Monarch: To fly or not to fly. That is the question.
On Saturday, the UK’s longest serving carrier Monarch Airlines was dethroned, joining Air Berlin and Alitalia as the next major European airline to go into administration in the last three months. This event has caused over 110,000 holidaymakers to have become stranded abroad and the UK government has called for the Civil Aviation Authority to initiate the largest repatriation programme in peacetime Britain.
However, a further 300,000 travelers with future bookings have had their flights cancelled and travel plans disrupted. What caused this long-running company to fail and what does it mean for its customers and the future of air travel?
The airline flew to 40 destinations out of 5 UK airports, with its largest volume route being to Spain, with the largest number of passengers stranded at the Costa Del Sol in southern Spain. The UK aviation regulator gave Monarch airlines 24 hours to raise funds, yet Greybull the company that owns the airline failed to do this despite having talks with several other airlines including EasyJet and British Airways.
To those who Monarch left behind...
The CAA are attempting to deal with the immediate problem of the 110,000 stranded passengers by chartering 700 flights to specifically repatriate these individuals at no further cost to them, however there are countless unfortunate cases of people’s plans being disrupted. There is a remarkable case of Steve Walker who was planning to travel to Stockholm for the World Masters Powerlifting Championships on Tuesday, however, due to Monarch going into administration, he was unable to travel crushing his dreams of competing this year.
Monarch’s failure can be explained by simple economics, as the supply of European low-cost short haul flights increased with competition from other airlines like EasyJet, Wizz and Ryanair. The European marketplace is simply too crowded and this would have pushed prices down so that firms such as Monarch would have struggled to remain profitable. In addition to this Monarch was further burdened with increased operating costs.
The purchasing of fuel and handling charges are denominated in dollars, however following the 2016 Brexit vote the pound has fallen against the dollar. This cost can be seen as the carrier was expected to pay £50 million more for fuel. KPMG, the airlines’ administrator states that the company flew 14% more passengers last year, yet due to their increased operating costs they had £100m less revenue.
A further unfortunate reason for Monarch’s failure that was beyond their control was due to terror attacks in Egypt, Turkey and Tunisia. These attacks have significantly reduced demand in key areas for carriers that specialize in the holiday market and routes to the sun. Sham El Sheikh was previously seen as an idyllic destination with year-round pleasant weather and sublime diving opportunities. However, following the 2015 bombing of a Russian Metrojet airplane all travel to the region was stopped.
The Future of the Skies
Following Monarch’s administration there have not been any significant offers for the airline as the whole, however competitors namely easyJet, British Airways and Whizz have expressed interest in the landing slots to fly more flights out of key airports such as Heathrow and Gatwick.
As the increased competition continues in Europe, there are extra strains on carriers to remain profitable, newer budget carriers have an advantage over so called “legacy carriers” such as British Airways and Air France which are heavily unionised and are forced to operate out of expensive airports whereas EasyJet and Ryanair are not in this position and are far more flexible despite the high competition.
The future of the airline industry in Europe is complicated, especially with the new kid on the block Norwegian who offer budget long-haul flights which is a new market that is highly profitable. Only the best managed and the most adaptable will be able to survive in this cut-throat environment. In the near future who knows how you’ll be travelling to the south of Spain to enjoy your two weeks on the beach.