MarketLine Blog

Monarch Airlines: Management not to blame for collapse of UK’s longest-serving airline

In the early hours of Monday October 2, 2017, KPMG announced that it had entered the office of Monarch Airlines and the company had officially entered administration. In the following hours the Civil Aviation Authority chartered 30 planes from across Europe to repatriate some 110,000 British citizens and customers who were then stranded abroad with no return flights. Cancellations of every flight from October 2 and onwards have affected some 300,000 bookings and likely close to a million individuals, and Monarch’s departure from the short-haul flight market will almost certainly be a messy and expensive one for all parties involved.

In the coming weeks the reasons behind Monarch’s failings will be scrutinized closely and the company’s executives and managers will likely be blamed for its collapse. In reality Monarch fell prey to a series of unforeseen and largely uncontrollable market forces and external events which first forced Monarch to abandon its lucrative long-haul flights in favor of the competition-heavy short-haul sector before battering it with intense pressure, both supply- and demand-side. Extreme levels of price competition, arising from high levels of saturation in the European market, combined with currency fluctuations – namely the weakening of the pound – and sharp increases in the price of oil created an atmosphere in which Monarch simply could not survive.

Monarch’s reluctant exit from the sector will be quietly welcomed by surviving players, however. The departure of the UK’s fifth-largest airline will relieve considerable pressure in the sector and should slow down the intense price war that is currently raging in the sector in the face of increased demand for budget airlines and consumers experiencing wage pressures.

In short, Monarch’s failure and subsequent departure from the market will leave many consumers put out, albeit temporarily. The blame will no doubt fall at the feet of upper management in the coming weeks but the company has fallen prey to a series of external forces over which Monarch had little to no control. Other players in the short-haul sector will welcome Monarch’s departure and it should provide some relief to the intense competition generated in a market over-saturated with cheap airlines.

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