Monarch expects ‘significant investment’ of many million £s within days to avoid cash crunch
Monarch Airline’s majority shareholder, Greybull Capital, is preparing to offer the short-haul carrier another multi-million pound lifeline after problems from the post-Brexit sterling plunge, on holiday demand. Monarch has had to deny weekend speculation that it is on the brink of bankruptcy and has assured the market that it is in line for a “significant” investment in the coming days. The rescue bid is expected to be led by Greybull Capital, which owns a 90% stake in Monarch, after it agreed to pump £125 million of permanent capital and liquidity facilities into Monarch in 2014. That Greybull bailout was Monarch’s 3rd in 3 years and prompted the Mantegazza family, who started the airline in 1968, to sell up completely. Since 2014 Monarch has made £200 million cost cuts, to try to improve its finances, and it made a £19.2 m pre-tax profit in the year to October 2015, compared to a £57.3m loss the year before. Now the devaluation of the £ caused by the Brexit vote means there is an uncertain time, of unknown duration, ahead for the travel industry. There are also uncertainties due to terrorist incidents, making travellers nervous about some countries. Earlier in the summer Monarch said it needed £35 million and issued a “going concern” warning in its annual report.
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Monarch expects ‘significant investment within days’
September 26, 2016 (TravelMole)
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Monarch has moved to allay fears about its future, saying its flights are operating as normal and it will announce ‘significant investment in the coming days’.
Rumours circulated yesterday on social media that the company was in financial difficulties, with reports that aircraft were being flown in from the US to repatriate passengers.
Monarch’s social media manager Gemma Hyslop (pictured) worked tirelessly to address the speculation, replying to Twitter and Facebook posts, as well as issuing the following statement on the travel industry site Travel Gossip:
“Over the weekend, there has been negative speculation about Monarch’s financial health.
“Monarch is trading well and is expected to achieve an EBITDA of over £40m 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 customers 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.”
Her hard work was praised by agents, some of whom said she ‘deserves a medal’. Another said: “Tell your bosses you deserve an extra day off or lunch on them today.”
It’s believed Monarch had been in talks with the Civil Aviation Authority about its financial position, but the company said rumours that it was going bust were ‘simply untrue’.
It is understood this injection of money will be enough to satisfy CAA requirements.
It said in a statement: “Our flights 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.”
Monarch suffered financial difficulties two years ago but was saved when investment firm Greybull Capital bought a 90% stake in the company.
Independent agent Steve Evans was among many who said Monarch now needs the support of the trade.
“Instead of speculating and scare mongering why don’t we try and spread the positive news and help Monarch Airlines. We as agents need to put concerned clients minds at rest,” Evans said.
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Greybull to offer multi-million pound lifeline ‘within days’ as Monarch Airlines battles cash crunch speculation
By Tom Ough and Jillian Ambrose (Telegraph)
26 SEPTEMBER 2016
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Monarch Airline’s majority shareholder is preparing to offer the short-haul carrier another multi-million pound lifeline after the post-Brexit sterling plunge added further woes to the struggling holiday industry.
The airline was forced to deny weekend speculation that it is on the brink of bankruptcy and has assured the market that it is in line for a “significant” investment from its stakeholders in the coming days.
The rescue bid is expected to be led by Greybull Capital, which owns a 90pc stake in the airline after agreeing to pump £125m of permanent capital and liquidity facilities into Monarch in 2014.
The Greybull bailout was Monarch’s third in as many years and prompted the Mantegazza family, who started the business with just two aircraft in Luton in 1968, to sell up completely.
Since then the short-haul airline has since embarked on £200m of cost cuts to bolster its finances, resulting in a swing to a £19.2m pre-tax profit in the 12 months to the end of October 2015, from a £57.3m loss a year earlier – even as a string of terror attacks in popular European holiday destinations added further pressure to the holiday industry.
But in recent months the sharp devaluation of the sterling following the UK’s decision to leave the EU has reignited concerns for the travel industry, and Monarch’s balance sheet.
Monarch Holdings said earlier this summer it was looking to secure facilities totalling £35m either from owner Greybull Capital or an outside lender, prompting the airline to issue a going concern warning in its annual report.
But the company defied negative speculation over its financial health which emerged over the weekend, saying the company is “trading well” and expects to achieve an EBITDA of over £40m at the end of this financial year next month.
“This is despite a difficult period for the holiday industry due to terrorist incidents, Brexit and the resulting devaluation of sterling,” the company said in a statement.
“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,” it added.
Worried customers had been tweeting the budget airline asking whether their flights would be disrupted, but the carrier said in a statement “our flights are operating as normal”.
http://www.telegraph.co.uk/business/2016/09/26/monarch-airlines-denies-it-is-about-to-go-bust/.
Earlier, before the EU Referendum result, Monarch warned of the problems it might cause:
CASE STUDY: COULD BREXIT IMPACT TRAVEL TO BRITISH HOMES ABROAD?
From ABTA and Deloitte – pre EU Referendum
? May 2016
The free movement of people across the EU has contributed to frequent travel between Member States and the decision by many UK citizens to take up property in countries such as France, Spain, and Portugal, either as their main or second home.
There are an estimated 1.3 million UK nationals living elsewhere within the EU. In 2014, more than 8.7 million visits were made by UK residents visiting friends and relatives (VFR) in other EU countries. VFR traffic is vitally important in ensuring the economic feasibility of many air routes.
The emergence of low cost airlines has increased competition and helped to cut prices for consumers in the airline industry. As the cost of travel has reduced, consumers have been able to take more frequent trips and in some cases even commute between two different European countries.
“The low cost airlines have helped to create huge social change in travel behaviour and it has been a big benefit to the consumer”, says Andrew Swaffield, the CEO of Monarch Group, the parent company for the UK based low cost carrier Monarch Airlines.
“We estimate that we fill circa 2 million seats a year with travellers that travel between the UK and their homes in Europe. We see a huge number of travellers with British names travelling with us one way between the UK and key European destinations”.
If the UK were to exit the EU, Monarch would view the outcomes for the travel sector as very negative, not least because of the uncertainty that would follow in the aftermath. “This sweating period after the exit would be very damaging for the sector. [An exit] would most likely lead to higher air fares and fewer scheduled flights between the EU and UK. It could also bring an end to the European Health Insurance Card and shared tax laws that benefit many British home owners and expatriates living in the EU.”
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ABTA says:
Travel to EU destinations accounted (2014) for 64% of the UK passenger outbound flow. In 2014 56% of travel and tourism spending by British residents went to EU countries (£19.76bn). 44% of inbound travel and tourism spending in the UK is by EU nationals (£9.55bn in 2014).
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