Word: burrs
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...half of the year, People was believed to have less than $50 million in cash on hand, and is still losing about $4 million a week. Even so, the decision to sell off some of the company's assets was not made voluntarily by People Founder and Chairman Donald Burr. The move was forced on Burr by the remaining board members. The insurgents were led by Venture Capitalist William Hambrecht of San Francisco, whose firm raised $23.5 million in the early development of People, and by Charles Phillips, a managing director of Morgan Stanley, People's investment banker. Said...
...Burr saw rapid growth as a survival tactic in an air-transportation market dominated by bigger rivals. No other U.S. airline, though, has ever expanded as quickly as People. Burr was confident in the price advantage that People's low-wage, nonunionized employees produced over other carriers: 5.28 cents to fly a passenger one mile last year, vs. the industry average of 8.6 cents. He was overly blithe as he pushed his company into Atlanta and Dallas/Fort Worth, the territory of two major rivals, Delta and American. People gained size but it failed to gain strength...
...still resembles a bus terminal at rush hour. A replacement facility is a year to 18 months away from completion. Horror stories have spread along the discount-fare grapevine of endemic baggage losses on People flights and of travelers stranded for hours in Newark, Denver or San Francisco. Chairman Burr protests that "we're as professional as any airline out there," but the stories have evidently hurt. One People way of fighting back: a two-month-old frequent-flyer program known as Travel Reward, which awards free flights to steady customers in the same manner as standard airlines...
People might have stayed out of financial trouble had it not been for Burr's $305 million purchase last November of Denver-based Frontier Airlines. Frontier, a conventionally priced, full-service carrier, was already battered at its hub by competition from Texas Air subsidiary Continental and from United. Burr's Denver foray violated one of the initial ingredients in People's formula for success: offer no-frills travel in areas away from heavy competition. Says Burr in retrospect: "When we bought Frontier, our competitors decided Denver was going to be a battleground. It still...
...final sign that People Express was feeling the competitive squeeze came last month. Suddenly and without forewarning, the airline seemed about to drop its entire spartan philosophy. Burr announced that People would upgrade all its services, install leather seats in its aircraft, and offer --horrors!--luxury flying in newly installed first-class seating. At the same time the determinedly upscale VIP lounge was set up in North Terminal. The counterrevolutionary campaign was a clumsy attempt to woo the slice of the airline market that People had never served, the business traveler. The change in style came on the heels...