The collapse of Freddie Laker's airline
About the article
This is a digitised version of an article from The Cayman Compass's print archive. Occasionally, the digitisation process introduces transcription errors, or other problems.
See the article in its original context from February 1982.
Brought to you by
Sir Freddie, 59, who rose from a teaboy to launch his own airline, announced that Laker Airways was bankrupt and he had asked for receiver to be appointed.
Banking sources said the airline, losing money heavily since passenger traffic on its flights to the United States dropped sharply in the last few months, had run out of cash before a bailout package could be finalised with bankers and creditors.
The failure of Laker Airways is the most spectacular result so far of the fares war on trans-Atlantic routes and the effects of recession, which have combined to force many airlines into losses and staff cuts in the past year. The announcement that Laker was bankrupt -- Sir Freddie termed it the demise of his airline immediately grounded Laker's fleet of 12 "skytrain" aircraft. It will also affect holidaymakers who have left Britain on Laker package tours and charter flights.
Laker last year carried nearly two million passengers, 800,000 of them on the scheduled no-frills Skytrain flights between Britain and New York, Florida and the West Coast of the United States.
But the ebullient Sir Freddie, who started in the airline business with money he borrowed from a man in a pub, ran into financial trouble when recession hit the world airline industry last year just as he was expanding.
He took out nearly 200 million sterling ($380 million) in loans to buy five new American DC-10 wide-bodied. jets from McDonnell Douglas and three European-made airbuses.
When the latest loan installments fell due, Laker already had a big bank overdraft and sought to defer repayment of the debts. His bankers announced in December that an agreement had been reached in principle to rescue the airline, and the financial arm of McDonell Douglas indicated it would infuse some cash in return for some equity in Laker Airways.
But banking sources said Friday McDomell Douglas was still dithering on conditions for the injection of cash and Laker had run out fo money, its overdraft doubling since last September.
Sir Freddie launched his walk-on, walk-off Skytrain to New York in September 1977 at a fare of just 59 sterling (then $130) well under what the major airlines normally charged.
He had battled for years with the big airlines, governments on both sides of the Atlantic, and the courts before he finally got his cut-price service off the ground. It ushered in a new era of cheap air travel as the major carriers were forced to cut their fares to compete with Laker.
The collapse ended Sir Freddie's dream of one day offering a cheap Skytrain service around the world.
Sir Freddie, a self-made millionaire with a taste for high living, grew up in the poverty of the 1930s. He left school at 16 and got a taste for the airline business as a teaboy at a factory that made flying boats.
He was a pilot during the Second World War and made his fortune when he bought converted bombers to take part in the Berlin airlift.
In his 30's, Sir Freddie helped build British United into Europe's biggest independent airline. In 1965 he resigned to start his own airline, starting mainly as a tour operator. One of Laker's main rivals was quick to pay tribute to him Friday.
"Sir Freddie has made a great contribution to the airline industry," said Roy Watts, chief executive of Britain's state-run airline British Airways. "It is a sad day for the consumer," lamented Dennis Kane, secretary of the air transport users committee.
British Prime Minister Margaret Thatcher had frequently held up Sir Freddie as a shining example of an entrepreneur who could make free enterprise work. Aides reported that she was saddened at the news Laker had folded.
Government officials discounted any chance of a state bail-out. While Mrs. Thatcher instructed the bank of England to play a leadng role in trying to negotiate the ill-fated rescue package, she was not disposed to offer state aid to prop up a failing private venture.
The effect of the Laker collapse was quickly felt by staff and passenges.
A Laker flight of holidaymakers to Tenerife in the Canary Islands turned around in mid-air to return to Manchester. About 200 Miami-bound passengers were stopped boarding a Laker plane at Manchester's Ringway Airport and told to return their duty-free purchases.
Some of Laker's 2,600 workforce burst into tears when they heard of the collapse.
"It's a terrible shock," said a weeping Laker receptionist at Gatwick Airport south of London. "We have seen it grow from nothing to a giant. Now this. It's a tragedy."
