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Monarch Goes into Administration

2 October 2017

Monarch Airlines ceases trading disrupting holiday plans for thousands

On 2 October 2017, it was announced that Monarch Airlines had collapsed, leaving over 110,000 holidaymakers stranded abroad.

Here, we will look at why this global company has been forced to cease trading, and what this might mean for its employees and customers.

Who is Monarch Airlines?

Monarch Airlines was one of the leading airlines to fly people on package holidays around Europe.

Having operated for over 50 years and being the UK's fifth biggest airline, it was a shock for customers, staff and the entire aviation industry when it announced its collapse.

Why has Monarch ceased trading?

Monarch announced that it was going into administration at 04:00 BST, a time when it had no planes in the air.

The airline had been in last-ditch talks with the Civil Aviation Authority (CAA) about renewing its licence to sell package holidays and ATOL protection, but had failed to reach a deal.

This resulted in the biggest collapse of a UK airline since records began. The company is said to have lost £291m in 2016, and has struggled to recover due to extraneous pressures on the market and operations.

Here are the four core reasons why Monarch fell into administration:

1. Fuel prices

Blair Nimmo of KPMG, Monarch's administrator, summed up the airline's problems quite succinctly: "failing revenues and rising costs".

Fuel is a key part of this, as the cost is denominated in dollars. Where the pound has fallen by 10% to the dollar since Brexit, the airline has had to pay more for fuel, vastly increasing operational costs.

2. Increased competition

According to Nimmo, prices have been depressed for some time. As an example, he stated that the company flew 14% more passengers last year, but for £100m less revenue.

This is because competition within the low-cost short-haul market is fierce and includes established brands, such as EasyJet and RyanAir.

3. Reduced number of long-haul flights

When Greybull took over Monarch in 2014, they decided to move away from long-haul flights and enter the short-haul market, monopolised by EasyJet and RyanAir.

This resulted in a huge drop in passenger numbers, as holidaymakers in this market had a greater choice of providers.

4. Terror attacks in Egypt and Turkey

Though Monarch’s planes did not regularly travel to Egypt or Turkey, terror attacks in these locations piled on the pressure for the airline.

Other providers who did fly to these areas saw demand dry up, so they decided to focus on different locations where Monarch was once the go-to option (namely Spain and Portugal).

This caused Monarch to reduce prices for travel to its key markets and resulted in a huge drop in revenue.

What does this mean for Monarch customers?

Approximately 860,000 people have lost bookings following the airline's collapse. Most were informed by text message, although some holidaymakers were already at airports when they were alerted.

The CAA is now undertaking what's being called the "UK's biggest peacetime repatriation" to combat the effects of Monarch entering administration. It will send more than 30 planes to return the 110,000 holidaymakers who are currently abroad and had booked return flights with Monarch.

It has also released this advice:

  • Customers in the UK yet to travel: don't go to the airport
  • Customers currently overseas: check for confirmation of new flight details (these will be available a minimum of 48 hours before the original departure time)
  • Customers abroad: passengers due to fly in the next fortnight will be brought back to the UK, at no cost to them. There is no need to cut a stay short. Customers with flight-only bookings after 16 October are unlikely to have ATOL protection, so will need to make their own arrangements.

All affected customers: keep checking for more information

There is a 24-hour helpline: 0300 303 2800 from the UK and Ireland, and +44 1753 330330 from overseas.

Customers are being advised to check if they have ATOL protection; if they do, they may be eligible for a refund.

What does this mean for Monarch employees?

Monarch employs approximately 2,100 people. Most claim that the move into administration was unexpected, and are now unsure of their futures while the company lies in administration.

If the company is effectively restructured, they may keep their jobs. If a viable resolution cannot be found, they may be searching for a job sooner rather than later.

These problems are not unique to Monarch, it is just one of the first (and perhaps the most prominent) airlines to be severely affected. In fact, Monarch is the third major European airline to collapse this year, following Airitalia and Air Berlin.

Unless other providers take steps now to combat the issues faced by Monarch, it's likely that further UK airlines may fall into administration.

If you are an employee of the business then read this page on what your rights are and what is likely to happen.

Categories: Hospitality, Administration, What is administration

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