The MacNeil/Lehrer NewsHour

Intro

ROBERT MacNEIL: Good evening. In the news today, the strongest earthquake in seven years shook Southern California. Wall Street prices fell for the second day. Admiral Hyman Rickover, father of the nuclear submarine, died.We'll have the details of these stories in our news summary coming up. Jim?

JIM LEHRER: After the news summary, we look at the Southern California earthquake and at earthquake readiness in the area. We have a three way discussion about the rise and fall of People Express, the low cost airline. And finally, essayist Jim Fisher talks about the wheat harvest in Western Kansas.News Summary

MacNEIL: The strongest earthquake in seven years shook Southern California today. It knocked out power lines, buckled roads and started brush fires, but caused no serious injuries. The quake, measuring six on the Richter Scale, was centered near the millionaires' resort of Palm Springs. It rattled dishes and shook windows from Los Angeles to the Arizona border. One of the main highways leading into Palm Springs was blocked by boulders that were shaken loose from the slope above. Half a dozen other roads in the area were also blocked by rock slides. But only one vehicle was struck by falling rocks.In town, broken windows and broken pottery were the worst of the damage. There were also several reports of broken gas lines, but the utility company said its inspectors found no serious damage. The quake was the strongest in Southern California since 1979, when there was a quake measuring 6.6 on the Richter Scale. In 1971 a quake registering 6.5 killed 65 people in the San Fernando Valley. The quake which killed at least 5,000 people in Mexico City last September had a Richter measurement of 8.1. Jim?

LEHRER: The stock market continued its dive today. The Dow Jones average of 30 leading industrial stocks was down 18.27 points at closing time.With yesterday's nearly 62 point drop, that adds up to a whopping 80 point plunge in the last two days. Analysts said today's action was more a reflection of Wall Street's concern about the economy.

In Washington today, President Reagan gave the nation three more weeks of Daylight Savings Time. He signed into law a 1987 change that will start daylight time on the first Sunday in April instead of the last, as it was this year and all other years since 1966.

MacNEIL: The head of the professional football players' union, Gene Upshaw, said today he was outraged by the plan for new mandatory drug testing of NLF players announced yesterday by Commissioner Pete Rozelle. We have a report by Spencer Michaels of public station KQED.

SPENCER MICHAELS [voice-over]: Former Oakland Raider Gene Upshaw, executive director of the NFL Players Association, was outraged that Commissioner Pete Rozelle had decided to change the collective bargaining agreement without any negotiations. Upshaw said the players would be willing to negotiate changes in the agreement, but would not bow to Rozelle's edict.

GENE UPSHAW, NFL Players Association: The players are not opposed to testing. They did it in '82. They're still doing it now. But we will be involved in any change that takes place within this agreement before the expiration date, which is 1987.

MICHAEL [voice-over]: The players' attorney announced that a grievance has been filed against the league, all the clubs and Rozelle, protesting the new drug testing program and calling for arbitration and no change in the testing policy for now. The attorney also threatened to go to court for an injunction to stop Rozelle's plan. Upshaw said drugs are not the issue; new working conditions are. But he finally responded to the issue of drugs and the recent deaths of two professional athletes.

Mr. UPSHAW: I feel as much remorse about what has happened to Len Bias and Don Rogers. I attended Don Rogers' funeral last week, and it had an impact on me. But I also feel a responsibility to the players that are still here that I represent. I'm not sure -- and everyone would admit -- even random testing wouldn't have helped Don Rogers. We can not legislate morality. At some point in time, the player has to take the responsibility to do the things and accept the things that are right.

MacNEIL: In Washington, Education Secretary William Bennett called on every college president in the nation to begin and strictly enforce a ban on drugs on campus. Speaking to the Heritage Foundation, a conservative think tank, Bennett said colleges have a responsibility to parents to protect their children from illegal drugs and drug pushers, just as they protect them from crime, fraud or exploitation. He added, "Parents do not expect colleges to be neutral as between decent morality and decadence."

LEHRER: Bernard Goetz will stand trial after all. The New York State Court of Appeals today reinstated attempted murder and assault charges against the so-called subway vigilantes. The charges grew out of the 1984 shootings of four youths in a Manhattan subway. Goetz said he shot them because he thought they were going to rob him. The victims said they were only panhandling for money. Lower courts originally threw out the attempted murder and assault charges. Goetz also is charged with the less serious offense of illegally possessing a weapon.

MacNEIL: In South Africa, 31 Zulu tribesmen were killed in a clash between two factions in a remote area of Natal Province last Sunday. Such battles are common, and not apparently connected with the struggle against apartheid.

In Pretoria, President P. W. Botha agreed to a second meeting in a month with Anglican Bishop Desmond Tutu.

In Austria, Kurt Waldheim was inaugurated as president, and appealed for tolerance for people of different religions and races. In Israel, there were protests because of the charges that Waldheim was linked to Nazi war crimes. We have a report from Chris Hardy of Visnews.

CHRIS HARDY [voice-over]: The demonstrators were mostly survivors from the death camps and young Zionists. They gathered outside the Austrian embassy to mark their disapproval of Waldheim's inauguration. Many of them held placards comparing the new Austrian president to Hitler, and several wore yellow scarves -- symbols the Jews were forced to wear during the Nazi era. While Israel was protesting, the former Secretary General of the United Nations was being inaugurated in Vienna. Waldheim, who looked drawn and tired after a bitterly fought election campaign, promised to respect the constitution and to do his duty to the best of his knowledge and conscience.

MacNEIL: The Food and Drug Administration today banned the use of sulfites as preservatives on fruits and vegetables, because they can cause allergic reactions and death. The FDA said sulfites used to keep produce fresh have caused 13 deaths and some 500 severe allergic reactions. Most of the serious problems were associated with salad bars, and, since posting signs didn't work, the FDA said sulfites would be banned for such use starting next month.

