The demise of Monarch Airlines came as something of a surprise to a lot of people, particularly to the 110,000 or so holidaymakers left stranded abroad and those now frantically trying to rebook a holiday or contact their credit card provider.

The failure did not however come as a surprise to the Civil Aviation Authority (CAA) which had invoked contingency planning a year ago for what has since been dubbed the largest ever peacetime repatriation effort. Coincidentally, Monarch struggled to renew their Air Travel Organiser’s Licence (ATOL) last year. This reason alone was seen by experts as the first warning sign that all was not well.

So, how did the CAA predict what was going to happen to Monarch?

The answer can be found in a series of events, which when combined, ensured Monarch really had nowhere to go.

  1. Falling value of the £ - the post Brexit slump in the value of the pound cannot be ignored and has affected so many companies operating internationally, not just airlines.
  1. Market focus shift – in 2015 Monarch dropped a number of long haul destinations in favour of the burgeoning Middle East market – citing lower costs and strong demand, the airline was confident this would shore up its position despite the increasing competition in that region; some commentators have identified this as a limiting option for the Company.
  1. Terrorism – the same year as Monarch decided to shift focus to the Middle East, a terrorist incident in Sharm el Sheik led to closure of the airport and an imposed restriction on flights into the popular tourist hotspot. Tourist numbers declined rapidly.

    Around the same time the Foreign Office placed a ban on travel to Tunisia, in the wake of another terrorist attack and Turkey, another Monarch destination, saw five terrorist attacks in the first half of 2016 and a failed coup attempt – the impact on tourism likely to take years to recover. 
  1. Competition – given the above, popularity of Spanish destinations increased and whilst Monarch served several, other airlines were cashing in and the market became increasingly competitive. Coupled with rising fuel prices, margins were squeezed tighter than ever meaning only the leanest could truly benefit and, ultimately, survive.

Despite being in business 50 years, Monarch simply could not compete with the younger, more streamlined (some might say more ruthless given recent coverage of Ryanair) airlines.

It is a stark example of basic market forces at work, with incidents completely outside of its control having both a direct and indirect impact on the bottom line.

It remains to be seen whether the disappearance of Monarch from the departure boards will ease the market for the remaining carriers; it is clearly a volatile time and this may not be the last airline casualty citing the same issues.

Danny Allen

Director

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