Laker's Lament

Pan Am cuts fares too

The proudest boast of Britain's Sir Freddie Laker is that he made transatlantic air travel affordable to the masses. For instance, his walk-on Laker Skytrain service from New York City to London costs only $250 one way, less than half of what most other airlines have been charging for even their economy-class tickets. But suddenly, Sir Freddie finds that he is facing stiff competition from one of the very airlines that his cutthroat pricing policies had siphoned business from in the first place: Pan American World Airways. Under its new chairman, C. Edward Acker, the loss-plagued air carrier has decided to go all-out to fill its planes and boost revenues. Thus Pan Am announced earlier this month that it will offer regular coach seats across the North Atlantic for a mere $261. Other major carriers are following suit.

The price war is only the latest in a series of headaches for Laker, and the outspoken Sir Freddie has begun to sound as cranky and befuddled as many of the competitors he undercut to get a share of the North Atlantic route four years ago. Sniped he of the Pan Am action: "It is nothing less than suicidal marketing that could endanger the fabric of the airline industry as a whole."

Laker's immediate problems are financial, and they have been sharpened by the yearlong rise of the dollar and the fall of British sterling on the world's money markets. For months, Laker has been seeking extra time to repay loans he took out to buy DC 10s and European-made Airbus A300s for his fleet. Included in the debts are $160 million in direct and guaranteed loans from the Export-Import Bank, and $131 million borrowed last January from a syndicate of 14 European and North American banks. His reason for seeking the extension: to avoid having to pay an extra sum of at least -L-6 million to his lenders as a result of the slide of sterling against the dollar.

Laker based his 1981 air fares on bank forecasts that the pound would be worth an average of approximately $2.25 in U.S. dollars this year. In fact, the decline of sterling has by now pushed the rate to about $1.82 to the pound, forcing his costs up sharply. Says he: "The Reagan and Thatcher governments have screwed up the world's monetary system and I am in the middle of it."

Laker has already received two 30-day extensions on loans guaranteed by the Eximbank, and other lenders are expected to give the firm at least some easing of terms. Throughout the negotiations, Laker has insisted that he can come up with the money, if necessary, by dipping into company reserves. Although scheduled aircraft serving the North Atlantic run have been flying about two-thirds full on average, Laker Airways has been a consistent moneymaker since the company's founding in 1966. Last week a Laker spokesman dismissed the possibility that the airline would soon be forced to raise fares to compensate for currency losses. Said the spokesman in a dig at Pan Am: "We have no need to put up fares. Unlike some others, we are making a good operating profit." But the question is, for how much longer. -

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