Laker 'Skytrain' lurches through turbulence of bankers' debt-stream
Sir Freddie Laker -- the buccaneering private airline operator who invented the trans- atlantic "Skytrain" -- is facing financial problems. The soaring US dollar has forced him to ask bankers in the United States and Europe for more time to make payments on a debt of $:130 million (about $243 million).
Sir Freddie is insisting that the Laker group is not in serious trouble and that its network of low-priced international air services will be unimpaired. Banking interests, however, are not so sure.
Laker's troubles are rooted in his decision to expand his sky fleet by purchases of American DC-10s and European Airbuses. This led to the borrowing of the $:130 million.
Encouraged by buoyant sterling, Laker calculated that he would be able to repay his dollar borrowing at a rate of $2.25 to the pound. But that was before the dollar, boosted by high american interest rates, began to soar. At present, the exchange rate is only $1.85 to the pound.
In other words, Laker is facing a $:6 million ($11 million) exchange loss on this year's repayments if bank lenders refuse to defer payment of the loan. Deadline for repayment is Jan. 1, and the news out of the banking houses is that the lenders are not happy about what Sir Freddie is asking them to do.
They say deferral would set a bad precedent. They also point out that when the pound was booming Sir Freddie had all the advantages of a foreign exchange market tipped very much in his favor.
Ebullient operator that he is, Laker is minimizing the difficulties, noting that other airlines face similar problems, including a falling away of passenger bookings.
But Laker's operation differs from that of most other major airlines, which are either state supported or state owned. In many airline companies Sir Freddie is regarded as a piratical figure prepared always to rejoice at their discomforts.
Typically, the man who brought prices down with a bump on North Atlantic routes and has been a powerful advocate of air passenger interests worldwide is not content merely to ask his bankers for more latitude.
Aware that he needs to bolster bankers' confidence in his operations, Sir Freddie is planning to launch a new price-cutting exercise in the British charter flight market. With his eye on package holiday business, Laker intends to use his new fleet of Airbuses to carry people looking for better bargains than can be offered by other airlines.
Some expect Laker Airways to offer cuts of 5 to 10 percent to holiday operators using Sir Freddie's planes. Laker's own package holiday company will offer similar reductions.
Sir Freddie is counting on his high reputation among the general public to be a key factor in persuading banking interests to get him over the difficulties created by the falling pound.
He wants more time to reshape his operations. Then, his executives are saying, the scene will be set for new expansion by the Laker group.