Sir Freddie Laker was the business maverick who first brought low-cost flights to the masses. In his last interview before his death, he told Simon Calder about his battle with the big guns

How egotistical? When, in the mid-Sixties, airlines' names derived from nations (Air France), regions (Eastern, Northwest Orient) or stating the obvious (Aer Lingus - Irish for air lines), Freddie decided to call his new venture Laker Airways. He redefined flying for what it should be: a commodity devoted to getting people from A to B for the lowest possible fare.

Frederick Alfred Laker cut frills, slashed costs and passed on the savings in a way that still benefits a generation of travellers who never knew him. Pre-dating the no-frills entrepreneurs by a generation, Freddie aimed to save money on every aspect of the operation - including persuading pilots to coax every spare mile from each ton of fuel by flying at high altitude, and to take off short of maximum thrust, thus reducing maintenance costs.

Initially, Laker Airways served the fast-growing charter market. With rising disposable incomes, the package holiday to Spain became within reach of many wage-earners. But Laker had his eyes on a bigger prize: the North Atlantic. At the time, fares and capacity between the UK and US were strictly controlled by the respective governments and the airlines they protected. Discounting was forbidden. There was, though, one loophole: cheap fares for "affinity charters" were permitted, if the passengers could demonstrate they had been members of a bona fide club for at least six months.

The rules were widely flouted. Passengers were posted fake membership cards, while last-minute customers surreptitiously picked up their tickets - and backdated membership cards - in dark corners of Gatwick airport. Periodically, though, inspectors from the Department of Trade would turn up to interrogate passengers checking in for an "affinity charter". One day in 1971, they decided to pounce on a Laker charter from Gatwick to New York that was ostensibly carrying the US Left Hand Club. Among the travellers who strayed from the script was an elderly lady who explained to inspectors that she was going to see her son, and had no knowledge of the association to which she was supposed to belong. She was left behind.

Freddie Laker created Skytrain in protest at such indignities. He told me the first long-haul, no-frills scheduled airline was born in the heat of the moment at Gatwick: "I stand up on a box then, don't I, and start shouting, 'They will never do this to me again. We are going to have a thing where people can get on and off aeroplanes when they like, how they like, they can eat the food or not eat the food, they can come up to the aircraft and buy the ticket at the door. Just like a train - Skytrain.'"

The initial response was one of mirth. One of the many mementoes hanging on the wall of his home in Grand Bahama is a cartoon showing passengers shovelling coal, with the caption: "What did you expect for £32?" - the one-way fare originally quoted by Laker. During the high-inflation Seventies, Laker's headline fare increased steadily, as did his legal bills. The ranks of the establishment, including both the main political parties, did their best to prevent Laker from offering cheap tickets.

"I fought, kicked, shouted at them day after day," said Laker. By late 1973, he met some success: one of the last acts of the Heath government was to designate Laker Airways as a transatlantic carrier. But the Labour Party that took over in 1974 was still a generation away from embracing free-market economics. Peter Shore, the Trade Secretary, withdrew Laker's designation. Freddie challenged the decision, and later won an Appeal Court ruling that the minister had acted in excess of his powers. Even this victory did little more than confer the right to start a series of legal battles in the US, where Pan Am and TWA did all they could to keep out low-cost competition. Eventually, in June 1977, President Jimmy Carter assented to the start of Skytrain.

One last-ditch legal manoeuvre by Laker's opponents was a bid to limit the number of seats he could sell each day to 189 (despite his DC10s having room for 345), to match the capacity on their Boeing 707s. Another was to force Skytrain to use Stansted rather than Gatwick. Each piece of obstructionism was eventually rejected.

"This is geared, and built, for the instant traveller. We've got 345 empty seats every day," promised Laker on 26 September 1977: the day a DC-10 christened Eastern Belle took off from Gatwick, destination New York JFK. "I still get emotional about it," he told me a quarter-century later. "All of us, all the crew, the passengers, were in tears." Rival airlines wept, figuratively, at the instant success of Skytrain. Laker became a national hero, and the following year he was knighted.

In the early days, such was the demand that the queue stretched around the block from the Laker ticket office in Victoria. But in return for a bit of waiting, and foregoing an in-flight meal, passengers could pay around half the prices previously charged by the bigger airlines: £59 each way.

Laker Airways quickly - perhaps too quickly - built up a network that included Los Angeles and Miami. Sir Freddie singlehandedly created a summer tourist industry for Florida, where he demonstrated that Englishmen were happy to endure the noonday sun in the Sunshine State.

Laker continued to expand, launching transatlantic services from Prestwick in Scotland, and introducing a business class - Regency Class. The trade paper, Travel News, chose him as Travel Personality of the Year for five straight years from 1977. But the winter of 1981-82 proved cruel: a rail strike cut the public-transport link between London and Gatwick airport. Soon, the average load on his DC10s was far fewer than 345. As is often the case when airlines are on the financial brink, flights began to be "consolidated" - the two New York departures would become one - to try to conserve cash.

When Skytrain hit the buffers in February 1982, hundreds of staff lost their jobs, and thousands of passengers were stranded on both sides of the Atlantic. Yet the public goodwill towards the founder appeared undimmed: pensioners offered their savings and passengers staged whip-rounds. In total, £1m was collected - regrettably, well short of the amount the banks were seeking.

To the end, Sir Freddie maintained that he was forced out of business by a conspiracy of traditional airlines: "We had LA and Miami, and we were about to get a round-the-world flight, Globetrain."

Virgin Atlantic filled the void left by Laker Airways: "Every route that Richard [Branson] has," said Sir Freddie, "we had or were going to get." The new people's champion benefitted from Sir Freddie's advice. The Virgin boss had habitually flown on Laker "on a point of principle", but believed the trick on transatlantic flights was to offer more frills, rather than fewer. Laker urged Branson to offer a business-class cabin: "Freddie said that if you're economy-only then you're vulnerable," says Branson, because competitors "cross-subsidise their economy fares with business passengers". The result was Upper Class, which began as an exclusive eight-seat cabin in the "bubble" of the Boeing 747, and is now regarded as the finest business class in the skies.

While Virgin Atlantic was getting going on the Gatwick-New York link, Laker was fighting a long legal battle with the airlines he accused of colluding to put him out of business. "I got them all in trouble," he later told me. "They couldn't possibly privatise British Airways until the action was over." He eventually received an $8m pay-off ("plus change") from BA, and the entitlement to free first-class travel for himself and accompanying family members for life.

He was able to build a home on "Millionaire's Row" on the island of Grand Bahama. Yet despite the pleasures of Bahamian life, he remained resentful at the way he was treated by the vested interests of aviation. They did, he said, their very best to keep flying the preserve of the rich: "It never occurred to them that there was a fourth class out there called the human race, who just want to fly at the lowest fare."