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Monarch Airlines goes bust, spoiling holiday plans for many Britons
October 2, 2017 / 6:06 AM / 2 months ago

Monarch Airlines goes bust, spoiling holiday plans for many Britons

LONDON (Reuters) - Britain’s Monarch Airlines [MONA.UL] collapsed on Monday, causing the cancellation of hundreds of thousands of holidays, after falling victim to intense competition for flights and a weaker pound.

The failure of Monarch, the largest British airline to go bust, will affect nearly 900,000 passengers in total. It marooned more than 100,000 tourists abroad, prompting what was billed as the country’s biggest peacetime repatriation effort.

Its demise added to turbulence in the European airline industry after Air Berlin (AB1.DE) and Alitalia [CAITLA.UL] filed for insolvency this year. Ryanair (RYA.I) has also been forced to cancel thousands of flights because of problems finding enough pilots to fly them.

Shares of Monarch rivals, easyJet (EZJ.L), Ryanair and Wizz Air (WIZZ.L) rose on Monday on the prospect of reduced competition and the chance to acquire some of its assets.

Monarch, based at Luton Airport north of London and in business since 1968, cancelled about 750,000 future bookings and apologised to customers and staff.

“I am so sorry that thousands now face a cancelled holiday or trip, possible delays getting home and huge inconvenience as a result of our failure,” Monarch Chief Executive Andrew Swaffield said in a message to employees after the company went into administration.

“I am truly sorry that it has ended like this.”

Nearly 90 percent of Monarch’s 2,100 employees were laid off on Monday, the joint administrators said.

Monarch’s finances deteriorated in 2016, after security concerns deterred travel to Tunisia, Turkey and Egypt and brought increased capacity for routes to Iberia. The decline in the value of the pound has also compounded its problems.

The airline was bailed out by its owner Greybull Capital a year ago.

“Monarch has really been a victim of a price war in the Mediterranean,” Transport Secretary Chris Grayling told Sky News.

Grayling said he expected many of Monarch’s more than 2,000 staff to find jobs elsewhere.

“Monarch’s problem was it was it was neither one thing nor the other. It was not really ... a package holiday airline, nor was it really a low-cost airline. I think it got rather squeezed in the middle,” he added.

The British government has asked the Civil Aviation Authority (CAA) to charter more than 30 aircraft to bring home about 110,000 Monarch customers overseas, the CAA said.

PAIN FROM THE POUND

Staff were seen packing up boxes and hugging each other at Monarch’s offices in Luton.

Blair Nimmo, partner at KPMG and joint administrator of Monarch, told Reuters that while a drop in income was at the root of the airline’s problems, a fall in the pound after Britain voted to leave the European Union had made life tougher.

A woman carries a cardboard box out of a Monarch office after the airline ceased trading, at Luton airport in Britain, October 2, 2017. REUTERS/Mary Turner

“We’re all aware of the exchange rate movement and that the company buys its fuel and handling and pays its traffic and leasing costs in dollars,” he said. “So there’d be a very material impact.”

Monarch has lost market share in recent years with the rise of budget carriers. It was Britain’s fifth-largest airline and, according to Euromonitor International, held 1.7 percent of the UK airlines market in 2017, down from 2.6 percent in 2012.

The collapse of Monarch could benefit its rivals.

“While we wait to see what comes out of the administration process, there is no doubt that the pace of restructuring across Europe will be beneficial to yields as surplus capacity is reduced,” Goodbody analysts said in a note to clients.

Analysts at broker Cantor Fitzgerald said that it was likely that easyJet would bid for some of Monarch’s assets.

Goodbody estimates that Monarch also has about 600 pilots. Virgin Atlantic launched a fast-track application scheme specifically targeted at former Monarch First Officers.

Slideshow (6 Images)

The collapse will be a headache for some of the world’s largest leasing companies, which financed its current fleet of 36 mainly Airbus (AIR.PA) jets, and for Boeing (BA.N), which has taken firm orders from Monarch for 32 of its 737 MAX aircraft.

In June Monarch announced plans to boost its order to 45 planes, but part of the deal never materialised on Boeing’s published order book.

Monarch had been a regular pawn in the global battle for market share between planemakers as it shifted its loyalties between Airbus and Boeing.

Boeing secured Monarch’s agreement to revert back to its jets in 2014 after a fierce contest against Airbus and Bombardier (BBDb.TO).

“GUTTING”

Monarch’s last flight landed in Manchester from Tel Aviv at 3:19 am (0219 GMT), according to flight tracking service Flightradar24.

The website also showed 25 aircraft had been lined up to start repatriating passengers by 0600 GMT on Monday, including 10 from Qatar Airways already based in Europe on behalf of British Airways. An easyJet (EZJ.L) plane and several charter aircraft were also part of the operation.

Hungarian low-cost carrier Wizz Air said it was offering to fly stranded Monarch passengers home from Tel Aviv for 119 pounds ($159) each.

KPMG said that 860,000 passengers would be affected in total. Monarch said its companies that entered into administration include Monarch Airlines, Monarch Holidays Ltd, First Aviation Ltd, Avro Ltd and Somewhere2stay Ltd.

While customers are being taken back to Britain, some who were due to travel out from Luton Airport said that communication from the airline had been poor.

Christine Brittin, a 46-year-old receptionist, landed in Luton after a weekend in Menorca. She was supposed to head straight on to her next flight for a week in Turkey, but only found out as she got off the plane that her next trip had been cancelled.

“They’ve cancelled all of it, all of my holiday, I just got an email,” Brittin said. “It’s gutting.”

Writing by Alistair Smout in London; Additional reporting by Polina Ivanova in Luton, Subrat Patnaik in Bengaluru, Victoria Bryan in Berlin and Tim Hepher in Paris; Editing by Guy Faulconbridge, Keith Weir and David Goodman

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