Monarch Airlines collapses: a look into the causes

Britain’s longest-standing airline brand, Monarch Airlines, was placed into administration on October 2. With all flights grounded and 110,000 passengers abroad, the Civil Aviation Authority is now responsible for initiating a monumental £60 million repatriation operation to return customers to the UK.

The primary contributing factor in the collapse of Monarch is the hugely weakened value of the sterling.

Since the Brexit referendum, the pound has fallen by 10 per cent against the dollar vastly, causing an increase in fuel costs. The pound has also fallen sharply against the euro, resulting in fewer people taking holidays.

The consequences of such a slump in the pound since the Brexit vote is not unique to Monarch, costing EasyJet £90m since June 2016.

Unite national officer Oliver Richardson blames the “continuing uncertainty surrounding Brexit and the ability of UK airlines to fly freely in Europe after the UK has left the EU” for preventing Monarch from “getting the investment it needed to restructure and survive”.

Recent events within the past couple of years revolved around terrorism has also played part as a long-term cause for Monarch’s situation.

In 2015, a Russian airliner departing from Egypt was bombed, killing all 224 passengers and crew; an attack on Sousse, Tunisia also devastatingly occured, leaving 30 Britons dead. Both severely affected the airline.

An attempted violent coup in Turkey in 2016 led the Foreign Office to warn UK citizens residing in the country. As noted by Tim Symes, a leading insolvency lawyer with DMH Stallard, “Egypt and Turkey provided a key chunk of revenue for [Monarch] and subsequent terror attacks left the airline deprived from the resulting weaker demand.”

Finally, Monarch suffered from strong competition amongst what is becoming an oversaturated low-cost market. Monarch never managed to establish itself as a budget airline against its larger competitors, like Ryanair or EasyJet, therefore whilst in 2016 the airline flew 14 per cent more customers, there was a corresponding decrease in revenue of £100 million.

With 110,000 passengers stranded abroad when the airline company collapsed at 4am on Monday October 2, the Civil Aviation Authority has since chartered 34 planes to fly customers back from more than 30 airports across Europe.

Andrew Haines, Chief Executive of the Civil Aviation Authority, explained that they were “putting together, at very short notice and for a period of two weeks, what is effectively one of the UK’s largest airlines to manage this task”.

While unions have accused the government of “sitting on its hands”, a Department for Transport spokesperson said: “This was a decision made by the company and it is the job of directors and their advisors to decide when a business is no longer a going concern… it is the not the role of government to decide on the viability of a business.”

 

Image: Matteo Arrotta via Flickr

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