Monarch Airlines collapses

      Monarch Airlines collapses

Monarch airlines are a low-cost airline, that operate across Europe and neighbouring countries like Turkey. As they are a low-cost airline, they are in direct competition with Ryanair and easyJet. The controlling shareholder of Monarch airlines is an investment firm called Greybull capital and they rescued them from becoming bankrupt in 2014 by investing more than 75 million into Monarch. With the tough market that the airline trade brings, Monarch airlines are struggling to survive against big airlines like Ryanair and Easy jet for low cost travel. The question is how long will Monarch Airlines survive for? 

Monarch administration

Monarch airlines fell into administration on October the 2 at 4am, causing 110,000 passengers to become stranded. One of the reason Monarch fell into administration was that the main investor Greybull Capital started to loss chase with the hope of increasing profits for Monarch. I feel that loss chase is a very risky decision as it could further increase investment loss if the business carries on in the same direction. However, if the investment was used to change the Monarch unique selling point, then they would be more likely to be able to compete against Ryanair and easyJet. Due to the decisions to keep investing into Monarch, Greybull Capital stands to have lost about £250 million since 2014.

How Brexit affected Monarch airlines

On Thursday 23 June the United Kingdom voted to leave the European Union and this was a massive problem for Monarch airlines as this caused the fall in the pound and pushed the dollar costs up. This was a problem for Monarch airline because this lead to them paying more 50 million pounds a year for fuel and aircrafts. As a low-cost airline, increasing cost meant that to cover is they would have to increase the pricing in seats, which means they would not have the price advantage on Ryanair and easyJet. I have been on trips with both Ryanair and Monarch, and there are major differences between the two. Monarch seemed to have smaller planes that could hold less people, but the space and the quality of the seating area was a lot nicer than Ryanair. However, Ryanair has less space and seems to hold a lot more people, also the cost of the flights was cheaper as well. In my opinion with a low-cost flight, as a customer you expect the travel to not be as a high quality because you get what you pay for. Ryanair has realised this and kept the quality to basic and fits as many people into one plane as they can, so that they can keep the competitive prices over competitors. Therefore, I feel that for short haul travel across Europe, Monarch airlines struggle to compete in the airline market.

The fall in flights to Turkey, Egypt and Tunisia

In 2017 customers interest into flying to Turkey decreased massively after a terrorist attack, as they no longer felt safe visiting the country.  The forging office also advised against travel to Egypt and Tunisia after the shooting in Sousse and the bombing of a Russian airliner in 2015. These were the three of Monarch’s most profitable destinations and this coursed them to lose out on large amounts of profit. This problem was unpredictable and needed a chaotic decision to help resolve it. This meant they had to lower the prices for travel to these destinations to try and encourage customers to still go to these destinations. This caused all the airline market to focus on short haul travel across Europe, to destination like Spain and France. With businesses like Ryanair and easyJet dominating this market, Monarch found it hard to compete against them. In evaluation of this decision, it was a good decision to try and focus on flight across Europe, as this is where all the customer growth would be. However, the move to the Europe travel would be hard without a niche in the market because Monarch would find it too hard to complete in the pricing war with easyJet and Ryanair. If I was in Monarch position I would got the marketing team together and discussed what niche we could enter the market with. Maybe chance there target market and try and focus the business around them so that they would of stole all the customers of that target market from Ryanair and easyJet.

110,000 passengers stranded, 300,000 bookings cancelled, 2,100 employees left unemployed

There are many stakeholders in Monarch that were affected by the collapse of the business other than just Greybull Capital. 110,000 passengers that were using Monarch as means of travelling home and they have been left stranded by Monarch. The fact that they have left so many passengers stranded has destroyed the image of the business and I feel that if some how they manage to sort out the problem they are in, no customers will be willing to use them. This is also going to cause increasing amount of debt as the 110,000 passengers and the 300,000-booking cancelled are likely to sue the company for the inconvenience. This is going also have major impacts on the economy and there are going to be 2,100 employees without jobs and with the limited job availability it will be hard for them to find new ones. However, in recent news Ryanair has been having problems planning too many piolets on holiday and losing piolets to competition. Luckily for the Monarch employees, Ryanair should be willing to take a lot of them on to help solve their problem. I think that Ryanair are going to benefit from this massively because all the customers that use monarch will have to transfer and if Ryanair do some clever marketing then they will be able to gain a large share of them. It will also help deal with the problem of lack of piolets they have. However, If I was Ryanair I would try and find the reason why they are losing so many employees to competition and try and address it. This will help improve job security in the business and this will keep the employees happy. I have personal been affected by delays and put my family off using the business any as me felt let down and me lost that customer business relationship. The company I lost it with was British’s airways and they did give us a voucher to spend at the airport, but I feel like it would have been better if they had people personal apologising and directing them to what we should do. This will help maintain the customer relationships, as they are seen to be on more of personal level with the customers and the additional information they could provide would reassure customers.

In collusion I feel that Monarch and Greybull Capital are in a very sticky position. The main problems which they need to deal with is the 110,000 passengers stranded, 300,000 bookings cancelled, and 2,100 employees left unemployed and the 250 million-pound Greybull have lost in investment. From this I have learnt how serious the risk is of investing into business that are already losing profits, as it can lead to major loss in investment and is highly unlikely to work without a major change in the business. I have also learnt that if you want to enter a highly competitive market then you’re going to need to stand out with a niche if you can’t compete against their prices.