Northwest Arkansas Democrat-Gazette
U.K. airline files for insolvency
Monarch’s collapse 3rd this year; 110,000 tourists stranded
U.K. airline Monarch filed for insolvency Monday in Britain’s biggest-ever airline collapse, leaving the government to arrange the return of 110,000 tourists and marking the third failure of a major European operator in five months.
The airline and Monarch Travel Group have been placed under administration, leading to the suspension of the Luton, England-based company’s operating license, according to a statement Monday. Future flights have been canceled and won’t be rescheduled, affecting a further 300,000 people.
The collapse of Monarch, which served more than 40 destinations from five U.K. bases, comes after insolvency filings at Alitalia SpA and Air Berlin Plc 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 dollardenominated fuel costs after the pound’s decline in the wake of last year’s U.K. vote to leave the European Union.
Monarch Chief Executive Officer Andrew Swaffield said the carrier had fallen victim to “outside influences,” especially a flood of seating into its core west Mediterranean markets after a spate of terrorist attacks prompted travel companies to reduce their exposure to Egypt, Tunisia and Turkey. Attempts to sell the short-haul business before the insolvency filing failed, he said.
The crisis at Monarch, which employs about 3,000 people and is Britain’s fifthbiggest scheduled airline by passenger numbers, comes on the heels of pilot scheduling issues at low-cost rival Ryanair Holdings Plc that prompted 20,000 flight cancellations, disrupting travel for about 700,000 customers.
Monarch, which was founded in 1968, has come close to collapse before, with the airline rescued by a $220
million capital injection from Greybull Capital LLP last December, just hours before it faced grounding by the U.K. Civil Aviation Authority because of a lack of funds.
Greybull bought 90 percent of Monarch in 2014 as the airline transitioned from charter specialist to discount carrier. The private-equity firm said in a statement Monday it was “very sorry” that the three-year turnaround bid failed.
Monarch operated 35 Airbus SE A320-series planes, almost all of them leased, with AerCap Holdings NV most exposed to aircraft being returned, according to Wells Fargo analyst Gary Liebowitz. He added that the jets represent only 0.5 percent of the firm’s fleet value.
The U.K. airline also has a contract for 45 Boeing Co. 737 Max 8 jetliners worth about $5 billion at current list prices, the last 15 of which were ordered only in June. Boeing said in an email that it is “aware of the situation” regarding the carrier — which was due to get the first planes next year — but doesn’t comment on discussions with customers.
The insolvency opens up opportunities for rival operators to expand into former Monarch routes or snap up the carrier’s assets. Cantor Fitzgerald analyst Rob Byde said in a note that the failure is “another step in the consolidation of the European short-haul market,” and that he views EasyJet Plc, Britain’s biggest discount carrier and also based at Luton, as a likely bidder, though a wholesale takeover is unlikely.
British Airways owner International Consolidated Airlines
Group SA has expressed interest in Monarch’s takeoff and landing slots, fleet and crew, Sky News reported over the weekend. IAG has a growing discount arm of its own in Barcelona-based Vueling.
Swaffield said a study by consultants had shown that Monarch, which attracted about 5.4 million passengers in 2016, would continue to struggle in the European market, prompting plans to “pivot” into long-haul flights in spring next year. That strategy came unstuck when buyers for the existing operation weren’t forthcoming.
KPMG administrator Blair Nimmo said on BBC Radio 5 Live that “the prospect of selling the business as a whole has pretty much gone.” The group’s aircraft-maintenance arm, Monarch Aircraft Engineering Ltd. isn’t in administration and continues to operate normally.