Posted February 17, 2012

Traveling On Business? Peoplexpress Might Not Be For You

The Peoplexpress brand is about to rise from the grave, but the carrier still may be dead to corporate travelers.

If you haven't already heard, the blast from the past plans to come back to the future this year. Its base of operations will be in Newport News, Va.; its fleet comprises fewer than a dozen Boeing 737-400 aircraft; its proposed destinations are Pittsburgh, Providence, West Palm Beach and Newark; and its mission is "to serve markets currently underserved by major carriers."

Wolfe Trahan airline analyst Hunter Keay shared a healthy dose of skepticism in a research note published Friday. "First and foremost the strategy seems very broad and runs the risk of trying to accomplish too much at once," he noted.

There's a case to be made for leisure travelers—especially those seeking to avoid bag fees and buy "deeply discounted fares," as the carrier calls them. But according to Keay, "We aren't sure how an airline with seven to ten aircraft intends on capturing business travelers when business travelers care about frequencies, network reach, frequent flier miles and upgrades." Furthermore, Peoplexpress will not offer business class, another strike in the minds of many business travelers.

To Keay, the carrier would be better to limit its focus. "Most airlines would like to offer a product that appeals to every single type of air traveler," Keay wrote, but even the most consistently profitable major U.S. carrier of the past few decades, Southwest Airlines, "sometimes struggles to retain business travelers." Remember, Southwest "operates about 100 times more aircraft than will Peoplexpress," Keay pointed out.

Meanwhile, Keay sees Peoplexpress sharing a congested East Coast stage with "growth-hungry" (not to mention largely successful) carriers like JetBlue and Spirit.

Yet, beneath all of Keay's skepticism is an underlying concern that Peoplexpress could indeed become successful and potentially upset the apple cart. The U.S. airline industry in recent years successfully has kept supply tight and fares relatively high. Start-ups—no matter how familiar in name—tend to disrupt that balance, oftentimes to the benefit of passengers, but the dismay of financial analysts. "Though Peoplexpress is still to small to affect the larger airline landscape, it is the mere effort that concerns us," according to Keay.

For the immediate future, the fledgling carrier will be tied up with quite a bit of paperwork as it seeks regulatory blessings from the Department of Transportation and Federal Aviation Administration. It has yet to announce a CEO, though it claimed one has been chosen. Peoplexpress operated between 1981 and 1987, at one point as the fifth largest domestic carrier, before being bought by Continental Airlines.

While some things are best left in the '80s (cassette tapes, Alf, parachute pants and Milli Vanilli quickly came to my mind), other creations from that decade have endured. Apple, which launched its initial public offering in late 1980, has become one of the most successful corporations the world has ever seen, and Madonna just headlined the Super Bowl half-time show.

Time will tell if Peoplexpress is a gently used pair of parachute pants or perhaps something with a little more staying power.

Posted by: Jay Boehmer | More by Jay Boehmer

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