-service managers selling tickets one minute and telling passengers to fasten their seat belts the next, or where pilots fly from Newark to Atlanta and back, and then spend some time in accounting.
Everyone is a manager at People and everyone is guided by the Six Precepts, the first of which is "Growth, service and commitment to the individual." The precepts read something like a creed or a fraternity pledge. See box.
"True," said Burr. "But people say that about the Golden Rule, too. It's 'Know your stuff, take care of your men,' stuff that Plato talked about a long time ago. When you know what to do, it's okay, but when you don't know what to do, the Six Precepts provide generalized direction in how to execute your plays . . . We find it works again and again . . . If we don't know what to do, we invent the right answer . . . "
Are the precepts going to be used at Frontier?
"Yeah," Burr said, "but over a good long period of time. It will be a matter of gentle persuasion."
Another view, from one who knows Burr well: "Those people from Frontier have no idea what's going to hit them. . . . Now they got a guy who's going to smile at them, and take their clothes." The business of everybody being a manager "is doublespeak," the person said. "Who can say four people on an airplane manage anything?"
Burr has many critics within the airline business, but they are not willing to take him on in public. Many of the people who helped him form People Express have left, including former president Harold J. (Hap) Pareti, who just started Presidential Airways at Dulles International Airport, and Gerald L. Gitner, vice chairman of Pan American World Airways.
Gitner would not comment on why he left, or discuss Burr.
Pareti said he left because, "For one thing, I wanted to have a little more control of my life, and structure it. Secondly, I saw a business opportunity. . . . It was a tremendous learning experience at People , a lot of which came from Don Burr. I just looked at my own life and decided I needed to have a better balance and be more in control . . . . I wasn't the lead person there."
He was also never on the board of directors and neither is any other employe.
Larry Martin is one of 11 "managing officers" in the company, and he said that "we had grown to such a size so rapidly that we had lost contact with large numbers of people. As a result, those people had lost sight of what People Express is trying to do. We sat down and said, 'If only we could put People Express back to what we first were . . . We can't, but maybe we can get close.' "
The answer was something People calls operating groups. Each group has one managing officer and about 300 employes, including flight managers, customer service managers and maintenance managers.
When the groups were set up early this year, employes chose the one to which they wished to belong during a process akin to collegiate fraternity or sorority selection, where they went from booth to booth to talk to group leaders. If the group they wanted was full, they were assigned elsewhere. "We called it Rush Week," Martin said.
Because almost all People employes pass through Newark, operations group offices that are far more comfortable than the executive suite have been set up in the Newark terminal. Because everyone is theoretically equal at People, work schedules are determined by a complicated lottery, not by seniority, as is customary.
The object of the operating groups is to make sure someone from top management is not far removed from every employe. The top, however, is referred to as the bottom on Burr's organizational chart. "It's an inverted pyramid," Martin explained, "We put the people at the top."
Indeed, the piece of paper that lists People's more equal managers has Burr in the center of the page, at the bottom. There are no boxes or lines, but it is not too difficult to figure out to whom one reports down to. It is, however, impossible to identify the vice president for operations, because there isn't one, just a managing officer whose several responsibilities include operations.
With operating groups in place, People is looking at other aspects of its business.
The telephones, for example. Travel agents complain they can't get People on the telephone to make a reservation, so they book clients on other carriers. In the Washington area, the listed phone numbers ring to a computer telling you only that they have been disconnected.
The new number, one learns from information, is 863-0960. It usually is answered more quickly than the reservation number at many airlines because People has contracted its telephone operation to two national firms "who know how to answer phones," as People spokesman Russell Marchetta put it.
Then there's the business of baggage check-in. People wants you to carry your bag and charges you $3 per bag if you check it. Baggage check-in is at the gate. However, that system began not to work at Newark, where the old terminal that People uses is so cramped there isn't room for people, much less bags. To alleviate the mob scene, People has built a check-in counter in the main lobby, even though it plans to move to a new $200 million terminal by the middle of 1987.
People even is considering adopting what has come to be recognized as the most effective marketing tool in airline history, the frequent-flyer program. "We're sure taking a look at it," said Martin. "It is clear the business traveler is swayed by frequent-flyer programs." People also is considering tickets by mail and advance seat assignments.
In other words, as it grows, People Express is beginning to look to the customer more and more like other airlines.
The one difference is Burr's management style. Although many managers have left, Burr promotes strictly from within. Said Martin, glowingly, "We rely heavily on his vision and his leadership to steer our way through the competitive waters."