Speculation over Monarch Group’s finances continued at the weekend with the Sunday Times that reporting the firm is looking to attract outside investment.
The report claimed corporate advisory firm Dean Street Advisers has been approached to try to attract interest from a private equity investor.
The speculation, which Monarch refused to comment on, came a week after it was reported that Monarch was in talks with its owner, the Switzerland-based Mantegazza family, over a £60 million cash injection.
This would be its third such refinancing since 2009 when £45 million was pumped into the travel group followed by a further £75 million in 2011.
The Sunday Times said Monarch wants to compete with Ryanair and easyJet on price but believes it can stand out against its low-cost rivals on service.
The refinancing speculation has been linked to Monarch’s £1.75 billion aircraft order announced recently and reports of weak trading in the short-haul leisure travel sector in the UK.
It also comes after “fast-growing” Monarch was cited as a potential threat to the no-frills carriers and to the big two charter operators Thomas Cook and Tui Travel in a report by finance giant HSBC.
Quoting a Travel Weekly report from July 3, the HSBC study noted the high level of late-season advertising, saying this was a “clear sign” the market was underperforming.
With intra-Europe aviation capacity up 6.2% this summer, HSBC described the low-cost carrier market as “increasingly challenging”. It said the short-haul sector was facing structural change in the face of “failing capacity discipline” and soft selling prices.
Among the low-cost carriers, only easyJet saw yield growth in all four quarters in 2013; Air Berlin saw significant double-digit second-half decline and Ryanair a 10% fall in the third quarter.
In this environment of weakening yields, HSBC said second-tier carriers such as Jet2.com, Monarch and Norwegian have emerged.
“In their local markets Jet2.com [northern England] and Monarch [southern England] are both growing fast, while Wizz continues to grow fast from eastern Europe,” the report said.
However, HSBC foresees a “new surge in competition from Ryanair and easyJet” and questions whether Cook and Tui are strong enough to also withstand the threat from Monarch, Jet2.com and Norwegian.
The big two are due to give third-quarter trading updates next week. HSBC said weaker UK trading “seems to be more than priced in” to Cook’s share price, which has fallen 30% since mid-May.