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Unfilled planes, combined with People's low fares, have depressed profits. Between October of 1984 and last March, People suffered operating losses of $21 million. In the following six months the airline recovered to earn $58 million, but some Wall Streeters think it moved back into the red during the last quarter of 1985. Its stock has dropped from a peak of 25 7/8 in 1983 to 9 3/8 last week.
Weak earnings have diluted the company's profit-sharing payments and hurt employee morale. Many pilots have left because they were dissatisfied with their pay and disliked being assigned extra jobs on the ground. Between 1984 and 1985, the number of pilots dropped from 1,100 to about 950. "We're having a family crisis," says Philip Rogers, a 727 captain who has stayed on. Burr says the remaining pilots are enough to fly the fleet, and new ones are being hired.
But a former high-ranking People executive thinks that the airline's personnel problems may be only beginning. Says he: "Burr has brainwashed employees into working 60-to-80-hour weeks by calling them all managers. They're in Disneyland, but his spell can go only so far." The former executive asserts that People's management is not nearly as democratic as Burr says. "There's only one way to do things at People Express, and that's Don Burr's way," says he. "Not only does Burr dislike being second-guessed, he dislikes being first-guessed."
People's riskiest, and most impulsive, move came when it outbid Texas Air and signed the agreement to acquire Frontier Airlines for $305 million. Burr says he made the decision to buy the Denver-based carrier without consulting other People executives when the deal was suggested to him by Jack Maatee, a lawyer for Frontier, during a tennis outing at the home of a New York investment banker. "I was convinced," says Burr, "that it was the brilliant thing to do."
Wall Street wonders, though, how Burr will mesh a traditional, highly unionized airline with People's unorthodox structure and style. Says Robert Joedicke, an airline expert for Shearson Lehman Bros.: "Running a company with labor unions on one side of the house and no unions on the other side is going to be tricky. Under those circumstances, collective bargaining can be contagious." In the merger agreement, Burr pledged to operate Frontier as a separate company until 1990. Says he: "Over the next five years, we'll try to convince the Frontier people of our way of doing things."
Buying Frontier puts People Express in a nose-to-nose confrontation with Continental, which has an important base in Denver. It pits Burr against a former colleague turned rival: Frank Lorenzo, the chairman of Continental's parent company, Texas Air. In the 1970s, before leaving to found People Express, Burr was Lorenzo's second in command at what was then called Texas International. The two men were once very close friends, but they now have colliding ambitions.