Monarch Group’s new management team is reviewing the business. New chief executive Andrew Swaffield explained why to Ian Taylor
The travel sector, like the British economy, has had some tough years since 2008.
Monarch has not been immune, but new chief executive Andrew Swaffield pointed out: “2012 13 were good years for revenue growth. Monarch grew from 31 aircraft to 42 from early 2012 to now.”
However, the situation has changed as the economy improved and other companies expanded.
Swaffield said: “We began to see the market deteriorating at the end of last summer. It’s the old story – too many aircraft. This has been a challenging year. There is too much capacity.”
In the circumstances, Swaffield is pleased to say: “Monarch is performing quite well. But because we have grown we need to be doing better.
“Capacity is up, but demand is flat. We have more aircraft than we would like in this market.”
New appointments
Swaffield took over as chief executive at the end of July, having joined Monarch as airline managing director at the start of April.
He previously ran British Airways’ air miles business Avios and, before that, BA’s travel shops.
New non-executive chairman Sir Roy McNulty replaced executive chairman Iain Rawlinson at the same time.
McNulty is chairman of Gatwick and former chairman of the Civil Aviation Authority. Rawlinson, an investment banker, had run Monarch since 2009.
Swaffield said: “Iain achieved a great deal. But he made the decision to step down and we now have a more normal board structure. We’re fortunate to have someone of Roy McNulty’s standing.
“Now we need to see what needs changing. The big focus is the airline. We’re on a trajectory of changing from a charter airline to a scheduled European low-cost carrier. We need to operate as efficiently as a low-cost carrier.”
Asked if Monarch does so now, Swaffield said: “No, but we can achieve it within a year to 18 months. We’re looking at everything. EasyJet and Ryanair demonstrate you can make money in a sustainable way. But to do that, you have to be competitive.”
Reducing the cost base
The airline will have 39 aircraft this autumn after retiring three Boeing 757s, but the whole fleet is due to be replaced.
Monarch confirmed a £1.75 billion order for 30 new aircraft last month, with options on another 15.
The deal will give it an entire fleet of the latest Boeing 737s by 2020. The first is due for delivery in April 2018, by which time Swaffield aims to have the carrier on a new cost base.
He said: “Each 737 will be 15% to 20% more fuel-efficient. But over the next 12-18 months we have to optimise the network and schedule.
“The old model of flying out on a Saturday and staying a week or two is finished. Increasingly, customers book shorter, multiple trips, going out on Thursday and back on Monday.
“We need a schedule that matches [these changes]. We also need to address our winter losses.”
The review could mean a smaller fleet and the end of long-haul flying. Swaffield said: “It’s difficult to run a long-haul business with two aircraft.”
More flights to fewer places
He insisted: “We’ll remain leisure focused and I don’t believe we’ll abandon our strongholds of the Iberian peninsula, the Canaries and Turkey.
“We’ll be adding places people want to go and using aircraft and staff more effectively. You will see more European cities, more ski, more schedules that enable short breaks and a deeper, rather than a wider, network.
“There will be more flights to fewer places. You will see significant change over the next 18 months.”
Swaffield said customer loyalty is also a priority. “I ran Airmiles and Avios and learned the value of a customer database. Most airlines have yet to learn that.
“The key is consistent delivery. We let customers down a bit this summer – there were various problems with luggage and delays.
“Offloads [leasing aircraft] have a habit of going wrong. We want to get the basics right – on-time departures, no cancellations, baggage delivery.”
He said: “Monarch has a unique set of strengths. There are many challenges, but I’m optimistic about our ability to change the game as a low-cost scheduled carrier that knows how to work with tour operators.
“It’s a change from charter to something more efficient and more sustainable.”