UNDERSTANDING PEOPLE AND ORGANISATIONS 1

ASSIGNMENT 1

Submitted by Sarthak Mehra

Roll No 16303
Section E

Q: Identify the factors that led to the growth and decline of the Peoples Express Airlines.
Answer: Environmental factors that led to the growth of the peoples express airlines
1. Government led Factors
As soon as the Congress deregulated the airlines sector, a lot of firms entered the market, most of
them failing in their first year itself, but not Burr with his Peoples Express(PE).
2. Industrial Factors
Peoples Express did not make arrangements with hotels and other airlines, which proved to be a great
cost saver for them.
PE chose the most underserved routes and then offered prices so low that the smaller airline
companies that served on those routes.
3. Economic Situation and Human Resources
Due to the recession that was going on in the sector, many pilots were laid off from other airlines,
which provided a pool of pilots, also called Flight Managers in PE, to Peoples Express.
4. Market Factors
Peoples Express rivals could adopt such cost cutting measures, due to their collaborations with
various other airlines and hotels, as adopted by PE. Therefore, they could not compete with the low
prices that PE offered to its customers.
Fuel shocks and air controllers strike that happened during the 1980s affected all the major airlines
except PE.
5. Financial Resources
The PE airlines received a small private financing from the Citicorp Venture and then a large Public
Financing from Hambrecht and Quist, thus providing an impetus for the growth of the airline.

Environmental factors that led to the decline of the peoples express airlines
1. Overwhelming demand
Since the prices of PE that were about 35% to 55% lower on peak times and about 70% lower in
normal times than the competition standard prices, there was an overwhelming demand for tickets in
PE. Add to this the fact that PE did not allow travel agents to book tickets for its flights; people came
to their office in large numbers, which the office was unable to handle. This increased demand led to
increased workload for the employees and tension among the employees arising from the cross
utilisation system that was in place.
2. Emerging Competitors
Continental Airlines, purchased by TI, emerged and took away PEs share of the market by offering
low-cost air tickets to the buyers. The airlines learnt to handle cost cutting and maintain operations at
the same time.
3. Technology
In order to counter the low price offered by the PE, the rival airlines came up with a technology that
made them offer tickets for different prices in the same plane. This way they could cross-subsidise
their ticket fare in order to offer prices that were even lower than those of PE.