They’re both happening. After People Express went under, Pan Am, Eastern and others followed in rapid succession. Everybody started saying, “Oh my God, it’s going to be an oligopoly. American and United and Delta are going to rule the world.” But I’ve been saying all along, “Don’t feel sorry about People Express, you’ll get another one.” Now it’s happening. A new set of second-generation entrants is coming that learned from both the mistakes of the People Expresses and the successes of the Southwests. The big airlines are giving entrepreneurs a target as big as the world because of their enormous cost structures. The new life forms will invent themselves right around the dinosaurs.
There are very few competitors now, and the big guys can’t do it all. They’ve priced themselves out of the short-and mediumhaul market. I won’t give them $200 for some one-hour trip when I know it can be operated for $35. No way. It’s against my New England upbringing. I bought myself a nice car and I drive there.
You can’t regulate an industry for 40 years and then expect it to become rational overnight. Now we’re 15 years into the post-deregulation world. You’re likely to see more intelligent applications than the first time around, because there are some great models of successful niche airlines like Southwest out there. But the most significant learning experience from the first wave was understanding the role of information technology in running airlines. In 1981, nobody even knew about inventory control and variable seat pricing. People say that the reason we went under was that I was a megalomaniac, an ego nut. The single biggest thing that killed People Express was poor inventory management.
It’s easy to say, “They tried to be like everybody else, and they grew too fast. They shouldn’t have acquired Frontier Airlines.” We never wanted to be American. But we needed to freshen the product and didn’t. You can’t make a Cadillac in 1985 and make the same Cadillac for 20 years. Every new airline had better remember that.
The luxury market (like UltrAir) is extremely limited. We competed against a lot of those guys-the Air Ones, the First Airs. They never even saw their sophomore year. You can’t tell me you can take out seats and put on steaks and the price is the same. Because if you leave in the seats and take out the steaks you could charge 50 bucks less.
In five years you’re going to see the big guys operating the global routes, a-nd you’re going to see tremendous froth in all the other markets. I think it’s dawning on American and Delta and United that they simply don’t have the cost structure to operate everywhere. There will be new carriers coming into business like crazy. We’re going to see some nonunionized, highvalue-added carriers on lots of our short- and mediumhaul routes. The trick for the big guys is not to let the little niche guys start attacking them on their global routes. In the next five to 10 years, everybody should have the ability to travel at People Express prices-if the government doesn’t mess things up.
Whoever said that an entrepreneur can walk into any market and not find somebody already there without strong competitive benefits? Regulation sounds good. But who is the genius that is going to say how to level the playing field? If the government starts coming in, you’re going to get weakkneed, crybaby entrepreneurs.
