(FORTUNE Magazine) – BURNED OUT, Harold J. ''Hap'' Pareti, 37, realized last January he had lost control of his life. Six months earlier he had become president of People Express Airlines, the $1-billion-a-year no-frills carrier he helped found in 1981. Shortly after the promotion, says Pareti, Chief Executive Donald C. Burr, known for his innovative personnel policies, had told Pareti to report to the office daily at 6 A.M. and remain there until 9 P.M., regardless of his workload. ''Don felt strongly that executives should role-model their leadership skills by being physically present,'' says Pareti. ''That didn't leave any personal time at all. I couldn't wind down enough to relate to my family. I was a basket case.'' Fearing a heart attack, facing what he calls the ''inevitable'' prospect of divorce -- and nurturing an idea for his own business -- Pareti abruptly quit. Having that idea made quitting easier. Eight days later Pareti started work on a low-fare, full-service airline that would manage its employees humanely: in short, a new, improved version of People Express. Presidential Airways, his rather hasty creation, began flying four secondhand Boeing 737 jets from Washington, D.C.'s Dulles airport to Boston, Hartford, Miami, Cincinnati, and Indianapolis in late October. And Pareti, who clearly relishes being his own boss, is working quite as hard as ever. The devoted son of a former Carlstadt, New Jersey, mayor and state assemblyman, the beefy Pareti exhibits the relentlessly cheerful enthusiasm of a young politician on the rise. Judging by its effect on Presidential's employees and investors, Pareti's enthusiasm is infectious. After a few weeks of operation, his red-white-and-blue planes have been flying mostly on time and about one-third full, a better start than Pareti says he expected. He surprised almost everybody by raising more than enough money to get Presidential off the ground (see box, right). Investors typically view new airlines with alarm; 120 have failed since the industry was deregulated in 1978. And finance isn't Pareti's specialty. After his resignation Burr, 44, reportedly told some pilots that Pareti ''can't spell finance.'' (Since that episode, Presidential executives often spell it with a ph for a laugh.) Yet Pareti, whose enthusiasm makes him a gifted salesman, sold $34 million of Presidential stock to investors ranging from an affiliate of Bain & Co., a Boston management consulting firm, to Washington merchants. Like People Express, Presidential is designed to win fare wars by keeping costs low, partly by getting workers to consider themselves owners. Presidential's employees, like People Express's, aren't union members; they receive modest salaries but generous stock options. For example, flight attendants hired in August got a flat $14,000 salary plus options to buy 250 shares of Presidential stock for $3 a share (the price recently was about twice that). Each worker is expected to do several jobs, from selling tickets to scheduling planes. Such practices helped People Express achieve the lowest costs in the industry -- 5.1 cents per available seat-mile, compared with an industry average of about 8.5 cents. Pareti expects Presidential's costs to drop from a recent 8.2 cents to 5.7 cents by early 1986. That would allow Presidential to make money selling seats for as little as 40% of what its main competitors, New York Air and USAir, were charging before Presidential started. PRESIDENTIAL'S hub, Dulles, is analogous to Newark airport, People's home: both are underused and near big cities. National airport, which handles most Washington air traffic, is just three miles from the city, while Dulles is 23 miles away. But National is one of only seven U.S. airports at which the Federal Aviation Administration has barred additional flights. At Dulles, by contrast, it is rare to see more than one plane at a time in the sky. Pareti, who has owned a home in nearby suburban Virginia for five years, learned that the metropolitan area around Dulles is among the fastest-growing in the country. And a new highway linking Dulles to the city has reduced travel time to a bearable 30 minutes or so, about the driving time between Manhattan and Newark. A big difference between Presidential and People: Presidential has frills. On domestic flights People Express offers no first-class service, no free baggage check-in, no free food and drink. But providing the usual amenities for coach passengers costs just 0.2 cent per seat-mile, according to Pareti. People Express's bare-bones service began as a marketing ploy to establish a bargain image, but the strategy has some shortcomings. The backpackers who crowd People's ticket counters don't seem to mind roughing it but, Pareti says, ''we had trouble attracting business travelers to People Express.'' Pareti's strategy is to charge only slightly higher coach fares than People while offering services business travelers like: free baggage check-in and food, advance ticketing and seat selection, and a first-class section. Another big difference is corporate culture. While Pareti and Burr share many goals and techniques, Pareti is much less dogmatic. Burr, who