Monarch files for insolvency

Monarch files for insolvency

Monarch Airlines has collapsed, filing for insolvency and leaving roughly 110,000 customers flightless at the whim of replacement flights arranged by the Civil Aviation Authority (CAA).

Chris Grayling, Transport Secretary told press that this will be the “biggest peacetime repatriation” the UK has ever seen. The CAA will need to charter approximately 30 aircraft to help repatriate the UK citizens.

All five businesses under the Monarch Group: Monarch Airlines, Monarch Holidays, First Aviation, Avro and Somewhere2Stay have ceased trading and have entered administration – which will be headed up by two KPMG Alumni.

The privately-owned airline failed to renew its Air Travel Organisers Licence. The 20,000 flights scheduled will not be rescheduled and the 300,000 bookings will be refunded. The final nail in the coffin is the suspension of its air operators certificate.

The bell has been tolling for a while. The airline suffered a severe loss of £291 million last year with stagnant results across the board. This is a substantial drop off from the previous year’s loss of £27 million. Monarch was also bailed out by its private equity owner Greybull Capital in 2014.

The collapse was quick, yesterday it was granted a temporary 12-day extension to its Air Traffic Organisers Licensing (Atol) licence less than four hours before its expiration. It was due to announce new funding in the next few days – The FT reported.

Following the extension, the group’s CEO Andrew Swaffield released a statement saying: “I am excited about the additional capital coming into the group which will help us fund our future growth” – Monarch collapsed shortly after.

Buying and Selling

This isn’t the first time Monarch has faced collapse. Greybull Capital injected £165 million, saving the company from impending grounding by the CAA.

Greybull Capital acquired 90% of Monarch in 2014. The equity firm injected £125 million into the company that helped transform Monarch airlines from a charter specialist to a discount carrier.

On 28 September, Reuters reported that Monarch was in talks with other airlines to buy up parts of its short-haul network. Sky News said that easyJet and Wizz Air had bid.

Insight

It was a dead man walking, the airline has been hit by all sides by economic uncertainty, security concerns, LCC competition and Brexit.

Monarch has seen a drastic downturn of passengers, the CAA reported Monarch flew 5.4 million passengers last year, down from 5.7 million in 2015 and a downturn from the more stable 7 million passengers.

While the other biggest carriers such as Easyjet, Ryanair have secured the low-cost market and British Airways maintains in leading role as the typical flag carrier and Thomson had the leisure market cornered – Monarch didn’t really have a definite ball in the game.

Monarch’s collapse also comes off the back of Alitalia and Air Berlin. The troubled market prompted by Brexit fears, fuel prices and lower costs is a definite threat to the less stable operators.

Alex Baldwin
By Alex Baldwin October 2, 2017 17:43