Laker fights for time to pay bills

Press, 19 December 1981, Page 9

Laker fights for time to pay bills

NZPA London The Bank of England has stepped in to try to help Sir Freddie Laker’s cut-price Atlantic airline out of its financial problems, according to banking sources. Laker Airways was having difficulty persuading banks to agree on a new timetable for repayment of debts to international banks totalling $359 million, they said. The Bank of England was acting at the behest of the British Government and had already approached two aircraft makers, Airbus Industrie and McDonnell Douglas, to take up a bigger share of loan liabilities, they said.

The debts were incurred when Laker Airways bought three Airbuses from Airbus Industr ■ and five DClOs from McDonnell Douglas.

Official sources said that although the Prime Minister (Mrs Margaret Thatcher) had asked the Bank of England to try to help Laker Airways, she did not favour financial help from the Government. “It’s completely against her philosophy to bail out lame-duck enterprises,” one Government source said.

Banking sources said a loan guarantee . from the Government would be one way out for the ebullient Sir Freddie, who pioneered cheap Atlantic travel when he introduced his “Skytrain'’ flights to the United States in 1977.. Laker Airways has been hurt by a price war and falling passenger traffic on

the Atlantic route in the last year.

This was the main reason for the reticence of banks to extend Sir Freddie's loan commitments, the sources said.

The airline had a cash flow problem just when it was negotiating with a consortium of 13 European banks on rescheduling a $l3l million loan made to buy the Airbuses. The sources said that the consortium was becoming increasingly concerned about Laker Airways’ commercial profitability and less likely to extend the loan.

The United States ExportImport Bank said recently that a group of private lenders had given the airline an extra year to repay their part of a $2281 million loan for the DClOs. This was conditional on the European banks’ agreeing to reschedule the other loan by January 6. Laker Airways has refused to comment on its financial position.

One airline source close to the negotiations said that the company hoped that a solution would be worked out with the help of the makers. A banking source said the British Government could indirectly exert some pressure on Airbus Industrie as a 20 per cent partner in the European aircraft-building consortium.

The French and West German governments each have a 37.9 per cent stake in Airbus Industrie and Spain the remaining 4.2 per cent.