LEHRER: And finally in the news of this day, Admiral Hyman Rickover died. He was the tough little man who drove and led the navy into nuclear power. He was known for not suffering fools or superiors gladly and for often seeing the two as the same. Rickover came to this country with his parents from Russia when he was six years old. He graduated from the naval academy and went on to serve 63 years as a navy officer, until forced to retire by President Reagan four years ago. In 1983 Congress gave him a medal, and that prompted this rare moment of reflection.

Adm. HYMAN RICKOVER: I have an old fashioned love for our country. She has been generous to an immigrant boy. She gave him every opportunity to advance himself. I am more than fortunate. I have done what I wanted during my life, and have even been paid well for doing so. So I thank all of you from the bottom of my heart.

LEHRER: Former President Carter, who served under Rickover in the navy, called him today one of America's greatest citizens and patriots. Rickover died at his Arlington, Virginia, home this morning of apparent natural causes. He suffered from a heart problem and had had a series of strokes last year. He was 86 years old.

MacNEIL: That completes the news summary. Coming up, more on today's earthquake and earthquake operations in California, the troubles of People Express Airline, and an essay on the Kansas wheat harvest. Earthquake Warning Signs

LEHRER: The California earthquake is first up tonight. It hit the southern part of the state at 2:21 a.m., Pacific Time, causing only modest damage and injury, but much fear among Southern California residents who have been told a big earthquake is on its way. Today's registered six on the Richter Scale -- the largest there in seven years. Clarence Allen will now tell us all about it. He is a geologist at the California Institute of Technology. He joins us tonight from Pasadena, California.

Dr. Allen, six on the Richter Scale -- how strong an earthquake is that?

CLARENCE ALLEN, California Institute of Technology: Well, it's certainly large enough to cause damage in areas with poorly built structures, but it's a long ways from being a truly great earthquake of they type that we had in 1857 here in Southern California, and 1906 in the San Francisco Bay area.

LEHRER: The fact that there was modest damage and injury can be attributed to what? That the earthquake wasn't very strong, or it hit in areas where -- where the areas were not susceptible to that kind of earthquake?

Mr. ALLEN: Well, in the first place, it was not really a strong earthquake, even as compared with the San Fernando earthquake. But I think more important is the fact that indeed it was in a fairly isolated area -- the desert area north of Palm Springs -- and much of the construction in the Palm Springs, Desert Hot Springs area is relatively modern. Had that same earthquake occurred underneath parts of downtown Los Angeles or parts of Pasadena, I suspect there might indeed have been a fair amount of damage and perhaps loss of life.

LEHRER: What is the difference between construction that can handle an earthquake and construction that can not?

Mr. ALLEN: Well, I'm not an engineer, and I'd just assume not try to attempt to get into a sophisticated explanation.But I think the primary thing we are concerned about in many earthquake areas of the United States are older buildings -- buildings built prior to 1933, particularly unreinforced masonry structures, most of which are simply sitting ducks.And we still have a lot of these buildings around in cities like Los Angeles, Pasadena, San Francisco. And until we get rid of those structures or bring them up to more modern standards, we're just waiting for a disaster to happen.

LEHRER: Where was the center of this earthquake? You call it -- you professionals call it an epicenter, is that correct?

Mr. ALLEN: Yes, we use the term epicenter for the point on the ground surface above the actual point where the rupture on the fault started. It was located about 12 miles northwest of Palm Springs.

LEHRER: And did that -- it's important -- I mean, just explain what that means -- what that is.

Mr. ALLEN: Well, an earthquake is caused by a rupture on a fault -- a surface of failure as stresses build up along it over many years. Finally the strength of the rock succeeded. The rocks rupture very suddenly along that fault surface. And the point where the rupture starts is called the focus, and the point on the surface of the ground above that is what we call the epicenter.

LEHRER: Was there any warning about this? Was there any knowledge or prediction? Were you able to predict that this one was coming?

Mr. ALLEN: Not that I'm aware of. Seismologists nowhere in the world are yet able to predict earthquakes routinely on a short term basis. And I'm not aware of anything that particularly happened before this earthquake that should have warned us. On the other hand, we're going to be looking very carefully over the next few weeks at the seismic history of this area over the past few days and weeks, as well as going further back in time. And we'll certainly be attempting to see if there were any precursors that, had we been wise enough, we could have recognized. But at the moment I'm not aware of any.

LEHRER: Do you expect this earthquake to be followed by other earthquakes in the next few days?

Mr. ALLEN: Well, certainly it will be followed by after-shocks.It already has been, and that's typical of earthquakes of this kind of magnitude. They'll be followed by after-shocks gradually decreasing in intensity and in frequency over the next few days, weeks, perhaps even months. I think a more significant question -- the one that concerns us -- is, is it possible that this is, on the other hand, a foreshock to a still larger earthquake? And clearly that's something that we as seismologists, as well as the general public, worry about whenever we have a moderate sized earthquake. And this particular part of the San Andreas Fault system is perhaps the most worrisome of all of the segments of the fault in California. It's the area where we most expect a truly great earthquake sometime in the not too distant future. Therefore, whenever an earthquake of this particular size occurs, we're somewhat worried that this could be the precursor or the foreshock to a larger event. Now, this hasn't happened yet, and every hour that goes by indicates that it's less and less likely, and indeed we think the chances are now very low.But it's certainly something that concerned us in the early hours and still is a matter of some concern to seismologists.

LEHRER: There's no way to find out except to wait, is that right?

Mr. ALLEN: I think that's true on our -- on the present basis of understanding, yes.

LEHRER: Now, do you go along with the much-heralded prediction that a large earthquake is going to hit Southern California in the next several years?

Mr. ALLEN: Well, we don't really call that a prediction, since it's not a specific prediction as to time and place, but there's no question but that large great earthquakes have occurred in the past in Southern California -- relatively recent past. They're going to happen in the future. And all the evidence we now have from a variety of sources indicates that a -- we're really getting very close to the time when a great earthquake will happen.

