had net assets of £1.68 million and tax equalisation reserves of £450,000. Although this amounted to over £2 million, 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 percent of the share capital was held by Freddie Laker 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, unsustainably high debts 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 Freddie Laker's's stud farm and his personal wealth. Economic climate Both the UK and US were in recession in the early 1980s, characterised by negative/low growth, high unemployment, high inflation and high interest rates. During that period the company was expanding to sustain commercial success generally and that of Skytrain in particular. Laker Airways needed to position itself to take advantage of additional opportunities to expand its business to maintain its status as Britain's second largest independent airline and third principal long-haul operator. Eventually, the company borrowed at high interest rates. The high interest rates were a major cause for the increase in the firm's borrowing costs as well as its debts. Although the Laker Airways fleet contained a greater proportion of modern widebodied aircraft than most of its competitors, which made it cheaper to operate and maintain, the airline felt the sudden tripling of the price of crude oil in the aftermath of the Shah of Iran's fall from power. Laker Airways needed to pay the high spot market oil prices because it could not hedge its future supplies by negotiating fixed-rate, forward purchases. Such financial derivatives were non-existent. The airline attempted to protect itself against sterling-dollar exchange rate fluctuations by buying US dollars