Sir Freddie Laker, who had bludgeoned his way into the transatlantic airline business with his Laker Airways' cut-rate Skytrain service, saw his empire crash around him today.
Laker, who had been fighting for survival by trying to make deals with his banks and McDonnell Douglas Corp. on payments for DC10s which he had bought, was told he had failed. Protesting, he called in an official receiver.
Sir Freddie was brought low by the effects of the recession on the traditionally profitable transatlantic air services, by high interest rates and by a drop in the value of sterling against the dollar, which increased his dollar debts in sterling terms.
Closure of Laker Airways caused chaos in Gatwick Airport, south of London, where Laker had his headquarters.
Laker jets were turned around in mid-flight, others were halted on the runway, and all but one returned immediately to base. Tears flowed among the 2,600 employes when they learned they probably had lost their jobs. Some employes at the ticket counters valiantly tried to deal with angry passengers who were told the airline had collapsed and their flights no longer existed.
Laker Airways was ordered into receivership, and Laker's banker, Clydesdale Bank, immediately ordered the accounting firm of Ernst and Whinney to take over management of the airline, which reportedly owed $376 million, United Press International reported.
As many as 40,000 Laker ticket holders were stranded abroad and forced to seek other means of transport home.
Laker's competitors on the transatlantic route, British Airways, British Caledonian and Pan American World Airways, said they would honor Laker tickets, at least through the weekend. Trans World Airways had not yet decided whether or not to give seats to Laker passengers at no extra cost.
"We are mounting a rescue operation for Laker ticket holders stranded abroad on a space-available basis at no extra cost," a British Airways spokesman said. Pan Am said it would honor Laker tickets through Sunday.
Under the receivership arrangement, Ernst and Whinney has several options, including sale of the entire airline, selling parts of the operation for an immediate cash infusion or trying to keep the airline under new management.
"It's very sad indeed that it has become necessary to take this step," said William MacKey who, along with N.J. Hamilton, was appointed to joint receivership by Ernst and Whinney.
Laker Airways issued a statement saying that it had hoped that a deal had been worked out on Monday night that met the most stringent conditions of its creditors. Laker had been seeking the rescheduling on loans of 200 million pounds sterling for his fleet of DC10 jets.
"However, on Wednesday events took a sudden and dramatic turn," the statement said, adding that on Thursday the creditors decided that arrangements with Clydesdale and McDonnell Douglas were inadequate.
Meanwhile, major U.S.-based airlines, fighting over the lucrative winter runs from New York to Florida, declared yesterday that they will raise their fares but will not be undercut if another price war breaks out, Associated Press reported.
With Laker Airways died a challenge to what Sir Freddie called "the big boys." Laker Airways crashed through the tariff barriers on the London-New York route and later in services to Los Angeles and Miami.
Laker, who had tiny operating costs compared with the major airlines, thought he could survive while they would lose heavily in bringing their prices down to his level. But the recession, and his own rising debts, ended the dream of Skytrain.
Commenting on Laker's collapse, the chief executive of British Airways, Roy Watts, said "we don't get any pleasure out of the situation in which Sir Freddie finds himself. Sir Freddie Laker has made a great contribution to the airline industry."
Lord Bethell, a campaigner for uncontrolled, low-tariff competition in the airways, said that "nearly one million people went to America from Britain in 1981 because of the low fares Sir Freddie pioneered. I believe his legacy will continue. Air fares across the Atlantic will remain generally low, though they are likely to rise slightly in the near future."
Laker began at the bottom of the market, concentrating on a bare, limited service at the lowest possible rate for economy-class passengers. This was bad enough for the big airlines. But then he went one stage further.
Last October, Sir Freddie inaugurated his own first-class service, aimed at savagely undercutting the exclusive and profitable preserve of the "big boys"--who had to respond by cutting their prices and profits.
When the big airlines cut their transatlantic fares, Laker made a now-ironic comment that "they are simply committing suicide because their costs are so much higher than ours. It's utterly irresponsible marketing."
Sir Freddie, a self-made millionaire, began the airline with 38,000 pounds which, according to legend, he borrowed in a pub. He became a symbol of the thrusting entrepreneur and was much admired by British Prime Minister Margaret Thatcher.
However, government sources said it was Thatcher who made the final decision not to intervene with government financing to save the airline.
Sir Freddie was a pilot in the Second World War, and he made his fortune with the Berlin Airlift.
His future is unknown, but a government spokesman, Ian Sproat, commented in the House of Commons during a special debate that "you can't keep a good man down."
Hearing the news of Laker's collapse, Laker receptionists at Gatwick Airport were in tears. "It's a terrible shock," one of them said. "We have seen it grow from nothing into a giant. Now this. It's a tragedy."
A porter, pushing a trolley that may not see Laker luggage again, said: "It's hit everyone, mate, like a smack in the mouth."