Published on October 2nd, 2016 | by Jim Lee0
Monarch Airlines week of rumour and speculation
Just over a week ago on Sunday, 25th September, rumours began circulating via social media that Monarch was in financial trouble and in imminent danger of suspending all operations. It followed reports of the positioning of several United Airlines Boeing 747-400s, Omni Boeing 767s, Miami Air Boeing 737-800s and Air Transat aircraft, to various leisure destinations around Spain, using flight numbers which were similar, or had timings similar, to flights on Monarch’s own network.
Aviation sites such as PPRuNe and Flightradar24, only fuelled this speculation, as did Facebook and twitter. While the airline continued to advertise holiday deals and take bookings for flights late into Sunday evening, it sent nothing out to the 113,000 followers on it’s verified Twitter account, although it began replying directly to customers asking if the rumours were true. Here are some examples of its tweets:-
“Hi there, the rumours are not true. Please ignore them.” In response to a tweet from user, Steven Bowie, who asked about “aircraft coming to the UK for repatriation flights”, Monarch said: “Hi Steven, this is nothing to do with Monarch Airlines, please ignore the rumours”. Asked directly by Adam Farmiloe – “Are you going bust tonight? Hope not, we have flights booked” – Monarch replied: “Absolutely not Adam. We hope you have a great flight, where are you off to?”
The problem was compounded by the lack of an official statement, by either the UK Civil Aviation Authority (CAA), or Monarch themselves, until the rumours had taken hold. This was in spite of the fact that there were persistent reports that the CAA were funding the positioning flights, estimated by one media source at up to £10 million (around €11.5 million), adding that this would be met from the Air Travel Trust Fund. This is funded by contributions from the travel companies, who must pay £2.50 (around €2.88) into the scheme for each person they book on a holiday. It quoted a CAA spokesperson as saying: “As a responsible regulator that puts consumers first, we have robust contingency plans for a wide range of potential issues. These flexible contingency plans enable us to be prepared to act in the interests of consumers on a variety of issues, whenever it is necessary”. To further confuse matters the CAA spokesperson was quoted as saying: “We do not comment on specific operational, financial or licensing matters relating to any of the businesses we regulate.”
Belatedly on 26th September, Monarch issued its own statement, in response to the speculation, which said:-
“Over the weekend, there has been negative speculation about Monarch’s financial health.
Monarch is trading well and is expected to achieve an EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of over £40 million (around €46 million) at the end of this financial year (October 2016). This is despite a difficult period for the holiday industry due to terrorist incidents, Brexit and the resulting devaluation of sterling.
Our flights and holidays are operating as normal, carrying Monarch passengers as scheduled.
To weather tougher market conditions and to fund its ongoing growth, Monarch expects to announce a significant investment from its stakeholders in the coming days”.
We understand that Monarch has also been talking to possible investors including the Chinese conglomerate, HNA Group, which could open up new commercial possibilities, for the airline.
So apart from the social media frenzy what fuelled the Monarch speculation?
One issue, which apart from the unexplained aircraft movements, which probably contributed significantly to the speculation, was the fact that Monarch Airlines parent, the Monarch Group had until Friday, 30th September, to reapply for its Air Travel Organiser’s Licence (ATOL), otherwise the CAA would have forced it to suspend sales of holiday packages. By law, every UK travel company which sells air holidays and flights is required to hold an ATOL, so If a travel company with an ATOL ceases trading, the ATOL scheme protects customers who had booked holidays with the firm. It ensures they do not get stranded abroad or lose money. The scheme, first introduced in 1973, is designed to reassure consumers that their money is safe, and will provide assistance in the event of a travel company failure. Permits granted are valid for no more than one year and require rigorous financial scrutiny for renewal. As at 31st March 2016 the ATT fund had a surplus of £139 million (around €160 million).
In addition, the Manchester Evening News reported that the CAA had expressed concerns about the state of Monarch’s finances and this is why it had put in place a contingency plan in the event the carrier’s license not being renewed.
The Monarch Group is a leading UK independent airline group with core activities in scheduled airline operations, tour operations and aircraft engineering. Based at Luton Airport, Monarch is 90% owned by UK investment company Greybull Capital. The remaining 10% percent is owned by the group’s pension fund. As Monarch’s largest shareholder, Greybull Capital LLC, is now widely expected to announce a significant investment in the coming days.
For over five decades Monarch has been fulfilling its customers’ desires for travel and package holidays and since 1961 its tour operating division has been in the business of providing a fully flexible and protected holiday proposition. with high-quality travel products, superior care and value for money. It’s over 30 years since Monarch launched scheduled flying and in that time they have grown to become a leading scheduled airline, focused on the leisure sector. Monarch Aircraft Engineering’s expertise has underpinned the quality and efficiency of the Monarch fleet for over 40 years and has a rapidly-growing third-party customer base.
Today Monarch provides some seven million airline sector seats taking passengers to 40 destinations from five UK bases selling 6.6 million airline sector seats with 800,000 tour operator passengers. It has around 2,800 employees group-wide while Monarch airlines fleet consists of 35 Airbus family aircraft (10 A320s and 25 A321s). On 31st October 2014, Monarch Airlines announces the confirmation of a narrow body fleet order with Boeing for a new generation fleet of 30 737 MAX 8s. The order, included options for 15 additional 737 MAX 8s and marked the beginning of Monarch’s transition to an all-Boeing single-aisle fleet.
CAA statement on the extension of Monarch’s ATOL licences finally brings clarity
On 30th September, the CAA issued a statement on the extension of Monarch’s ATOL licences, which finally brought some clarity to the situation. In its statement the CAA confirmed that it had granted Monarch a 12 day extension to its existing ATOL licences. The extended licences will now expire at 23:59 on 12th October 2016. It added:-
“The CAA was able to do this by requiring the shareholder to provide additional funding and because customers’ money will be protected.
“Monarch now has 12 days to satisfy the CAA that the group is able to meet the requirements for a full ATOL licence.
“Monarch will remain ATOL licensed until this extension expires.
“The CAA always advises consumers to ensure they book ATOL-protected air holidays and consumers who choose to book an ATOL-protected flight or holiday with the company during this time will continue to be protected by the ATOL scheme.
“During this period of extension, the CAA will continue to monitor the company.”
Monarch also issued a statement confirming that it had successfully concluded discussions with the CAA to extend its ATOL licence, “for which it thanks the CAA”. It added “the company has also received significant further investment from shareholders and is close to announcing the largest investment in its 48-year history”. The statement concluded by saying that Monarch “continues to fly and looks forward to welcoming customers on board”.
Andrew Swaffield, Chief Executive Officer of The Monarch Group, commented:
“I am delighted that we have been able to come to an agreement with the CAA on the extension of Monarch’s ATOL licence and am excited about the additional capital coming into the group which will help us fund our future growth. I am immensely proud of the professionalism of the Monarch team.”