Economics concepts and applications

¶ … boom of commercial air travel peaked in the late sixties and early seventies, the cost levied by the most popular and powerful airlines had virtually no standard of limitation. There was little competition in Great Britain for economic command of the air industry. British Parliament's cozy relationship with British Airways ensured a monopolistic situation in which the consumer was not offered the advantages of a competitive market. This changed for a brief period in 1971 when Freddie Laker, former managing director of British United Airways, unveiled some of the groundbreaking features of his fledgling Laker Airways.

Freddie Laker, millionaire maverick of commercial traveling, fashioned his airline around a fleet of modern jet airliners, derived of the highest technological standards of the time. This did not prevent him from providing stripped down, affordable flights. Laker's entrepreneurial notion, pioneering in its execution of the obvious and necessary, set out "to launch a low-cost scheduled service between London and New York with a lowest single fare of £32.50. The cheapest seat on any other airline... [was] £94.20.

Laker said that the low prices would be made possible 'by cutting out the traditional costly frills of international air travel.'" Laker Airways offered the only trans-Atlantic flight that did not require a reservation. Likewise, the exclusion of a mandatory meal with a flight favored the consumer's right to choose the nature of his expenses. Providing an absolutely indispensable service at nearly a third of the cost of his nearest competitor, Freddie Laker made a large and immediate impact in the industry.

His vision was of a steady service from London to New York with no advanced booking and no frills called Skytrain. The idea was to establish a first-come first-served day-of-departure system. For many years, Laker's innovations stalled in the courts, where the major airlines, who stood to lose the most form Laker's savvy, philanthropic business measures, wrangled to keep the Skytrain dream from lifting off the ground. The cut-rate fares and option laden flight packages that Laker Airways had spearheaded reflected rather poorly on the common practices of other, more bureaucratic and heretofore lucrative air companies. To avoid the exploitation of their flaws as consumer servicemen, as well as to stifle the rise of an able usurper in Freddie Laker, the major airlines united to throw one legal roadblock after another into the pathway of Skytrain and a proliferation of flyers' rights.

In September of 1978, Freddie Laker finally succeeding in forcing his way past a hostile industry gateway. After six long years battling it out in court with his firmly-rooted, imperial rivals, Laker was finally given the right of way to begin the Skytrain service. Within weeks of his victory, the reverberations of his consumer-advocacy strategy began to show. The major airlines who had so rigidly abided by a code of unfettered extortion had no choice but to heed a changing market. Prices for transatlantic flights plummeted to within just a few dollars of Laker's rock-bottom rates and a new, flexible, consumer friendly face began to show itself across the industry boards. Not only had Laker successfully created a route of flight for the less-than-affluent flyer, but he single-handedly forced an industry to adapt to an altogether more democratic standard as well. It naturally forged him as a nemesis to the hulking standard-bearers of the airline industry, who had been forced into a corner, on the defense in a new pricing war.

On the other hand, he was quite clearly a good friend to the consumer. His initiative and vision made transatlantic travel a reality for people of a great variety of socio-economic backgrounds, many of whom may not have otherwise been capable of affording such a luxury.

However, Laker's desire to serve the consumer in this way set a bad precedent for his relationship with the industry. This is not simply to say that he was vehemently disliked by other airlines, though he was. More than that, his proliferation of the market had run him afoul of the commercial aviation authorities and the British Department of Trade and Industry. He continued undaunted to expand the capabilities of Laker Airway, soon forging flights of the same bargain basement nature to Los Angeles. It was when he attempted to take on Europe that hurdles began to loom insurmountably large. While Laker continued to amass airbuses for his fleet, he also spent much of his time in court, looking to gain clearance for up to 630 discount flights in Europe, beginning with a Skytrain-like program for flights from London to Zurich, Switzerland. The above mentioned agencies steadfastly refused to approve the venture for politically and economically influenced motives.

In 1981, Laker went to court with the British Department of Trade and Industry, charging it of anti-trust behavior in sidelining his project. His claim was rejected and by 1982, Laker Airways folded. A decade of battling in the courtroom had bled the company dry. Many of Freddie Laker's investments went unrealized due to the legal delays and, as such, many loan repayments were brought to bear. A conspiratorial effort commanded by the industry's largest airlines, the British Government and the overseers of the airline industry crushed the Freddie Laker dream. The conflict languished in courts until 1985, when Laker agreed to accept an 8 million dollar settlement from his saboteurs. And though it marked an end to Laker's specific vision, his valiant effort broke open the industry for competitive consumer service. Though they had rid themselves of Freddie Laker, the major airlines would have no choice but to abide by the new standard of flexibility and affordability. Laker's efforts had not been totally in vain.