The sudden collapse of Monarch Airlines, the UK’s 5th largest airline, has left the European airline industry is starting to look like an emergency ward with three cut price operators or full service airline collapsing in the past couple of months and the largest, Ryanair struggling under self inflicted managerial incompetence that has left it short of pilots and forced to cancel hundreds of thousands of passenger journeys.
Monarch is a low-cost carrier and tour operator and it was placed in the hands of administrators early Monday morning London time, leaving 110,000 people stranded around the world and unable to travel. The flights of a further 300,000 people have been cancelled, seriously damaging the UK aviation sector. The collapse followed talks between the airline and US regulators over the weekend over Monarch’s future.
Part of the reason for its collapse was the strain on its weak finances from the slump in the value of the pound in the wake of the Brexit vote – making the company the biggest victim so far a of that controversial decision.
Shares in other airlines rose in the wake of Monarch’s fall as investors reckoned there would be less competition, especially at the bottom of the market.
Both Air Berlin and Alitalia filed for insolvency this summer as Etihad Airlines, the big Middle Eastern lost $US1.87 billion in the failure of both carriers and walked away from involvement in rescues of both. Ryanair problems have seen it placed under investigation by regulators in the UK after warning 315,000 passengers their flights will be axed following a disastrous administration blunder earlier this month involving its pilots. The low-cost airline has now admitted that more planes will grounded affecting more than 400,000 travellers.
Ryanair cancelled about 170 flights the weekend the chaos was announced in mid September with about 40 to 50 more axed every day until the end of the summer season on October 28. But the airline revealed on September 27 that it would be grounding 25 of its 400 aircraft from this November to March 2018 because of pilot shortages. Ryanair has suspended 34 routes over the winter as the blunder over pilots’ holidays rumbles on, and it has also cancelled a series of other individual flights on different routes.
Its pilots, sick of being treated badly by the airline and its managers, refused an offer for more cash if they would cancel a week of their holidays. The problem stems from changes to way pilots hours are worked out from an annual basis to the end of March (Ryanair’s financial year) to a calendar year. Inexplicably this saw the airline realise that it was drastically short of dozens of pilots.
Terrorist attacks have affected tourism in Egypt, Turkey and Tunisia in the past year or and have in turn seen holidayers switch to destinations closer to home and ‘safer’. More airlines are flying from the UK to Spain, Monarch’s main destination. Monarch also has faced rising costs following the pound’s drop in value since the Brexit referendum a year ago last June.
Financially, Monarch has struggled over the last five years, undergoing a number of attempted turnrounds and had recently hired KPMG (its administrators) to find a buyer for its short-haul business.
The Financial Times reported that its main shareholder, the investment firm Greybull Capital, "provided a last-minute £165m cash injection that enabled the CAA to renew Monarch’s licence nearly a year ago. In 2014, it was rescued from the brink of collapse by Greybull, which manages the wealth of the Meyohas and Perlhagen families… Monarch, which was previously owned by the Swiss-Italian Mantegazza family for nearly half a century, had been a profitable business until charter flying declined and travellers started opting for budget airlines.”
