Published on October 17th, 2016 | by Jim Lee0
Speculation around Monarch Airlines ends with CAA statement and confirmation of new investment
On the 12th October, in a brief statement, a United Kingdom Civil Aviation Authority (CAA) spokesperson confirmed that “the CAA had “renewed Monarch’s ATOL licences until the end of September 2017, following confirmation that all licence requirements have been met”.
The statement added; “Monarch’s licences permit them to sell ATOL protected holidays until 30th September 2017, after which they will be required to obtain a new licence in line with the annual process for all ATOL protected companies”.
It concluded with the observation that the CAA advises consumers to book ATOL protected air holidays “to ensure they are protected in the event that their travel company stops trading. In these instances, ATOL protected consumers will be brought home if they are already abroad or receive a refund if yet to travel. Consumers should ensure they receive an ATOL certificate which confirms their protection, as soon as they pay any money towards their ATOL protected holiday.”
Simultaneously, Monarch announced what it described as “the biggest investment in its 48 year history a £165 million (around €183.34 million) investment from its majority shareholder, Greybull Capital”.
It is recalled that the CAA had given Monarch Group until 12th October to resolve its financial issues or risk losing its ATOL status.
The statement confirmed that as a result of this investment “Monarch has successfully renewed its ATOL licences from the CAA for the next 12 months and funded future growth plans”.
Andrew Swaffield, Chief Executive Officer of The Monarch Group, commented: “It is testament to the extensive effort by all parties, over the past weeks and months, that we are able to announce the largest investment in our 48-year history, as well as the renewal of our ATOL licences.
“I’d like to thank the CAA, our shareholders, partners, loyal customers and the team at Monarch for helping us to achieve this successful outcome. We are now firmly focused on the future as a stronger Monarch.”
Seabury Group LLC and Seabury Securities (UK) Ltd. served as financial advisor with respect to the recapitalisation.
In October 2014, Monarch announced an order for 30 Boeing 737 MAX- 8 aircraft, valued at the time, at more than $3.2 billion (around €2.92 billion), at list prices. The order was originally announced at the Farnborough International Air show in July of that year, when Monarch selected Boeing, as its preferred bidder for fleet replacement. The first of these aircraft is due to be delivered in the second quarter of 2018 and the order includes options for 15 additional 737 MAX 8s.
The arrival of these state-of-the-art, fuel efficient aircraft in less than two years’ time, will enable Monarch to continue to provide passengers with what it described as, “a best in class inflight experience and allow the company to enjoy significant operational cost savings”.
It has also emerged that Monarch Airlines is planning to restructure its Boeing 737 MAX order into sales/lease-back agreements with an unspecified third party in a bid to ease mounting financial pressure.
According to Sky News, the restructured order agreement, which has already received Boeing’s support, will form part of the investment from Greybull Capital. The bulk of the investment is in the form of new equity, an inside source told Sky.
In spite of the relatively good news, the CAA has been silent on why it felt it necessary to cause the speculation that almost brought Monarch to the brink, by seeming to lease in a fleet of aircraft and shadow Monarch’s operations. Another factor was the effect of that speculation across social media. Hopefully lessons have been learned and no other airline, its staff and its passengers will be put in the position that Monarch was, during September.
Pegasus Airlines forced to clarify aircraft leases following speculation
In another example of what media speculation can do, Pegasus Airlines (Pegasus Hava Tasimaciligi A.S) was forced to issue a statement 12th October, regarding the wet-leasing of its fleet. This followed reports that Pegasus Airlines had advertised the wet lease of its entire fleet of 77 aircraft (twelve A320-200s, four A320neo, 50 Boeing 737-800s and eight 737-400s operated by Izair), claiming that they would be available from 1st October onwards.
The statement pointed out that further to the recent erroneous news stories based on Pegasus Airlines advertisements, which have inaccurately reported on the wet-lease of its aircraft, it would like to provide clarification that the airline currently is offering only three of its current fleet of 77 aircraft, of Boeing 737-800 and A320 types, for its long-term wet-leasing plans. It added that the he advertisement in question referred to the Pegasus Airlines fleet of 74 aircraft (a further three being operated by Air Manas) – the fleet size at the time of the advertisement – purely in order to provide general information about the total Pegasus Airlines fleet size, not in relation to how many aircraft were available for wet-lease.
Turkey’s tourism market has suffered from the impact of regional conflicts, as well as political instability at home that culminated in July’s failed military coup. This has led to Turkish Airlines deferring the delivery of 167 Airbus Industrie and Boeing aircraft, as it deals with weaker demand for travel to Turkey. AnadoluJet has also cancelled a wet-lease agreement with Borajet Airlines for three EMB-195s, while Sun Express also abandoned plans to lease in four Boeing 737-800s from Gol Linhas Aéreas Inteligentes this summer and has redeployed a number of aircraft to its Sun Express Deutschland unit. These actions undoubtedly fuelled the speculation regarding Pegasus, which is the leading low-cost airline in Turkey.
However Pegasus is a long established airline with a good pedigree, making it a natural survivor. Pegasus was founded as a joint venture company on 1st December 1989 by Aer Lingus, Silkar Yatırım ve Insaat Organizasyonu A.S. and Net Holding A.S., which entered into a commercial operation to create an inclusive tour charter airline. Services were inaugurated on 15th April 1990 with two Boeing 737-400s. Aer Lingus and Net sold their shares in the company in 1994 to Istanbul-based Yapi Kredibank, making Pegasus a purely Turkish company. In January 2005, it was acquired by Esas Holding A.S. owned by Sevket Sabanci and his family, Pegasus started scheduled domestic flights in November of the same year and became the 4th top among the scheduled airlines operating in Turkey.
Pegasus is continuing to provide its scheduled service as normal across its domestic and international networks with the remaining 74 aircraft servicing 33 destinations in Turkey and 69 in the rest of the world in its network of 102 destinations in 40 countries.