LEHRER: All right. But this -- today's wasn't it?

Mr. ALLEN: Obviously not.

LEHRER: Okay. Don't go away, Dr. Allen. We'll be back in a few minutes. Robin?

MacNEIL: As Dr. Allen just mentioned, one of the reasons there was relatively little damage from today's quake was that it hit in a rather remote desert area. If it had hit a major city, things could have been much worse. Just how prepared are Californians for that possibility? Jeffrey Kaye of public station KCET, Los Angeles, asked that question in this report which we first aired last year.

Training official: Just think of how you want to look on TV tonight, because that's where you're going to be. And a little bit of hustle looks real good.

JEFFREY KAYE, KCET [voice-over]: The debris and wreckage are simulated; the buildings, movie sets. But the public safety equipment and personnel are real, and so is the danger.

2nd training official: Beginning in just a very few minutes you'll see what happens when a one tank containing toxic chloride is knocked off its foundation by the quake.

KAYE [voice-over]: The earthquake, the big one. Everyone knows it is eventually coming to Los Angeles. Some are getting ready for it. This exercise at Universal Studios movie lot is part of LA's annual earthquake awareness week. It is designed to train public safety crews and to remind residents that Los Angeles should prepare itself for a virtual certainty.

Dr. LUCILLE JONES, seismologist: Fifty percent chance in the next 30 years, and unfortunately that's all we can say at this point.

KAYE [voice-over]: That's a 50% chance of an 8.3 earthquake on the Richter Scale -- a huge one between now and the year 2015. Seismologist Dr. Lucille Jones works for the U.S. Geological Survey at the California Institute of Technology in Pasadena. Her research uses state of the art sensing and recording devices, but Dr. Jones acknowledges the science of earthquake prediction is in its infancy.

Dr. JONES: There's quite a bit of it that's just a crap shoot. Some things we know every well. For instance, we can say exactly that the San Andreas Fault is going to have a large earthquake. We know that. Given the time that it's going to occur, we hardly know at all.

KAYE [voice-over]: By studying the history of seismic activity along California's San Andreas Fault, scientists believe they have discovered cycles -- a buildup of ground movement, then an earthquake, a period of quiet, then another buildup and earthquake.

Dr. SAMUEL ARONI, UCLA: Los Angeles is doing a lot to prepare itself for earthquakes, both in the private and the public sector, but I don't really believe that it is prepared. I think much more can be done.

KAYE [voice-over]: Dr. Samuel Aroni, dean of UCLA's School of Architecture and Urban Planning, says far less is spent on earthquake preparation in Los Angeles than in many foreign quake-prone cities, particularly in Japan. The consequences, he feels, could be devastating.

Dr. ARONI: If it would happen at something like at 4:30 in the afternoon, some scenarios have indicated casualties of up to 25,000 people. Now, different times -- there are some luckier times that earthquakes could happen, where people would be in safer places than others.

KAYE [voice-over]: Aroni is an engineer who has studied how Los Angeles structures suffered during previous tremors, including the disastrous 1933 quake. That tremor killed 115 people and leveled large parts of Southern Los Angeles and Long Beach. The widespread destruction led to stricter building standards, but there is concern these days that too many old buildings like these have yet to be rought up to code. Moreover, even new buildings may not be sufficiently quake-resistant.

Eyewitness, 1971 quake: It just shook and shook and shook, and the wall just opened up.

KAYE [voice-over]: In the 1971 tremor in Los Angeles' San Fernando Valley, for example, a relatively new hospital was damaged beyond repair. The shock was a reminder of the area's vulnerability.

Eyewitness: The only way you can describe it is you look down, it looks like a bombed-out area that you've seen in some war pictures.

KAYE [voice-over]: LA's 1971 quake had a magnitude of 6.4 -- a moderate one, as earthquakes go. It left 58 people dead, $500 million worth of property damage, and a host of systems in need of repair. Today, many of the same kinds of vital services could still not withstand the shock of a huge jolt.

Dr. ARONI: I'll give you one example: vulnerability of computer banks. What is likely to happen to the whole computer system? Have they been designed to earthquake? Have they been braced? Which of them are going to lose the information? Which of them will physically collapse?

KAYE [voice-over]: Aroni believes that many systems, such as the ones that supply telephone, water and power services, must be fortified to survive the kinds of shakes LA has experienced in the past and should expect in the future. Living with earthquakes is part of LA's folklore and culture. The impact of the 1933 shock was captured by a camera recording a W.C. Fields movie at the time it struck.

1st actor: What's the matter?

2nd actor: Earthquake!

W. C. Fields: Take your time, folks. Everybody walk easy. It's all right now. All right. Okay.

KAYE [voice-over]: Today Hollywood is doing its part to prepare LA schoolchildren for earthquakes.

[clip from public information film]

YOGI BEAR: Remember, if Mother Nature gives a shudder, it's like someone shaking your chair.

KAYE [voice-over]: Public agencies and many businesses have planned for emergencies, and exercises such as these have ceased to be big news. But despite the warnings, most residents have yet to take the threat seriously. Less than 10% of California homeowners have earthquake insurance.

Resident: And we're fatalistic about it. If it's going to happen, it's going to happen.

2nd resident: I don't believe it's going to happen, so I just don't, you know, give it a second thought.

3rd resident: Oh, well, we keep stock food, and our house is pretty safe.

4th resident: Am I prepared for it? I don't even really think about it.

KAYE [voice-over]: In the main, the people of Los Angeles have become blase about earthquakes, paying little heed to the warnings. By contrast, in the rural hamlet of Parkfield, midway between Los Angeles and San Francisco, residents take their quakes quite seriously. Their interest could save lives in Los Angeles.

