Bankruptcy
Laker Airways did not have the financial strength to survive the early 1980s recession and competition by the established scheduled airlines. Swiss aviation enthusiasts' magazine Interavia had reported in a 1978 issue that Laker's issued share capital was £10,000. As per the airline's 1980 balance sheet, the paid-up share capital was £504,000. These figures compared unfavourably with BCal and British Airways, whose issued share capital stood at £12m and £100m respectively. As long ago as June 1971, when Skytrain was first announced, it was revealed that Laker Airways had net assets of £1.68m and tax equalisation reserves of £450,000. Although this amounted to over £2m, it could not disguise the fact that Laker Airways was a financial minnow compared with most of the established flag carriers and BCal. The weak financial position was underlined by the fact that 90% of the share capital was held by Sir Freddie and the remainder by Joan Laker, a former spouse, while Laker Airways was a subsidiary of Laker Airways (Leasing), which in turn was a subsidiary of Jersey-incorporated Laker Airways (International). This had served the firm well since it allowed it to take advantage of lower taxes and more employer-friendly labour legislation in the Channel Islands. However, the fact that the airline's ultimate holding company was in an off-shore tax haven outside the jurisdiction of UK law increased lenders' risk to get their money back.
In addition to undercapitalisation and weak finances, Laker Airways was not backed by any significant assets. The bulk of its fleet was leased, as was the maintenance hangar at Gatwick that also housed the airline's offices. The only financial backup that Laker Airways had was Sir Freddie's stud farm and his personal wealth.
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