Monarch Airlines goes into administration

Administrators have been appointed for Monarch Airlines after the carrier failed to have its Atol licence renewed amid concern about its finances.

The plug was pulled at 4am on Monday morning after the final Monarch flight of the evening schedule touched down in Manchester from Tel Aviv.

It is the largest UK airline ever to enter administration and leaves 110,000 people abroad and 300,000 forward bookings that will be cancelled.

The Monarch group’s engineering division, that employs 800 of its 2,800 staff is not affected by the administration.

A repatriation of the 110,000 customers who were abroad will start immediately and is expected to take seven days although some customers are due to be away for longer.

The repatriation is understood to be expected to cost around £40 million to £50 million but the Air Travel Trust Fund which backs Atol will only be hit for around 10% of that.

The failure of Monarch is the first major collapse of a leisure airline in the UK since XL Leisure Group in September 2008 when 85,000 passengers had to be brought home.

A statement from the CAA stated all future Monarch Airlines bookings, including flights and holidays, have now been cancelled following a decision by the company’s board to stop trading.

The CAA said: “As all of Monarch’s flights due to depart from the UK have now been cancelled, customers should not go to their UK airport.  Affected customers still in the UK should check for further information.

“Due to the unprecedented number of UK consumers currently overseas who are affected by this airline administration, the CAA and Government are securing a fleet of more than 30 aircraft, flying to more than 30 airports, to bring 110,000 people back to the UK at no cost to them. This is the equivalent of operating, at very short notice, one of the UK’s largest airlines.”

The CAA has a dedicated website, which is the best source of advice and information for affected customers, and a 24 hour helpline (0300 303 2800 from in the UK and Ireland, and +44 1753 330330 from overseas) to provide additional assistance.

Customers currently overseas should check for confirmation of their new flight details which will be available a minimum of 48 hours in advance of their original departure time.

Andrew Haines, Chief Executive of the CAA, said: “We know that Monarch’s decision to stop trading will be very distressing for all of its customers and employees.

“This is the biggest UK airline ever to cease trading, so the Government has asked the CAA to support Monarch customers currently abroad to get back to the UK at the end of their holiday at no extra cost to them.

“We are putting together, at very short notice and for a period of two weeks, what is effectively one of the UK’s largest airlines to manage this task.  The scale and challenge of this operation means that some disruption is inevitable. We ask customers to bear with us as we work around the clock to bring everyone home.

“We urge people affected by the company’s collapse to check our dedicated website for advice and information on flights back to the UK.  It also gives information to those passengers that have future bookings with Monarch but are yet to leave the UK.”

Monarch is known to carry up to 12,000 passengers per day but due to competition and the pressure on prices in the short-haul market has seen revenue per seat around £20 to £30 lower this year than 2016.

Monarch has fallen into repeated difficulty over recent years as it struggled to compete with budget rivals easyJet and Ryanair.

Long-standing owners the Mantegazza family decided to sell the group in July 2014 after refusing to finance a fresh bail-out.

But they first persuaded Andrew Swaffield, who had recently joined the airline, to take over as chief executive to attempt a turnaround and to try to find a buyer.

Swaffield led a restructure that slashed more than 700 jobs and won union agreement to pay cuts of up to 30%. It ended with a takeover by London-based venture capital firm Greybull Capital in October 2014.

As a condition of renewing Monarch’s Atol under the new owners, the CAA insisted on extending the airline’s Atol protection to its seat-only sales.

Monarch ceased charter and long-haul flying and appeared to have turned a corner. But by late 2015 it was back in trouble.

When the carrier’s Atol licence was due for renewal in September last year, the CAA imposed financial conditions which Greybull appeared reluctant to meet.

The CAA delayed the license renewal and made plans to repatriate Monarch passengers in the event of the carrier failing.

It subsequently emerged, in the accounts of the Air Travel Trust fund which underwrites the Atol scheme, that the measures put in place to carry out this repatriation cost £25 million.

At the eleventh hour, Greybull announced a £165 million investment, guaranteeing Monarch’s immediate and, it appeared, long-term future.

The CAA renewed the airline’s Atol and Swaffield, an Abta board member, appeared in triumph at Abta’s 2016 Travel Convention in Abu Dhabi.

He told the Convention: “I wanted to express thanks to the trade for supporting us. The investment from Greybull is built around our six-year business plan and takes us to the end of that.”

He insisted: “The investment is from now, not spread over the six years.”

The cash injection allowed Monarch to order a new fleet of fuel-efficient Boeing 737 MAX aircraft.

Swaffield told Travel Weekly: “The aircraft order will bring significant savings. We spend £120 million a year on fuel. The fleet order will be transformative for us.”

The first of the aircraft was due to be delivered next March.

In line with the new arrangements, the CAA dropped its requirement that Monarch provide Atol cover for seat-only sales, reducing the group’s Atol capacity to about 244,000 for the 12 months to this September, when Monarch carries about six million passengers a year.

Yet the pressure on Monarch continued to mount as overcapacity across Europe and especially in the western Mediterranean squeezed prices and led even hugely profitable rivals such as easyJet to report falling margins.

Just two months ago, Swaffield was forced to respond to fresh reports of Monarch’s impending demise.

However, he rejected suggestions the airline was in trouble after group accounts for the year to October 2016 showed pre-tax losses of £291 million.

He blamed the losses on a write-off of costs for the remaining three years of the carrier’s lease arrangements for its existing fleet, explaining: “We pulled all the costs into one set of accounts.”

That suggested Greybull might be keen to find a buyer, and Swaffield confirmed that consultancy KPMG had been brought in to review the group’s entire operation and strategy.

Subsequent reports suggested the airline could exit the short-haul market and move back to long-haul flying – a nonsense given the aircraft Monarch operates.

It could be the involvement of KPMG that led in the past week to reports that Monarch has been the subject of bids by easyJet and Wizz Air.

But the carrier’s end will have been determined by decisions taken by Greybull and the CAA.


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