Laker's Mayday

An upstart airline crashes

The 200 passengers waiting patiently last Friday morning to board a DC-10 bound for Miami from Manchester, England, were stunned to hear over a loudspeaker that their flight had been canceled. An Airbus A300, already airborne toward Tenerife, reversed course and flew back to Manchester. At London's Gatwick Airport, stewardesses and ticket agents openly wept. Sir Freddie Laker, the swashbuckling British entrepreneur who had revolutionized transatlantic travel by slashing air fares, had abruptly announced that he was liquidating his debt-laden airline. Said one Laker counter attendant: "It's hit everyone, mate--like a smack in the mouth."

Launched in 1966 as a charter carrier, Laker Airways jolted competitors in 1977 with its Skytrain round-trip service between New York and London for $236, or almost $200 less than the best excursion fare available on regularly scheduled airlines. Beamed Laker: "This puts transatlantic air travel in the pocket of the workingman." Later many other carriers matched his low prices.

The Skytrain was so popular and profitable that in the past two years Laker, who owns 90% of the airline, borrowed $359 million to expand his fleet of DC-10s and Airbus A300s with the intention of adding new services between European and Asian capitals. Then trouble struck. Fuel prices surged, recession in the U.S. and Europe cut into passenger traffic, and the rise of the dollar's value against the pound upset Laker's balance sheet. Much of his revenue was in pounds, but he had to make debt payments in dollars.

Sir Freddie, who was knighted by Queen Elizabeth in June 1978, tried in vain to get help. Last Sir Freddie Thursday he phoned Iain Sproat, Britain's Under-Secretary for Trade, to warn that without government aid, his airline would crash. Later that day Prime Minister Margaret Thatcher discussed Laker's plight with several Cabinet members, but chose not to bail out the carrier. Early next morning, at a tense meeting with his board of directors at Gatwick, Laker called it quits.

Laker thus becomes the first victim of the airfare wars that he originally started. Fierce price competition is also threatening the solvency of American carriers such as Pan Am and Braniff. Last summer Laker admitted that the airline business had become "a hell of a poker game." Sir Freddie, and his planes, will be missed by thousands of budget travelers on both sides of the Atlantic.

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