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PEOPLExpress to Fly as Budget Carrier - Analyst Blog

Lost in the history of the airline industry, PEOPLExpress is now set to make a comeback. However, this time it is a new airline carrier reviving the old brand name of PEOPLExpress, which once operated during 1981-87 as a low-cost carrier, prior to its merger with Continental Airlines, subsidiary of United Continental Holdings, Inc. ( UAL ). PEOPLExpress is now the name for a Virginia-based start-up carrier that expects to begin operations from the end of June.

Founded in 2012, PEOPLExpress aims to keep up with the legacy of the brand name, which is considered as the first U.S. carrier to have introduced the concept of budget flying. Back in the 1980s, PEOPLExpress had started the concept of low base fares plus an additional charge for overheads, which is now known as the standard pricing model for all budget airlines.

According to various reports, the company will begin service from Newport News Williamsburg International Airport to seven destinations - New York's Newark, Boston, Pittsburgh, West Palm Beach, Atlanta, New Orleans and St Petersburg/Clearwater. Except for Atlanta, served by Delta Air Lines Inc. ( DAL ), all the routes will be solely operated by PEOPLExpress.

Due to the pending approval from the Federal Aviation Administration and DOT, PEOPLExpress will operate through Vision Airlines for the first one year. The company has leased three Boeing 150-seat 737 aircraft from Vision Airlines which will also provide pilots and flight personnel until PEOPLExpress receives all certifications.

According to PEOPLExpress' current CEO and President Jeff Erickson, introductory flight fares will be around $76 each way in the first month of the service. Tickets are expected to be available June 4, onwards. However, various reports suggest the carrier will charge additionally for checked and overhead baggage.

Although the company's attempt to tap underserved routes and replicate the success of the former PEOPLExpress remains encouraging, in the coming days, we expect it to face significant competition from popular budget carriers like JetBlue Airways Corp. ( JBLU ) and Southwest Airlines Co. ( LUV ).

As per reports, the company plans to expand its services in 24 cities within the next 5 years. We believe, at the moment, there is ample groundwork that needs to be done for PEOPLExpress to achieve its set target.

With budget flying no longer a novel concept and many airline companies rooted as established players with top of the line service, it will likely be immensely difficult for a new entrant to promote itself on the same philosophy of budget flying with limited infrastructure.

Hence, besides competition, procuring capital investment will be another roadblock for PEOPLExpress if it plans to strengthen its presence as a regular passenger carrier. Further, in the current economy where demand remains significantly volatile and air carriers are struggling with capacity issues, it will be a significant challenge for PEOPLExpress to provide optimum service levels considering operating costs and existing demand trends.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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