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{{B}}People
Express{{/B}} People Express, founded in April 1981, grew rapidly on the basis of low fares and no-frills service. It soon became a leading airline and{{U}} (19) {{/U}}changed the industry as firms constantly engaged in price wars to lure passengers. Then, People Express' bubble{{U}} (20) {{/U}}because it overexpanded, consumer complaints mounted and other airlines matched its fares on popular routes. In 1986, People Express{{U}} (21) {{/U}}hundreds of millions of dollars and was forced to sell out to Texas Air, the owner of Continental and Eastern Airlines. In early 1987, Texas Air{{U}} (22) {{/U}}People Express into its Continental division and industry observers believed{{U}} (23) {{/U}}the costly fare wars would be ended. They could not have been more wrong. To stimulate business for its{{U}} (24) {{/U}}Continental Airlines, Texas Air instituted a new low fare category{{U}} (25) {{/U}}MaxSaver. The fare offered prices that were up to 40 per cent lower than "supersaver" rates offered{{U}} (26) {{/U}}all airlines. For example, the round-trip MaxSaver fare from New York to Houston was $79. The MaxSaver fares were immediately matched by all major airlines, {{U}}(27) {{/U}}feared losing business. While MaxSaver rates were low, they also had restrictions. Tickets could not be{{U}} (28) {{/U}}or flight times modified after purchase. Passengers would have to stay over either a Saturday or Sunday, Reservations had to be made at least two days{{U}} (29) {{/U}}and there were limited seats available. Three weeks after MaxSaver rates were{{U}} (30) {{/U}}American Airlines announced plans to raise its discount fares and require 30-day{{U}} (31) {{/U}}purchasing for its lowest fares. It felt it could not continue at the rates in effect. However, just 10 days{{U}} (32) {{/U}}American Airlines had to revise its plan. Texas Air refused to abandon the MaxSaver fare; it even extended the program into the busy summer sea son. Competitors went along and the price war raged on, {{U}}(33) {{/U}}an executive's comment that "nobody's cost structure can survive MaxSavers." |