On this day in history : 5th February 1982 – Budget airline Laker Airways collapses owing £270 million to its banks and creditors….
Laker Airways was a private British independent airline founded by Sir Freddie Laker in 1966…. It was based at Gatwick and from 1977 it began to offer low cost, no frills, long haul flights to the United States….
To offer the discounted prices it was known for Laker Airways needed to attract all year round business – which was not an easy task as most travel was required during the summer months – and this in turn could easily cause cash flow problems…. With the launch of ‘Skytrain’ in 1977, attracting long haul business travellers between Gatwick and JFK, the company seemed to have found the recipe for success….
A period of rapid expansion followed and new aircraft were acquired…. Laker became the first airline outside of North America to operate the Douglas DC-10….
However, Laker had overstretched its finances – and with competition from other established airlines was unable to withstand the 1980’s recession…. To maintain its position as Britain’s second largest independent airline it had borrowed heavily at very high interest rates…. There was also the added factor that the DC-10 had a history of a series of fatal accidents and many people were avoiding flying on them….
A £5m rescue plan was put together by McDonnell Douglas and General Electric, suppliers of the DC-10…. However, British Caledonian got wind of the deal and together with other DC-10 operators refused to do business with McDonnell Douglas and GE…. The rescue deal with Laker did not go ahead….
On the 5th of February 1982 – after a four hour board meeting – Laker asked Clydesdale Bank to call in the receivers – Laker Airways had collapsed…. All 17 Laker Aircraft were ordered to return to the UK by that night…. A DC-10 at Gatwick was impounded to cover landing and parking costs…. 6,000 stranded passengers had their return tickets honoured by other airlines such as British Airways, British Caledonian, Pan Am and Air Florida…. A ‘Save Laker’ fund was set up by the public – but it was too late….
Within weeks Sir Freddie was trying to relaunch his airline by transferring Laker Airways licences to a new company – but this was blocked by the Civil Aviation Authority…. Twelve months later Sir Freddie sued British Airways, British Caledonian, Pan Am, TWA, Lufthansa, Air France, Swissair, KLM, SAS, Sabena, Alitalia and UTA – all IATA members – for a conspiracy to put his airline out of business…. He received an out of court settlement for $50m – and a separate £8m settlement from British Airways….