GLENDA JENSEN, Parkfield resident: But, like, if I go to bed at night and we have one during the night I can get up and tell the different in the morning.

KAYE [voice-over]: The crevice running down the center of Glenda Jensen's kitchen flexes as the minor earthquake strike. Parkfield sits right on top of the San Andreas Fault, and, because it does, major tremors have hit the farming community an average of once every 22 years.

KAYE [voice-over]: Seismologists believe Parkfield is just about due for its next big earthquake. Its geology has made it one of the most intensely monitored areas in the world. The U.S. Geological Survey spends $1 million a year studying the San Andreas Fault. Scientists are preparing to sink a sensor down a 1,000 foot hole they are drilling.

Dr. PETER MALIN, seismologist: This device senses the motion of the ground at all times, and during an earthquake it registers a greater deal of motion. Se we're essentially sensing very small earthquakes, and the reason we're going underground is to sense even smaller ones and then understand the property of the rock between the ground level and down hole.

DUANE HAMANN, teacher: How long do they live after they come out of the water as a dragonfly?

KAYE [voice-over]: Duane Hamann, the teacher at Parkfield's once room school, is also part of the community's earthquake watch. Hamann moonlights for the U.S. Geological Survey under a program run by the University of Colorado.

Mr. HAMANN: I'm not in this for the money. I'm really interested in this from the standpoint of what can be done to predict earthquakes. Now, I'm not worried about Parkfield, because out here there isn't much to fall on us. I'm worried about the metropolitan areas.

KAYE [voice-over]: About three times a week Hamann drives to a laser station to help scientists measure ground movement around the fault. Hamann aims the laser towards a series of reflectors on nearby hilltops and measures the lengths of the beams periodically to see how much the earth has moved. So far the information gathered by the laser and other measuring devices has not yielded a pinpoint prediction. But researchers have no doubt that a Parkfield earthquake is imminent.

[on camera] Some people might look at the crack in your house and look at the potential for an earthquake here and ask themselves, why doesn't she get out of that place?

Ms. JENSEN: I'm safer here. I'm a lot safer here than I'd be in the cities.

KAYE: Why?

Ms. JENSEN: Because if a big earthquake hits there there's going to be a lot of crazy people panicking and running, and buildings are going to fall. And I have nothing to fall out here. Even my house is going to stand, crack and all.

KAYE [voice-over]: Scientists studying Parkfield realize that in the scheme of things an accurate prediction of an earthquake here will not have much practical effect. As far as anybody knows, no one has ever been injured in a Parkfield quake. But, as remote as rural Parkfield may be, what scientists learn about earthquakes here may save lives in Los Angeles. In this populated area the next major quake could be devastating. An accurate earthquake prediction might mean the difference between a catastrophe and an orderly, lifesaving response.

LEHRER: We return now to Dr. Allen of Cal Tech, who's with us tonight from Pasadena. Dr. Allen, first, how did Parkfield do in this morning's earthquake?

Mr. ALLEN: Insofar as I'm aware, nothing happened at Parkfield, but then Parkfield is a long way -- several hundred miles -- from the epicenter of the earthquake this morning.

LEHRER: I see. Is the woman right, Bill, when she says she'd be safer in rural Parkfield with all of its susceptibility to earthquakes than she would be in a city?

Mr. ALLEN: That's hard to say. I think it depends on what kind of house she is living in. If she's living in a wood frame house, and she probably is, then she's probably reasonably safe. But the same kind of houses in the city of LA or Pasadena, likewise, are apt to be fairly safe.

LEHRER: Okay. What about the prediction that there's a 50% chance of a really big earthquake in the next 30 years along the San Andreas Fault or in the Los Angeles area specifically. Do you buy that?

Mr. ALLEN: Well, I'll buy it in general. No one can be very precise on those numbers. But I think the evidence on which that's based is very sound. We know from trenches we have dug across the San Andreas Fault in the area near Los Angeles that large earthquakes have occurred about every 145 years here. We know the last one occurred in 1857. And that allows us to talk about the probabilities of a similar event happening at some time in the future. So yes, I think that number's in the right ballpark.

LEHRER: But how can you measure the strength of a -- of a -- or how can you predict that an earthquake will be a particularly strong one?

Mr. ALLEN: Well, we know from these trenches that have been dug across the fault that many of these past earthquakes -- and we've identified about 12 such earthquakes in the past 2,000 years or so -- they have about the same kinds of displacement of the ground -- of the strata. They have about the same kinds of effects as that of 1857. Therefore, it looks as though this part of the San Andreas Fault has a sort of a characteristic kind of earthquake that's about magnitude 8.3, and we get those and not many smaller ones. So that's the basis of our reasoning.

LEHRER: You, of course, are an expert. Is it your feeling that the rest of the people or most of the people in Southern California do not take this threat very seriously?

Mr. ALLEN: Well, certainly many people are blase, although I'm also impressed that a survey a few years ago indicated that more people in Los Angeles had heard of the Palmdale bulge than knew who the Vice President of the United States was. I think we've made a lot of progress.

LEHRER: What's the Palmdale bulge?

Mr. ALLEN: Well the Palmdale bulge is this area north of Los Angeles that's been uplifted and that's become quite famous and a matter of great interest here in the Los Angeles area.It has something to do, of course, with the stresses building up along the San Andreas Fault, although no one is willing to use it, necessarily, to predict when the next earthquake will happen.

LEHRER: Okay.

Mr. ALLEN: But I think a lot of progress has been made in the past five or ten years, and a lot of public agencies and governmental agencies are working now to try to increase the awareness. We have a long ways to go. There's no question of that. Both in the public awareness area and in this particularly serious problem of getting rid of or bringing up to some modern standard these old buildings that are just waiting for the disaster to happen.

LEHRER: Dr. Allen, thank you very much for being with us tonight.

