Laker Airways

~ the obit ~

Freddie Laker spent six years asking two governments for permission to sell an airline seat the way a railway sells a seat. You would turn up at Gatwick, join a queue, pay, and fly to New York if there was room. No reservation and no travel agent. He announced the idea at the Savoy Hotel on 30 June 1971 at a fare of 32 pounds 50 one way in winter, and the regulators on both sides of the Atlantic kept him grounded until September 1977.

The airline itself was older than the idea. Laker Airways was registered on 8 February 1966 and started flying out of Gatwick that July with two Bristol Britannia turboprops, working charters for tour operators. It opened a base at Tegel in West Berlin in 1968 and spent a decade hauling West Berliners to the Canaries and the Mediterranean. Freddie Laker owned 90 percent of the shares, his former wife Joan owned the rest, and the ultimate holding company sat in Jersey.

That structure is most of the explanation for what happened later. The paid-up share capital on the 1980 balance sheet was 504,000 pounds against British Airways at 100 million. Almost the entire fleet was leased, the maintenance hangar at Gatwick was leased, and the only hard asset behind the company was Freddie Laker's own money and his stud farm. It was a large airline balanced on a very small amount of equity, in a business where the bad years arrive on a schedule nobody controls.

~ the rap sheet ~

~ skytrain ~

Skytrain ran on McDonnell Douglas DC-10-10s, which Laker took because nobody else wanted them. Mitsui had ordered five for All Nippon Airways, ANA changed its mind and bought TriStars, and British Caledonian turned the aircraft down because the series 10 lacked the range for its network. Laker took two and made the range work by capping free baggage at 40 pounds per passenger and cutting the cabin from 380 seats to 345, trading the weight for fuel. At 345 seats he broke even at 52 percent full.

The other three of those five aircraft went to Turkish Airlines, and one of them came down in the forest at Ermenonville on 3 March 1974 with 346 people aboard and no survivors, after a cargo door failed. That is the only thread connecting this airline to anything near me: a batch of unwanted widebodies split between a British entrepreneur and my own country's flag carrier, where one half built the cheapest seat across the Atlantic and the other half became the worst air disaster in the world at the time. Laker's own DC-10s later suffered from the type's reputation, which by 1981 was bad enough to show up in his bookings.

~ the winter of 1981 ~

Pan Am decided in October 1981 to drop its lowest economy fares by up to 66 percent on every route where Skytrain competed with it. Laker's answer was a discounted premium cabin called Regency Class. Then British Airways and TWA cut by roughly the same amount, and four carriers were left fighting over a North Atlantic that does not carry four carriers between January and March.

Everything else arrived at once. Interest rates were high and Laker had borrowed at them to expand. Crude oil had tripled after the Shah fell and there were no fuel hedges to buy in 1979 because the instruments did not exist yet. He had bet on sterling holding at two dollars through the 1981 winter season, and sterling did not hold, so his dollar costs went up while his sterling revenue went down. Loads and cash halved between October and February.

~ the settlement ~

McDonnell Douglas and General Electric were both willing to restructure what Laker owed them, since a customer flying is worth more than a customer liquidated. British Caledonian and the other European DC-10 operators then told both companies that any rescue would cost them all their other business. The rescue was dropped and the airline stopped in the early hours of 5 February 1982.

The liquidator sued for conspiracy. The defendant list was British Airways, British Caledonian, Pan Am, TWA, Lufthansa, Air France, Swissair, KLM, SAS, Sabena, Alitalia and UTA, and the claim was that they had priced Skytrain out of the market deliberately. They settled out of court for 50 million dollars, British Airways paid Freddie Laker a further 8 million pounds personally, and in July 1985 added 35 million dollars on top. That cleared the estate's remaining 69 million dollars of debt and let the British government get on with privatizing BA.

Five of the airlines on that defendant list are buried on this site now, and the settlement is the only document that puts them in a room together. Richard Branson, who was paying attention to all of it, founded Virgin Atlantic two years after Skytrain stopped.

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