Monarch Airlines Collapse: What Happened??

At 4am on the 2nd of October it was announced that Monarch, Britain’s longest-surviving airline brand, had been placed into administration. The fact that all further flights had been cancelled leaves 110,000 passengers left abroad and in excess of half a million people with scuppered holiday plans. The Civil Aviation Authority said it had launched a programme to bring back Monarch customers to the UK over the next fortnight on 34 chartered planes, but what actually caused Monarch to fail?

Quite simply, Monarch was struck with rising costs and falling revenues.

Due to the international nature of the aviation industry, many of the big costs of running Monarch, such as fuel and handling charges, are denominated in dollars. This has caused significant issue to the UK based company since the Brexit vote last summer. The pound has witnessed a decrease against the dollar by around 10%, leading to the increase in costs monarch were faced with.

In conjunction with this, they were struck by the sheer amount of competition it faced in the low-cost market. Since the takeover by Greybull in 2014, Monarch had modelled its business plan on successful aviation companies like EasyJet, moving away from long haul flights, but in doing so it placed itself in direct competition with these businesses who have already established a “low-cost” reputation. These high levels of competition caused a further fall in prices and a reduction in levels of trade they receive. As to be expected, lower revenues and higher costs, caused a lot of financial instability.

Another contributor to their down fall were the terror attacks in Mediterranean countries like Egypt and Turkey. With reduced appeal to travel to these areas, travel firms have shifted resources towards traditional Monarch catchment areas, increasing competition even further.

To conclude, the rising costs due to the fall in pound and the increased competition they faced, caused cash flow issues and eventually their collapse.