Mr. ALLEN: Thank you. People Express: Buying Low

MacNEIL: Next tonight, we analyze what went wrong for People Express. Four years ago it was the brightest business on the block -- a case study for business schools. Today the airline that revolutionized the industry is on the selling block. All through the July 4 weekend, bankers negotiated with potential buyers, including Texas Air, and the People Express board of directors met today to consider its options. On June 23, People's chairman, Donald Burr, said financial difficulties forced them to sell part or all of the company. Since then, Burr has been unavailable for comment, in contrast to the high profile he's had in the past.

[voice-over] It was the charismatic Burr who built People Express into the nation's fifth largest airline.

DONALD BURR, People Express: People Express' power today is not in its perfection. It's in its aspiration to perfection. Aspiration is very powerful. It's the desire to be the best that's creating this energy today -- not because we're anywhere near the best.

MacNEIL [voice-over]: People began operating in 1981 with three planes based in Newark, New Jersey. Under Burr's leadership, it established a reputation as a no frills airline, with fares that were not only cheaper than other airlines, but in some instances cheaper than buses.

[clip from commercial]

Announcer: Thanks to People Express, flying costs less than driving.

Mr. BURR: When you are able to go to the public and say, "Look here, I can take you to Boston for $19. I can take you to the West Coast for $119. Take you to Europe for $150." The public feels good about that before they start.

MacNEIL [voice-over]: In 1983 People doubled its fleet by purchasing 20 Boeing 727s from Braniff Airways. In 1985 it expanded again, acquiring three airlines -- Frontier, Brit Airways, and Provincetown Boston Airline -- in the span of four months. But People's profits did not keep pace with its rate of expansion. As it moved into larger markets, it faced stiff competition from the older, established carriers.The company lost $20 million last year, and a record $58 million in the first quarter of this year.

Last April, People began courting business travellers for the first time by offering a frequent flyer program and first class seats in most of its aircraft. But People's attempt to go upscale has so far failed to solve its problems.

[on camera] Now we look at the past and future of People Express from three different perspectives. First, we have Julius Maldutis, who watches the airline industry for Solomon Brothers, and David Lewin, a labor specialist at Columbia's Business School in New York.

Mr. Lewin, this was a success story. What happened?

DAVID LEWIN, Columbia University: It was a success story. I think the answer to what happened is fairly succinct. This is a case of a business that expanded rapidly as a start up and did very well, and partly because it did so well, thought it could continue to expand extremely rapidly in the next phases of its growth. It found out the hard way that it can not do that, and I think that's the simple bottom line for People Express -- too much growth too rapidly.

MacNEIL: Do you agree with that, Mr. Maldutis?

JULIUS MALDUTIS, airline analyst: I would take partly an exception to that.It wasn't growth per se that caused this company's problems. It was quite successful when it flew noncompetitive markets -- the small cities. As its success spread and its fleet increased, it entered markets of the vary large established carriers who had a vested interest in the Chicago, Minneapolis, Los Angeles, San Francisco routes. This entry into the large markets came also at a very bad timing, because the large carriers realized the growing threat that People Express and Continental produced for them, and they began to match them on pricing action. So I think it was not only the growth itself, but the direction of the growth that caused these problems.

MacNEIL: What were the consequences -- the bad consequences of growing too fast?

Mr. LEWIN: Well, they --

MacNEIL: For customers and within the airline?

Mr. LEWIN: Yes. Well, the figures you cited in terms of the financial performance of the company is, I think, the most significant bottom line result. The increasing frequency of customer complaints, lost baggage, and I think most particularly, given the notion of trying to entice business travellers, the increase in delayed flights and cancelled flights. One must remember that People Express started out as an airline without a mechanic or a maintenance person, and that is still true today. They subcontracted all of that work. And, as Mr. Maldutis says, when they were doing that in the local markets -- the regional routes -- that was fine. But when they started to compete with American and TWA and United, who have subsidiaries that are servicing People Express' planes, it doesn't take a genius to figure out that those airlines may say, "We're not going to give them the service on time, and perhaps the quality they deserve." So I think there are numerous effects, and perhaps later on we can talk about the effects on employees, which I count among the most significant.

MacNEIL: Well, we can discuss those now. People was not only innovative in its prices; it was innovative in its -- in the way it worked its employees.What happened there?

Mr. MALDUTIS: Well, I think the great success story to People Express is still to be told.

MacNEIL: We should just summarize how it was innovative with this --

Mr. MALDUTIS: Innovative in the sense that there were approximately 35,000 unemployed airline people whose skills were not readily transferable -- that Mr. Burr had a very great labor pool that was available. He also formed a very different management structure and a management philosophy that was diametrically opposite to what was known in the industry. It was participation management, it was group management. I think our colleague here can expound on that some more.

MacNEIL: And what happened to it?

Mr. LEWIN: Well, just one other point. It was not only that, which I quite agree with, but for the largest employee group in the airline -- the customer service manager, who performed several functions -- this company said the one thing you can't have is airline experience. And it hired schoolteachers, social workers and nurses -- largely young women -- into these jobs, promised them opportunity, growth, profit sharing, required stock ownership, as it did with the former pilots. So you had a tremendous goodwill and morale among this work force in its early years. What I think has happened now is that that morale has turned down. Turnover had increased substantially, including most recently Mr. Pareti, the president, and Ms. Dubois, the personnel manager. Folks who would have come to work for People Express in '82 and '83 and maybe '84 are now looking askance at the airline. And that's not something you can just jerk around and recapture a market on.

MacNEIL: With the big loss in the first quarter and a projected big loss, I gather, in the second quarter of the year, what are the options for People Express tonight, Mr. Maldutis?

Mr. MALDUTIS: I think there are several, one of which, it has to change its basic business strategy and decouple itself from the highly competitive markets. Namely, go back to its original route strategy. Second, its liquidity position, which I estimate is about $50 million today --

MacNEIL: What's that mean, the --

Mr. MALDUTIS: Fifty million in cash.

