Will the collapse of Britain’s Monarch Airlines be the only casualty?

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Europe

The bankruptcy of Britain’s Monarch Airlines is the biggest failure of any British airline. And the question everyone keeps asking is: Will Monarch be the only casualty, or could others follow?

The collapse has highlighted the fragility of the ultra-competitive European airline market, experts said.

The UK Civil Aviation Authority (CAA) said Monday that Monarch has ceased operations with immediate effect, leaving 110,000 customers stranded overseas. The airline is also canceling about 300,000 future bookings after last-ditch talks with the CAA failed to secure a deal.

Information regarding the cancellation of flights by Monarch Airlines is available at Luton airport on October 2, 2017. /VCG Photo

The British government has asked the CAA to charter aircraft to bring passengers home. The UK transport minister said the government was doing all it can to get holidaymakers back home as quickly as possible.

"What we've done is to put together one of Britain's biggest temporary airlines, we should be able to get people home close to the time they were expecting to," British Transport Minister Chris Grayling stressed.

According to flight tracking service Flightradar24, 25 aircraft have been lined up to start repatriating passengers, including 10 from Qatar Airways. An EasyJet aircraft and several charter aircraft are also part of the operation.

Two grounded Monarch aircraft after the airline ceased trading, at Luton airport, Britain October 2, 2017. /VCG Photo

Monarch was part of a travel group whose origins reach back 90 years, long before the days of mass air travel. The airline itself was launched in the 1960s as a package holiday pioneer, and traces lingered of the idea of flying as a luxury for the mass market.

While the weak pound has no doubt been a contributing factor in the demise of Monarch, the changing nature of Europe’s holiday landscape created a battleground in which the 50-year-old carrier just could not compete.

"Overcapacity in the short haul market has meant that prices have been depressed for some time. To give an example of that, the company flew 14 percent more passengers last year but for 100 million pounds less revenue. And on a cost base it also significantly increased as a result of the adverse movement of the pound against the dollar," said Blair Nimmo, KPMG’s UK head of restructuring.

Nimmo said Monarch has fallen victim to a price war over the European airline market, but is not the only "sufferer." Tough competition has put pressure on other European airlines too. Air Berlin and Alitalia have already filed for insolvency earlier this year.

Monarch aircraft are seen parked after the airline ceased trading, at Luton airport in Britain, October 2, 2017. /VCG Photo

The problem, it seems, is that there are too many planes chasing too few passengers. And the rapid expansion of low cost carriers also added to the mix, since they are battling for market share with extremely low fares.

For example, to many of Spain’s major holiday hotspots, Monarch was competing for price against Ryanair, EasyJet and Jet2, all of which are famous for low prices. As tourism boomed to Spain and passenger numbers of Ryanair and EasyJet continued to rise, Monarch's fell. What added insult to injury was Ryanair even began selling flights for as little as ten pounds each way.

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