It was run by a British fellow named Freddy Laker in the 1970s. Laker once offered one-year round trip tickets to Europe for $250.
Some at the time called him the "compassionate hip capitalists." Others referred to him as the "hippie backpacker's savior." But when Freddy and his airline got caught up in what essentially was a volatility crunch, ordering a bunch of new aircraft he couldn't pay for, most just called him broke.
President Nixon closed the gold window in 1973, but it wasn't until 1981 that the US dollar, freed from its gold shackles, was allowed to float or fluctuate freely. The key word here is fluctuate. Given a choice most of us opt for stability and consistency.
Recall those silly exam questions many of us took to get into college, the true or false ones like coffee is to cream as sand is to the sea. Well, volatility is to fluctuation as change is to life. And savvy, successful investors learn to understand and live with volatility. Unsuccessful ones don't.
The late Peter Bernstein in his wonderful book Against the Gods The Remarkable Story of Risk, discussed the sudden outburst of volatility and how fast it can happen. "During the 1970s and the 1980s," Bernstein wrote, "volatility seemed to be breaking out all over, even in places it had been either absent or muted."
As Bernstein recounts, "These unexpected outbreaks of volatility soon littered the corporate landscape with a growing number of carcasses, providing grim warnings to executives that a fundamental change was taking place." One of those carcasses turned out to be Laker Airlines.
Bernstein again: "For example, Laker Airlines, a fabulously successful upstart in transatlantic travel, ended up in bankruptcy after ordering new McDonnell-Douglas aircraft in response to soaring demand; with most of its revenue in pounds and with the foreign value of the dollar climbing higher and higher, Laker found it impossible to earn enough to pay off the dollar obligations on their DC-10s."
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