Some thoughts on “People Express” et al.
The original People Express was a low cost carrier of the ’80’s. It was absorbed into Continental Airlines in 1987. I never flew it.
Donald Burr, formerly of Texas International Airlines, the creation of one Frank Lorenzo and a former business partner, was the founder of People Express. It ultimately was financially drowned in debt, which accounted for the Continental acquisition.
And who, pray tell, controlled and was running Continental? The despised Frank Lorenzo, who took the “new Continental” into bankruptcy twice, after acquiring Continental for Texas Air Corporation (Texas International Airlines) in the early ’80’s and moving its corporate headquarters and primary base of operations from Los Angeles, where it had had a storied history, and was primarily a carrier in the western United States and the Pacific, to Houston.
Lorenzo also gobbled up Eastern Airlines after disastrous negotiations between Eastern’s CEO, former Apollo Astronaut Frank Borman, and the International Association of Machinists union. Continental was owned by Texas Air Corporation, controlled by Fort Worth financier David Bonderman, then President of the Robert Bass Group. Bass is a Texas oil gazillionaire.
I personally experienced Continental first-hand in the 1990’s from 1991 through 1998, both during and post Lorenzo. I was on their planes at least two days a week heading from or back to Houston on business. It had to be one of the shoddiest, saddest excuses for American businesses from my observations, flying the airline 1991-1994. Flights were cancelled when seats weren’t full. Planes were dirty. Personnel were extremely frustrated and unhappy. Fear was everywhere. Management was despised. Reservations were constantly screwed up. The airline held records for lost baggage. They had one of the worst on-time records in modern aviation history. Planes were constantly delayed due to maintenance issues. Lorenzo owned the caterer, Chelsea Food Services, and the food was beyond awful. Bonuses were promised but never paid.
Guess who was responsible for revenue planning? Ben Baldanza, now CEO of Spirit. Hm. Ben got excellent training from the master of how to squeeze blood from a turnip, Frank Lorenzo, and one can see a reprise of the Continental of Lorenzo days in Baldanza’s cavalier attitude toward customer needs and shoddy, underhanded pricing practices. He learned from the master.
Finally Continental’s board had had enough of poor financial performance and Lorenzo’s ineffective and hated management style. Lorenzo was a less than honest, cut-throat bean counter at heart. The only thing during Lorenzo’s era that didn’t visibly suffer was safety, and I suspect that was the case solely because the FAA and the insurors wouldn’t let him skimp on safety more than the law allowed. Lorenzo hadn’t a clue when it came to actually RUNNING an airline effectively from an operational standpoint, and in 1994, under pressure from investors, he stepped down as CEO.
During 1994 the Board hired Gordon Bethune, a Boeing executive in charge of the 737 program, as a senior executive. Bethune’s background was operational–he had been head of operations at Piedmont Airlines prior to its acquisition by Allegheny, which later was renamed USAir. He also held a jet transport pilot’s license. At the end of 1994 Bethune was appointed CEO and Greg Brenneman, formerly of Bain and Co., was appointed President and COO.
According to Bethune’s book published in 1997, “From Worst to First”, he and Brenneman discovered at the beginning of 1995, that Continental had cash in the bank to meet payroll for only 30 more days. Its systems didn’t talk to each other, its books were a mess, its personnel in turmoil, its staff turnover rate the highest in the industry, its fleet one of the oldest in the air, its paint scheme only half changed and its brand despised by business travelers and leisure travelers alike. Reservation centers had too few agents and people waited forever to book flights.
At the end of 1995 Continental Airlines had $1 billion cash on hand and was ranked in the top four in on-time performance. Employees became believers. The armed guards guarding Lorenzo’s CEO office doors were relieved of their post. Fascinating story. Primarily a result of Bethune and Brenneman’s “Go Forward” plan devised on Bethune’s dining room table in Houston. In less than one year Bethune and Brenneman accomplished what Frank Lorenzo couldn’t or wouldn’t in 13 years. All Lorenzo knew how to do was cut costs, and make employees and passengers hate his guts. The unions particularly despised him. He took the company into bankruptcy to break the unions in 1983.
Bethune was fond of saying, “Anybody can make a pizza without cheese. The question is, who’s gonna eat it?”
Lorenzo made cheese-less pizza, and only those who had no other choice bought it. It might relieve hunger, but nobody wanted to eat it, given a choice, even at rock bottom prices. Ben, are you listening?
Continental wound up with huge hubs in Houston and Newark and instead of dominating the western skies, became the most dominant player in the New York market because of the Newark hub.
The turn-around story is fascinating.
I owe Kate Hanni a debt of gratitude. Three or four years ago Delta Airlines went out of its way to abuse me in ways that astounded even her when I made a Houston-Chattanooga trip for an uncle’s funeral. The story was so horrible that she actually called me on a Saturday after I posted the story via Flyers Rights. In the end Delta finally, FINALLY made amends and has behaved itself with me since. Her interest caught the interest of an ESPN color commentator based in Atlanta and a Platinum Medallion Delta flyer who got involved.
My frequent flying days on Southwest and Continental are over–I should write a book some day of the good, the bad, and the ugly. Believe me. There has been plenty of ugly. Even during the Bethune days, although his office always was horrified and made amends each and every time an incident occurred. One incident was so bad that his executive assistant for passenger relations gave me 24 positive space first class upgrades after a captain threw me off a plane at the gate in Detroit when the crew wouldn’t make room in the cabin for my bag with a computer and sensitive Dun and Bradstreet data in it. Checking it was a fireable offense. And I had a Gold Elite card in my pocket that I flashed him. It was the last plane out on a Friday night on Christmas weekend. I forgave but never forgot.