Tuesday 17 July 2018

UK government to fly 110,000 home as Monarch collapses

A woman carries a cardboard box out of a Monarch office after the airline ceased trading, at Luton airport
A woman carries a cardboard box out of a Monarch office after the airline ceased trading, at Luton airport

Thomas Seal

Leisure carrier Monarch has filed for insolvency in the UK's biggest-ever airline collapse, leaving that country's government to arrange return flights for 110,000 passengers.

In the third failure of a major European operator in five months, the airline and Monarch Travel Group have been placed into administration, leading to the suspension of the Luton-based company's operating licence. Future flights and holidays have been cancelled and won't be rescheduled, affecting a further 300,000 people.

The collapse of Monarch, which served more than 40 destinations from five UK bases, follows insolvency filings at Alitalia and Air Berlin, as a glut in capacity, prompted by the low oil price, compels carriers to slash fares in a battle for market share. At the same time, the low-cost operator has seen margins squeezed by higher fuel costs, priced in dollars, following the pound's decline in the wake of last year's Brexit vote.

Monarch CEO Andrew Swaffield said it had fallen victim to "outside influences", especially a flood of seating into its core west Mediterranean markets after a spate of terrorist attacks prompted holiday companies to reduce their exposure to Egypt, Tunisia and Turkey. Attempts to sell the short-haul business prior to the insolvency filing failed, he added.

The crisis at Monarch, which employs 2,100 people and ranks as Britain's fifth-biggest airline by passenger numbers, excluding tour operators, follows on the heels of 20,000 flight cancellations at low-cost rival Ryanair amid pilot scheduling issues. The move has disrupted travel for around 700,000 customers.

Monarch, which was founded in 1968, has come close to collapse before, with the airline rescued by a £165m (€186m) capital injection from Greybull Capital last December, just hours before it faced grounding by the UK Civil Aviation Authority (CAA) due to a lack of funds.

Greybull had bought 90pc of Monarch in 2014 via a £125m recapitalization that funded the final elements of a transformation from charter specialist to discount carrier. Greybull said in a statement yesterday that it was "very sorry" the three-year turnaround bid failed.

The insolvency opens up opportunities for rival operators to expand into former Monarch routes or snap up its assets. Cantor Fitzgerald Research analyst Rob Byde said in a note that the failure is "another step in the consolidation of the European short-haul market" and that it views EasyJet, Britain's biggest discount carrier and also based at Luton, as a likely bidder, though a wholesale takeover is unlikely. EasyJet declined to comment.

British Airways owner IAG is reported to be interested in Monarch's slots, fleet and crew. KPMG administrator Blair Nimmo said "the prospect of selling the business as a whole has pretty much gone". Aircraft-maintenance arm, Monarch Aircraft Engineering isn't in administration and continues to operate normally.

Irish Independent

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