MacNEIL: But with a lot of debts.

Mr. MALDUTIS: With a lot of debts -- approximately $800 million in debt for the company today. I think it will have to sell some of its larger aircraft, namely the 747s. And it may, in fact, have to dispose of Frontier airlines, which has turned out to be, I think, a bad strategic move.

MacNEIL: But can it stay in business as an independent entity itself -- People Express -- or will it have to sell itself out to somebody else like Texas Air?

Mr. MALDUTIS: I don't think at this point that question can be answered. I believe that there is a market for companies such as People Express. It all depends on the strategy that management will follow.

MacNEIL: What do you see as the option?

Mr. LEWIN: I would add to one possible additional option to either being taken over in part or in whole or going out of business. Those are the two options being discussed widely now.But go back to the point of employees. Every full time employee in the business is required to own stock. Every one of them participate in a profit sharing plan, and it's yielded nothing.

MacNEIL: How many are there?

Mr. LEWIN: Oh, you're talking roughly 4,000 full time employees. One other option is that employees might buy this airline. Their future was tied to it. And if the options they face are liquidate the business or be taken over by an unknown, such as Mr. Lorenzo, who may be a bit more known than unknown.

MacNEIL: Who runs Texas Air.

Mr. LEWIN: Texas Air, Continental and the rest. Employees may decide that this is an option, and they may take some action in that respect. I don't think it should be discounted fully.

MacNEIL: Okay, gentlemen. We'll come back. Jim?

LEHRER: A third opinion now from Alfred Kahn, who is often called the father of airline deregulation. It came into being when he was chairman of the late Civil Aeronautics Board in the Carter administration. He now teaches political economy at Cornell University, and he joins us from WCNY in Syracuse, New York.

People Express was considered a child of airline deregulation, so that makes you the grandfather of People Express. Is that right, Mr. Kahn?

ALFRED KAHN, Cornell University: Yes. And I'm very sad about the recent news about People Express.

LEHRER: What went wrong in your opinion?

Mr. KAHN: Well, I think it was the combination of circumstances that the other two -- Professor Lewin and Mr. Maldutis -- have been talking about. There were clearly mistakes made by the management of People Express. They grew way beyond their capacity to practice the kind of management style that they had and to be able to give the good quality of service that they previously gave. The side of it that I think perhaps they haven't emphasized quite enough is the fact that People Express -- its fate is not unique. We've had enormous numbers of failures, particularly among the new entrant airlines, and the industry does seem to be turning around and becoming somewhat more concentrated than it was before. There are advantages that the major carriers have had that when they were directly challenged by People Express, they began to exert with a will.

LEHRER: And is that where the future lies, do you think? We're going to end up with fewer but very big airlines?

Mr. KAHN: Well, I think that is the trend. That does not mean that I think that competition in the industry is dying out. It's obviously because competition is so effective and intense that we've had these large scale failures, especially among the new entrant airlines.

LEHRER: Well, explain that. I mean, deregulation was supposed to foster competition. It fostered --

Mr. KAHN: That it truly has done.

LEHRER: And it did. And now it's destroyed competition.

Mr. KAHN: Well, I think that's an exaggeration, Jim. You look at American industry generally. You find that they go through a period of shaking down and often the industries come to be dominated by a relatively small number of firms. The airline industry -- any airline industry tht has, let's say, six major, integrated firms -- which seems to me -- it's hard to believe there would be less than that -- that includes among its numbers a Texas Air, a Continental -- which is a very low cost and aggressive price cutting carrier -- that includes a Southwest Airlines and an America West, that's an industry that is not going to be -- or now a Presidential -- that has the romance to people of every year people want to form new airlines, and entry is relatively easy. That's not going to settle into sluggish, slovenly, monopolistic ways, I don't think.

LEHRER: But back to your point. It was the ability of the big airlines -- the established airlines, American, United, Delta and so on -- to react to People that caused People to get hurt, correct?

Mr. KAHN: That's right. And you have to recognize that the competition's been so intense in the last year or so that while consumers have clearly benefited, it -- fares were at levels, yields have been at levels that really were not sustainable. The whole industry has been losing money, practically, in the first half of this year.So that I don't regard it as catastrophic in itself if the industry becomes somewhat more stable and competition more sustainable.We're not going to the extreme -- I mean, of ending up with one firm monopolizing the whole market.

LEHRER: But in other words, if I'm interpreting correctly what you're saying, the industry no longer needs People Express.

Mr. KAHN: Well, I think it needs the threat of the possibility of new People Expresses springing up. And as I say, look at Presidential. Now, I'm not saying that I know that Presidential will survive out of Dulles. But that's the one --

LEHRER: That's Presidential Airways that started what, about a year ago, right?

Mr. KAHN: Yeah, with the president of People Express -- Mr. Pareti.

LEHRER: Okay.

Mr. KAHN: Out there America West operating out of Phoenix is making money. You do have new carriers able to come in and have the advantage of flexibility and that may avoid some of the errors that People made.

LEHRER: Well, wouldn't you think, though, that if you were thinking about starting an airline, you would think twice about following the People Express model?

Mr. KAHN: Of course you would. There does, however, seem to be something about the romance of forming an airline that seems to drive otherwise rational investors slightly crazy. And that is going to be a continued protection of consumers. But that isn't the only protection. I'd like to have a chance at some point to say what happens if I'm wrong and this industry really does end up to be a tight oligopoly of say only three or four carriers. I don't think it likely, but that's not the time to say that we've been defeated at all.

LEHRER: Robin's going to give you a chance in a minute, I promise.

Mr. KAHN: If you promise, Jim.

LEHRER: It's a promise. Robin?

MacNEIL: Mr. Maldutis, if People goes out of business, is that the end of discount fare competition?

