Europe

Monarch ties up rescue deal

Monarch A320
Tis Meyer/Planepics.org

Monarch Holdings Limited announced the completion of its strategic review and restructuring programme under which it has secured £125 million of permanent capital and liquidity facilities provided by Greybull Capital anchored by a £50 million capital commitment, with contributions from the Group’s prior shareholders, principally the Mantegazza family.

Greybull also acquired 90% ownership interest in Monarch, with the remaining 10% passing to the Group’s defined pension scheme and ultimately the Pension Protection Fund.

The Civil Aviation Authority has renewed the Group’s ATOL licence.

Greybull is a family office that manages investments in private companies across a diversified range of industry sectors. Greybull will provide significant capital to Monarch in order to grow the Group and build on its long-established heritage and trusted brand name.

Under the leadership of new Chief Executive Andrew Swaffield, Monarch has undertaken a comprehensive strategic review of all areas of the business, from operations to ownership and financing. The aim of the review has been to create the optimum structure to realise the significant opportunity to build on Monarch’s respected brand and distinctive offer to its customers in the European scheduled leisure carrier market.

The main outcomes of Monarch’s strategic review and restructuring, which have led to the successful transaction with Greybull, are:

  • Optimise fleet from 42 to 34 aircraft, and revised agreements with lessors to either mark-to-market or early return of 10 aircraft from the current fleet
  • Securing a new Boeing fleet order for 30 737 MAX 8 aircraft with deliveries from 2018 to 2020, providing a cost-effective and uniform fleet by late 2020
  • Both long-haul and charter flying to end by April 2015
  • Focus on five UK airport bases – London Gatwick, Manchester, Birmingham, London Luton and Leeds-Bradford – and closure of East Midlands from summer 2015
  • Airline network to specialise on Monarch’s ‘heartland’ of scheduled short-haul European leisure routes, with increased average frequencies, aircraft utilisation, productivity and profitability
  •  Material concessions agreed with employees across the Group to enable the successful restructuring, including reductions in pay of up to 30%, with more than 90% of unionised staff voting to accept changes, and some 700 redundancies, two-thirds of which were voluntary
  • Reduction of the Group’s operating cost base, in line with other low-cost carriers, and increased efficiencies across the business
  • Resolution of the Group’s pension deficit through agreement with the Pensions Regulator, PPF and the Trustee of the Monarch Airlines Limited Retirement Benefits Plan which will result in the Plan being assessed for entry into the PPF. The PPF would then hold a 10% stake in the Group, in line with its principles in restructurings such as this. The Pensions Regulator has cleared the restructuring. The pension deficit as per the company’s balance sheet was previously £158 million and the current estimated shortfall to secure full benefits is around £660 million.

Monarch Group CEO, Andrew Swaffield, said: “I am delighted to welcome the Greybull team as the new owners of the Monarch Group. We have a shared vision for the strategic direction and prospects for the business, and I am looking forward to working with them to implement the exciting plans for building our future.” “I would personally like to thank all Monarch employees who have been hugely supportive of the initiatives which were essential to complete this transaction. I am very proud to be leading such a team – together we will be building a great future for the Group.”

Commenting on behalf of the selling shareholders, Fabio Mantegazza said: “We are very proud to have created one of the most loved aviation brands in the UK over the last 46 years. We think that now is an appropriate time to allow new shareholders to take Monarch into the future, with secure financial backing and clear strategic goals and we wish the Group every success.”

Said Greybull Partner Marc Meyohas: “We are delighted to acquire Monarch and invest our capital into a very strong brand with great potential in all its markets and are grateful for the selling shareholders’ support in achieving this transaction. We see this as a long-term investment and hope we can be very supportive shareholders throughout Monarch’s next chapter.”

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