declined to talk to FORTUNE, is an intense management theoretician who is invited to speak at business schools and has talked of the ''pristine beauty'' of his ideas. In his vision People Express is a humane, nonhierarchical organization whose every employee is a highly motivated owner-manager (see box below). Pareti is less of a theorist and more practical. Since People Express is against bureaucracy, for example, it employs no full-time secretaries or administrators. Pareti hates bureaucracy too, but figures he's better off with a few secretaries. Pareti and other former employees say Burr resists delegating authority, keeping a tight leash on a few overworked officers; while treating low-level workers like managers, he in effect treats managers like low-level workers. Pareti gives more autonomy to subordinates, saying he doesn't care about their hours as long as they get the job done. Hap's wife, Lee, 36, says she is no longer contemplating divorce. ''He hasn't had a lot of free time lately,'' she says, ''but something is different.'' The father of four, Pareti now feels free to schedule his work around such family events as trick-or-treating -- wearing a bomber jacket, white silk scarf, leather helmet, and goggles -- with his kids on Halloween. He urges his employees to find time for their families too, though few have been able to lately. ''Half a person is not my idea of a successful airline executive,'' he says. Observed at home one recent dinnertime, Pareti was a model of contented domesticity. He seemed entirely comfortable in Lee's frilly yellow apron as he carved the beef; later he bottle-fed 5-month-old Caroline with aplomb and devoted his attention to the question of which prizes Lauren, 6, hoped to win in a school lottery.

Pareti seems too ambitious ever to slow down as much as his wife and kids would like. He retains an unnerving habit developed in his harried days at People Express: reading reports and jotting notes while driving his car at 65 mph. The oldest of five children, he says he is ''driven to achieve an end result,'' usually in a hurry. He has always tried to please his father, Harold, by meeting his high standards of accomplishment. The most painful experience Pareti can remember of his youth in Carlstadt was failure to become eighth-grade valedictorian. ''I was more upset for my parents than for myself,'' he says. During his years at a Catholic prep school in nearby Newark, Pareti became a track star specializing in the quarter-mile sprint; his father rarely missed a meet. Today Harold Sr. -- who, like most family members, invested his savings in Presidential -- is a company director. ESCHEWING DRUGS and radical politics in the late Sixties, Hap began preparing for his career. Poor eyesight dashed his hopes of becoming a pilot at the U.S. Air Force Academy, so he went to the University of Pittsburgh on a track scholarship and worked as a baggage handler and campus sales rep for TWA. He graduated in 1970, determined to become a leader in the airline business. TWA offered him an executive-trainee job, but Pareti figured he'd rise faster in the long run by attending Boston's New England School of Law first. He married Lee in 1972 and continued working at TWA part time and during summers, mastering such blue-collar skills as directing taxiing jets to their parking spots. One result of this experience is Pareti's insistence on placing himself at the bottom of Presidential's organization chart, with line workers at the top. ''They're the ones who control the product,'' he says. After graduation Pareti again declined job offers from airlines. Instead he joined the Civil Aeronautics Board as a staff attorney. Only after complementing his blue-collar perspective with an overview of the industry from the CAB did Pareti, in 1977, become an airline executive. He joined Texas International Airlines and there met Donald Burr. The airline hired Pareti to be its staff expert on regulation; he later became a vice president. Burr, a Harvard Business School graduate, had been president of a mutual fund specializing in aeronautics stocks now called National Aviation and Technology. Burr became Texas International's president, lowered fares to boost business, and was credited with helping to revitalize the airline. As Pareti was to do years later, Burr quit after only a few months as president to start an airline of his own. He recruited most of his top officers from Texas International, just as Pareti would hire most of his from People Express. At People Express, ''I didn't have a title for a while,'' remembers Pareti. Eventually the company placed six executives called managing officers under the C.E.O. and the president, and Pareti was one. Each managing officer had a primary responsibility -- Pareti's was legal affairs -- but all were expected to be generalists, indoctrinating employees with Burr's vision. They were also expected to spend a couple of hours a day ''role-modeling'' by performing such tasks as loading bags shoulder to shoulder with workers, who are called managers. After six months Burr put Pareti in charge of flight operations -- hiring pilots, scheduling, writing manuals. It was