Mr. MALDUTIS: No. Quite to the contrary. I would argue that we will continue to see very aggressive price competition, and I think you will see next year some very innovative pricing which will follow along the lines of theatre tickets or baseball tickets. You will have no refundability. It will be purchase the ticket, and if you don't fly, you will lose it. It will come at great discount, and it will be available months in advance.

MacNEIL: Even more discount than --

Mr. MALDUTIS: Probably perhaps so. So to that extent, I expect to see greater competition in the industry.

MacNEIL: Now, are you predicting that in countries -- in companies with nationwide or very large service, or just small, regional, specialized market service?

Mr. MALDUTIS: I think the large, established carriers have learned some extremely painful lessons from the People Express and others -- that they must be price competitive. They have been extremely successful in reducing their labor costs. For example, some carriers today -- the old carriers -- have costs that are equal to, if not lower to, People Express. I would also argue that the price of entry to the industry -- and I would disagree with Dr. Kahn on this point -- that the price of entry into the industry is becoming very high. If we have another carrier that fails, the financial markets are not that foolhardy that they will continue to finance the so-called romance.

MacNEIL: What about that, Dr. Kahn?

Mr. KAHN: Well, I'm sure that that's partially true. But the fact is that in 1984, which was the most prosperous year that they've had for a long, long time, some 40 carriers failed. And yet since then we've had some new ventures. I'm not saying that -- Mr. Maldutis is the one who's sitting there on all those other people's money more than I. But the fact is that there have been new carriers forming.

MacNEIL: Well, the question is, can, in today's market, with all the factors you've mentioned, is it still possible for a new airline to come along and make it on -- as a discount airline? Do -- let me ask Mr. -- Dr. Lewin about that.

Mr. LEWIN: Well, if you regard the financial markets as the only source of funding, the answer becomes more no than yes. But if you regard employees as a source of funding, as we have seen in People Express, the answer moves over a little more to yes. I think it would be a shame if the lessons taught by People Express on the employee relations policies in relation to financing the airline were lost, and you used modest investment capital and modest stock ownership initially to help fund this airline.I don't see any structural reason why that couldn't continue to occur in the future. But if I may just add a point on competition that has been mentioned by both Dr. Kahn and Mr. Maldutis, I would submit to you that over the next four to five years, which is a reasonable planning cycle, it's not just competition from other air carriers that this business has to worry about. It is competition from the telecommunications, electronics and information processing firms. Because if you ask yourself what business is the airline in, it's not just in the transportation business. It's in the communications business. Firms will find over the next four to five years reduced costs, more efficient production of teleconferencing and telecommunication, so they don't have to send 12 to 15 to 20 executives up in the sky with a high opportunity cost, possible risk, to go meet in a location. So if you're talking about competition in this industry, I would submit for the future it's not just the question of a People Express and a Presidential versus an American. It's the industry as a whole versus other substitutes for a portion of its market base.

MacNEIL: Okay, now, so that we keep our promise to Alfred Kahn and get back to the way the airline industry's going to shake out, do you agree that it's entering the phase of consolidation -- that a lot of the new carriers and some of the old ones are going to shake out, and we're going to end up with a few consolidated big airlines?

Mr. MALDUTIS: My judgment is that we will have approximately eight to nine very large nationwide carriers with nationwide route systems, and then a multitude of small, specialized carriers. Many of these carriers are already entering in collaborative marketing agreements, which is a form of consolidation. We've had three major mergers that have been announced. We may see some more mergers. I would expect that this entire consolidation phase is going to be completed by the end of this year, or at least we will know the shape of it.

MacNEIL: And so you're predicting eight or nine. That's not very different from what there is today -- eight or nine national carriers and a lot of regional ones feeding them. Is that --

Mr. MALDUTIS: That is correct.

MacNEIL: So you're not predicting a radical consolidation.

Mr. MALDUTIS: Absolutely.

MacNEIL: What do you think?

Mr. LEWIN: Well, I rather like that description, because if we look at other industries that have been deregulated -- banking, securities, houses, trucking -- what do we find?We find a very substantial shake out with new entrants and consolidations.So competition breeds winners and it breeds losers. And I myself think that there will be a substantial number of carriers. Whether 8 or 9 or 10 or 11 is the right figure, I don't know.

MacNEIL: But now, Alfred Kahn, you think it could be as few as six or perhaps even fewer.And you have some fear that that would lead to what you called slovenly monopolistic ways.

Mr. KAHN: Well, you're not really going to succeed in starting a fight between me and these two other gentlemen. I think --

MacNEIL: That is not our purpose.

Mr. KAHN: I know. It certainly is not going to get below six, and it may well be seven or eight. And I think each of us could name what those systems are likely to be. There are --

MacNEIL: Well, name what you think they're likely to be.

Mr. KAHN: Well, I think that definitely you're going to have an American system, and we're not going to let them engage in any major acquisitions. You'll have a United system. You'll have this Texas Air-Continental system. You have TWA maybe joining with somebody -- whether it's Western as well as Ozark, maybe even with Delta -- but that still leaves a fourth system. You've got a Piedmont system. And I'm sure I've missed one or two major ones.

MacNEIL: Anyone want to add in on this? What do you think? We haven't got up to your eight or nine yet.

Mr. MALDUTIS: I would agree with almost all of the choices. I would add only Northwest Airlines.

Mr. KAHN: Exactly.

MR. MALDUTIS: Which is the financially strongest company. You have Southwest Airlines -- another very financially strong company.

MacNEIL: Nobody's mentioned Pan Am in this. Where do --

Mr. MALDUTIS: Well, Pan Am and TWA may still have to resolve the leadership on the North Atlantic.

MacNEIL: I see. Looking -- in other words, you are all agreed that People -- the purpose that People has served in really revolutionizing the industry and throwing this whole new era of competition -- door of competition -- open, that that is not going to be closed if People itself goes out of business -- that the threat, as Dr. Kahn says, is still going to be there. Do you all agree on that?

