Why Monarch Airlines went into administration

October 16, 2017

In late-September, rumours started surfacing about Monarch's imminent bankruptcy. A couple weeks later, the airline's final flight landed and the company entered administration. Over 100,000 passengers were stranded overseas and 300,000 future bookings were cancelled.

In this article, we investigate Monarch Airlines to explain why it went into administration.


Monarch Airlines timeline

Founded in 1968 by travel entrepreneurs, Sergio and Paolo Mantegazza, Monarch Airlines rode the wave of charter tourism for many years.

After many years of profitability, the airline experienced its first major setback in 2009, reporting a 5.2% decrease in passenger numbers and a £32 million loss across the Monarch Group.

In response, the Mantegazza family injected £45 million into Monarch and pivoted the airline to focus on "scheduled leisure airline" instead of chartered flights.

This injection, however, wasn’t enough to lift the airline completely out of it’s sticky situation and things were about to get even worse.

In 2011, despite a 23% year-on-year increase in passenger numbers, the Group reported a loss of over £45 million.

Two years later, the Mantegazza family decided to cut all financial ties and the airline fell into an even worse state.

On 24th October 2014, London-based Greybull Capital acquired Monarch Airline for a nominal sum with the company just two hours away from insolvency. Whilst Greybull's restructuring work was initially successful, the respite was short lived.

In 2016 Greybull invested a sum of £165 million so Monarch could renew its license and continue operating. Unfortunately, the money didn’t last long and, earlier this year, it became clear that Monarch was headed for collapse.

On 2nd October 2017, Monarch Airlines Limited officially appointed Blair Nimmo, Jim Tucker and Mike Pink from KPMG as joint administrators.


Monarch Airlines

What went wrong?

So what went wrong in this rather bumpy revenue ride?

We’ve investigated some of the factors that have played a part in grounding the Monarch fleet and forcing the airline into administration.

Terrorism and political turmoil

Terrorism and political turmoil in Southern Europe and in the Middle East have drastically affected the top 10 travel destinations for Europeans. Destinations such as Tunisia, Turkey and Egypt completely disappeared from popular routes.

This abrupt change in destination preference has forced airlines to sell their tickets at a consistently lower price — sometimes at a loss.

For Monarch Airline this has meant carrying 14% more passengers at £100 million less revenue.

Currency fluctuations

As Monarch Airlines is based in the UK, recent currency fluctuations have had a significant effect on their fortunes.

When the sterling was strong against the euro and fuel prices were low, Monarch enjoyed consistent growth and healthy profits. However, Brexit hit the value of sterling hard, which put Monarch at a heavy disadvantage compared to other European airlines.

A competitive European market

Monarch was up against several high-powered European fleets with lower cost bases.

Operating an increasingly more competitive short-haul market with mounting financial pressures, Monarch experienced a sustained period of trading losses.

Blair Nimmo, one of the joint administrators, said:

Mounting cost pressures and increasingly competitive market conditions in the European short-haul market have contributed to the Monarch Group experiencing a sustained period of trading losses.

Other airline floops of 2017

This has been a harsh year for all airlines. AirBerlin, Alitalia and Monarch have all entered administration, RyanAir is still cancelling flights due to pilot shortage and United Airlines is still suffering from the United Express Flight 3411 incident, where David Dao was forcibly ejected from the plane.

Go big or go home

With several collapses of mid-market airlines, it would seem there is no space in the European airspace for mid-market airlines as the market leaders push prices to the bare minimum.


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