the career breakthrough Pareti had been waiting for. He continued to handle legal matters and would regularly jump behind the check-in counters to deal with grouchy customers. Though putting in 90-hour weeks, the ambitious Pareti was exhilarated. The airline's president, Gerald L. Gitner, quit to join Pan American in 1982. Burr chose not to replace him until mid-1984, when he told his managing officers he would appoint one of them president if they could agree unanimously on a choice. Only Pareti, the politician's son, lobbied for the job. He spent eight hours or so pitching himself to each fellow managing officer, pointing to his popularity among company pilots, who were considering joining a union. He also did some old-fashioned horse-trading -- or, as Pareti puts it, ''I tried to focus on the needs of the individual I was talking to.'' Last July he became president and chief operating officer. PARETI WASN'T EUPHORIC over his victory for long. He quickly discovered that his new position carried far less authority than he had expected. He imagined that as operating chief he would be able to adopt changes to make the company run more smoothly and with less waste of people's time. For example, he saw no need for all senior officers to stay late every night to oversee operations; they could take turns. But he says with some bitterness that Burr accepted only changes that did not require less of people's time. Already at odds with his boss, Pareti was shocked when Burr began scheduling Pareti's workday, as if the airline's president were a trainee. ''I said that was foolish; as chief operating officer I should be in control of the operating environment,'' says Pareti. ''Don said that as chief executive he really had the authority to make that judgment.'' Pareti decided to quit during a four-day family vacation in Florida, his longest in a year. He felt guilty leaving the office -- Pareti says Burr couldn't understand why he wanted to go -- but Lee's concern over his health persuaded him. Walking on the beach, recalls Pareti, ''I said to myself, 'I shouldn't have to apologize for four days of fun and relaxation with my family.' And for the first time in months I felt relaxed.'' Without consulting or even informing Lee -- ''I wanted to take responsibility for the decision myself,'' he says -- Pareti made up his mind. HIS AIRLINE is so far developing according to plan. By late November Pareti expects to complete a new $5.5-million terminal building with ten gates, more than tiny Dulles can offer any competing airline. Before the end of Presidential's first year, Pareti plans to add five 737s and flights from Dulles to five more cities. New York Air has added flights to and from Dulles and, with USAir, matched Presidential's fares. But only People Express has undercut Presidential, with a $49 fare on its daily flight to Miami. Pareti has lowered fares on his three daily Miami flights to $69 and is offering standby seats for $49. Industry experts are divided over Presidential's prospects. Barry J. Gordon, president of National Aviation Technology, Burr's old outfit, is confident enough to have invested $430,000 of his funds' capital in Presidential stock. ''New York Air is the major airline at Dulles now, and they can't be competitive on a cost basis,'' he argues. Security analyst Michael Derchin of First Boston disagrees. ''Having had a bad experience with People Express, the airlines are taking new entrants seriously,'' he says. He figures established lines will keep their Dulles fares low and add flights, regardless of the short-term cost, to stamp out Presidential. If he's right, Presidential could have to attract a lot of new airline customers just to survive. The human cost of Pareti's ambitious plans may yet prove higher than he or his employees expect. Donald E. Hoydu, a senior vice president at Presidential, says he worked 12 hours a day and never took more than two consecutive days off during his five years at People Express. At Presidential he is still working 12 hours a day, seven days a week. ''There's a difference,'' he insists. ''Hap is more humane.'' And like most Presidential executives, Hoydu looks forward to a softer life once the airline is established. But competition and Pareti's expansion plans may defer the days of ease a long time. For the moment Pareti looks suspiciously similar to his former mentor: an ambitious man with a good idea, an airline of his own, and plenty of overworked managers. BOX: FAST TAKEOFF Presidential, which began flying in October, is among the best-capitalized airline startups ever, with $34 million of stock sold -- though some security analysts think that won't be enough, given the fierce competition. The company has borrowed $6.5 million, and in return for about 20% of Presidential's stock, a Bermuda insurance company has agreed to provide up to $70 million of off-balance-sheet aircraft financing. Presidential projects first-year revenues of $82 million, with profits coming in by the fall of 1986. The shares, issued at an average price of $5.75 in September, recently traded over the counter at $6. Pareti picked up 10% of the ten million shares at 59 cents each.PROFILE