Mr. MALDUTIS: Agreed.

MacNEIL: Now, what about the point that Mr. Maldutis made earlier that we're about to see a lot of really innovative fare structuring and everything? I mean, do you agree with that? Do you see even more changes coming for the average air traveller?

Mr. LEWIN: I think we'll see some innovations in prices, because I think one of the lesson that People has offered -- and some other originally regional carriers have offered -- is that you can do some innovation on the price side. But I think we ought to remember tht a number of the majors have been fairly innovative on the price side, what with the discount fares and the variety of techniques they have used. What strikes me is that the big lesson for those carriers is perhaps less in the pricing than it is on the employee relations policies. How long ago was it where we could have cited an Eastern and a Western -- not as leading examples, but as facts -- that have employees on the boards of directors? How long ago was it that you couldn't take an airline employee performing a narrow job and ask him to do a second job? Many of the airlines have gone to this, and I think the People Express story has had that spill-over effect.

MacNEIL: What about the -- briefly, Dr. Kahn, what about the proposal somebody suggested to me the other day that you may end up with airlines flying one plane first class, another plane all full fare economy class, another plane all discount fares. And you get into a kind of class difference either between airlines or within an airline. Do you agree? Is that a possibility?

Mr. KAHN: I would disagree with that. Two statistics: during the month of May, 90% of all domestic air travellers flew at a discount fare. And that includes business travellers, as well as vacation travellers. So discount fare structure is virtually available to everyone in the United States. The second statistic: there have been several carriers that attempted first class service that are no longer in business. Regent Air, for example, which flew from Newark to Los Angeles, was a lavishly designed service, and it failed, because the market was just not there.

MacNEIL: I'd like to hear your other observations on that, but that's the end of our time. Alfred Kahn in Syracuse, thank you for joining us. David Lewin, Mr. Maldutis

Mr. KAHN: Didn't keep your promise. Eternal Harvest?

LEHRER: Finally, some words from Jim Fisher of the Kansas City Times about the wheat harvest in Western Kansas -- the place where America the beautiful's amber waves of grain are found.

JIM FISHER, Kansas City Times: Winter wheat sown last September -- wheat worth $2.12 a bushel at the nearby elevator, down a dollar from last year.It happens in early summer in Western Kansas where the hard land is briefly softened by the rippling grain. Headed out, waiting for custom cutters who hire out to farmers at harvest time who come off the main highways and down the dirt roads -- endless roads with few signs -- using abandoned farmsteads and junk machinery as landmarks. Familiar, though, to those who for a century -- since steam threshing machines came along -- have made the harvest a yearly ritual.

For years, Fred Thackeray and his crew have made what can only be described as an odyssey from their home in Dawson, Montana, to Southern Kansas in June and back to the Canadian border in late August. Thousands of miles, hundreds of places. Cutting wheat: just a job? Something more.

FRED THACKERAY: I think what's more important than anything else to me, now that I've got the machines fairly well paid for, is the people I've met. I really enjoy working with farmers. They're good people. When that wheat's ready to cut, those farmers want it cut, and they want it cut now. And another thing that I noticed about these farmers -- and I understand them -- they're not normal. When harvest time comes, they are not normal, and you gotta be careful. They've worked for two years to get that crop, and they can get wiped out in five minutes in a good hailstorm. So the minute that wheat -- the moisture gets down in that wheat to where the elevator will take it, they want it all cut right now, whether they've got 30 acres or 4,000. They just -- they want to get it done.But then, as soon as it's over with, they're very fine people again. They're very happy.

FISHER: You don't need a fancy resume out here. Nobody exchanges business cards. Do a job. Hold up your end. No politics.The old American work ethic is almost palpable here. And something else -- the harvest is something that seems from afar an acting out of our agrarian heritage, a gathering in of the year's crops, a celebration of the land. When the wheat is ready, when it's time to make the last adjustments on the combines, to eat in the fields, to visit with the owners of the land -- Anne and Duane Wente -- to talk of wheat.

Mr. THACKERAY: About thirteen and a half, isn't it, Duane? The wheat?

DUANE WENT: Twelve eight. Twelve eight on that. So it's getting drier.

FISHER: And when the sun has dried the fields, it's time to cut swaths through the standing grain. The unloading of the combine -- grain cascading into the trucks. Then another circle of the fields, and another, and another. Clipped conversations on the FM band.

Mr. THACKERAY [on radio]: I dumped on the red one was the last one in.

Mr. WENTE: Okay, you've got grain on two trucks.

FISHER: Dust, sun, threatening clouds, as the trucks wait for the loads to come in off the combines and then head for the elevator. Yet closer there's a difference from decades past. Without the government subsidy, worth roughly two bucks added onto the cash price at the elevator, a lot of this wheat would rot in the fields. But the subsidy comes at a price. In order to qualify, the farmer has to plant less. And that means farmers, and crews like Mr. Thackeray's, will harvest a Kansas crop 24% smaller than 1985's, yet a crop still big enough to supply every man, woman and child in this country with two loaves of bread a week for a year. That just from Kansas.

Even with the farmers planting less, there's more wheat than we can eat or ship abroad. As the surpluses for all kinds of agricultural commodities grow, so do the subsidies -- a heaping $25 billion this year. But whatever the problem, the harvest has a life of its own. On into the night until the fields are clean, ready to lay fallow, collecting the scant moisture in this part of Kansas. Another year, another crop, a right of passage complete. Maybe next year the price will be better. Maybe. So the custom cutters can come again. So maybe a way of life won't scatter like wheat chaff in the wind.

MacNEIL: Once again, the main stories of the day. The strongest earthquake in seven years shook Southern California. Wall Street prices fell for the second day. Admiral Hyman Rickover, father of the nuclear submarine, died. Good night, Jim.

LEHRER: Good night, Robin. We'll see you tomorrow night. I'm Jim Lehrer. Thank you and good night.