Laker Airways

Laker Airways was founded by Freddie Laker in 1966 as a charter carrier and became famous for its low-fare Skytrain service between London and the United States. It stopped flying on 5 February 1982 when its banks appointed receivers, with debts of about £270 million. A later antitrust lawsuit against rival airlines ended in settlements in 1985.

How it started

Freddie Laker left British United Airways in 1965 after a long-running clash with its chairman. According to the Aviation and Aerospace Archives Initiative, he announced the formation of Laker Airways on 8 February 1966, as a contract-hire and ad hoc charter business at London Gatwick. Two second-hand Bristol Britannias came from BOAC for £373,000, and commercial flying began on 29 July 1966. Early work included European charters, sub-leases to other airlines and cargo flights into Zambia.

Three BAC One-Elevens arrived in 1967, one of them leased to Air Congo. The others flew inclusive-tour contracts from Gatwick and Manchester. The same source says the first full summer produced a profit of £305,000. Laker bought the tour firm Arrowsmith Holidays in November 1967 and later took over Lord Brothers, his main customer. Two Boeing 707s bought from the collapsed British Eagle replaced the Britannias in 1969.

The heyday

Laker's big idea was a daily, walk-on, low-fare service across the Atlantic. He called it Skytrain. The licence took years of fighting, and the Labour government revoked it in 1975. Laker won it back in the courts, and the US Civil Aeronautics Board approved it in June 1977. Three DC-10-10s, originally intended for All Nippon Airways, had already been delivered from 1972.

Sources differ slightly on the launch date. The aviation archive puts the first London–New York flight on 2 September 1977, carrying 272 passengers at £59 each, with Los Angeles opening on 26 September. Sir Freddie Laker's official site gives 26 September 1977 for the launch. Laker was knighted in 1978. Miami followed on 22 May 1980 and Tampa on 1 April 1981, with departures from Manchester and Prestwick as well. He ordered longer-range DC-10-30s and ten Airbus A300s, and spoke of Hong Kong, Australia and a round-the-world Skytrain. Wikipedia lists a fleet of 20 aircraft, 14 of them widebodies, on 5 February 1982.

What went wrong

Several problems built up, roughly in this order:

• The DC-10 grounding. After the Chicago crash in June 1979 the type was grounded worldwide. The archive estimates the cost to Skytrain at $13 million, which wiped out its first-year profit of about $2 million.
• Currency and debt. By 1981 recession was cutting North Atlantic traffic. Laker's large debts were in dollars, while most of its income came in sterling, which was falling against the dollar.
• Fuel costs. Wikipedia notes that oil prices tripled after the fall of the Shah of Iran, and that the airline could not hedge its fuel purchases.
• Competition. HistoryNet describes major carriers matching his fares while losing money, and says the company was undercapitalised and overextended by 1981. The History Press adds that a costly winter 1981–82 push into a premium "regency class" cabin brought very low loads.
• The refinancing failed. The archive says McDonnell Douglas offered to help refinance the airline, then withdrew after European customers threatened to take their business elsewhere.

The last flight

The crisis peaked on 4 February 1982, while Laker was in New York filming a Skytrain commercial. According to The History Press, his bankers demanded £5 million by 5 p.m., then extended the deadline to 8 a.m. the next day. Laker could not find the money, and receivers were appointed. The airline stopped flying on 5 February 1982, leaving thousands of passengers stranded. Sources give the debts as roughly £270 million. The aviation archive says it was never technically bankrupt and had never defaulted on a loan payment. Our route-by-route record of the final flight is not documented in the sources we found.

What happened next

The archive says the receivers quickly sold assets to rival British Caledonian. Several "Save Laker" funds raised pledges, but not enough to keep the airline going.

The liquidators then brought an antitrust case in the United States against British Airways, Pan Am, TWA, other airlines and McDonnell Douglas. They alleged a predatory scheme to drive Skytrain out of business. In July 1985, the Washington Post reported a $48 million settlement for creditors, including 14,000 ticket holders. A month later, UPI reported that Laker personally accepted $8 million. British Airways stated that the agreement carried no admission of guilt.

Laker later moved to the Bahamas. Wikipedia records a Laker Airways (Bahamas) that ran from the early 1990s until 2005. It was a separate company that used his name and expertise.

Sources: Wikipedia: Laker Airways, Aviation and Aerospace Archives Initiative: Laker Airways, The History Press: The end of an era for Laker Airways, HistoryNet: How Freddie Laker Took On the Big Airlines and Won, Washington Post: Laker Airways Antitrust Suit Is Settled, UPI: Sir Freddie Laker settles for $8 million, Sir Freddie Laker official site, Wikipedia: Laker Airways (The Bahamas)