Monarch ties up rescue deal

Monarch Group has secured £125 million of capital following its sale to Greybull Capital which was confirmed shortly before 9pm tonight.

The announcement stated the deal was anchored by a ?50 million capital commitment, with contributions from the Group’s prior shareholders, principally the Mantegazza family.

Greybull also acquired 90% ownership interest in Monarch, with the remaining 10% passing to the Group’s defined pension scheme and ultimately the Pension Protection Fund.

The Civil Aviation Authority has renewed the Group’s Atol licence which had been due to expire at midnight on October 24.

The confirmation said “Greybull will provide significant capital to Monarch in order to grow the Group and build on its long-established heritage and trusted brand name”.

Monarch has undertaken a comprehensive strategic review of all areas of the business, from operations to ownership and financing.

The main outcomes listed in the agreement announcement were:

• Optimise fleet from 42 to 34 aircraft, and revised agreements with lessors to either mark-to-market or early return of 10 aircraft from the current fleet
• Securing a new Boeing fleet order for 30 737 MAX 8 aircraft with deliveries from 2018 to 2020, providing a cost-effective and uniform fleet by late 2020
• Both long-haul and charter flying to end by April 2015
• Airline network to specialise on Monarch’s ‘heartland’ of scheduled short-haul European leisure routes, with increased average frequencies, aircraft utilisation, productivity and profitability
• Focus on five UK airport bases – London Gatwick, Manchester, Birmingham, London Luton and Leeds-Bradford – and closure of East Midlands from summer 2015
• Material concessions agreed with employees across the Group to enable the successful restructuring, including reductions in pay of up to 30%, with more than 90% of unionised staff voting to accept changes, and some 700 redundancies, two-thirds of which were voluntary
• Reduction of the Group’s operating cost base, in line with other low-cost carriers, and increased efficiencies across the business
• Resolution of the Group’s pension deficit through agreement with the Pensions Regulator, PPF and the Trustee of the Monarch Airlines Limited Retirement Benefits Plan which will result in the Plan being assessed for entry into the PPF.

The PPF would then hold a 10% stake in the Group, in line with its principles in restructurings such as this. The Pensions Regulator has cleared the restructuring.

The pension deficit as per the company’s balance sheet was previously £158 million and the current estimated shortfall to secure full benefits is around £660 million.

Monarch Group chief executive, Andrew Swaffield, said: “I am delighted to welcome the Greybull team as the new owners of the Monarch Group. 

“We have a shared vision for the strategic direction and prospects for the business, and I am looking forward to working with them to implement the exciting plans for building our future.”

“I would personally like to thank all Monarch employees who have been hugely supportive of the initiatives which were essential to complete this transaction.  I am very proud to be leading such a team – together we will be building a great future for the Group.”

Commenting on behalf of the selling shareholders, Fabio Mantegazza said: “We are very proud to have created one of the most loved aviation brands in the UK over the last 46 years.  We think that now is an appropriate time to allow new shareholders to take Monarch into the future, with secure financial backing and clear strategic goals and we wish the Group every success.”

Said Greybull Partner Marc Meyohas: “We are delighted to acquire Monarch and invest our capital into a very strong brand with great potential in all its markets and are grateful for the selling shareholders’ support in achieving this transaction.  We see this as a long-term investment and hope we can be very supportive shareholders throughout Monarch’s next chapter.”

The fate of one of the industry’s biggest and best-known travel companies has been the subject of fevered speculation for weeks with concern over its future mounting particularly on the eve of the winter half term getaway.

Now that the deal has been finally agreed comes after Monarch confirmed the departure of strategy director Stuart Jackson, who is among 700 redundancies to be announced.  Jackson leaves the company on November 5 after more than two decades with Monarch.

The job losses are below the 900 expected following consultation, with the cost cuts demanded by Greybull achieves through some staff accepting changes terms and conditions and others changing their hours to go part-time.

Two-thirds of the 700 job losses are voluntary redundancies while others have taken pay cuts of “up to 30%”. Earlier this week a spokeswoman for Monarch had said they were “on track for a solvent sale” of the group, which includes Cosmos holidays and bed bank Somewheretostay.

Previously Greybull Capital was involved in the buyout of struggling electrical goods retailer Comet before its collapse into administration in November 2012. Greybull was one of the so-called “vulture investors” that backed OpCapita’s bid for the firm the previous February.

In a statement the CAA said: “The CAA can confirm we have renewed the Atol licences for the following businesses: Avro Aviation Ltd (Atol number TRA975129); Avro Ltd (Atol number 1939); Cosmos Holidays (Atol number 2275); Cosmos Aviation Ltd (Atol number TRA976100); and First Aviation Ltd (Atol number 4888) until 30 September 2015.

“All of these Atol holders are part of the Monarch Travel Group. At the group’s request, we had previously extended the licences until 24 October, while the group continued negotiations with its new investor. Those negotiations have now been successfully completed and the group’s Atol licences have therefore been renewed for the next year.”