KPMG to administrate ailing UK airline Monarch

12 October 2017 Consultancy.uk

Big Four firm KPMG have been appointed as administrators for Monarch, after the airline became the largest ever in Britain to enter administration.

Blair Nimmo, Jim Tucker and Mike Pink from KPMG have been appointed as administrators to Monarch Airlines, after the brand fell into administration earlier in October. Nimmo, Tucker and Steve Absolom were also made administrators of Monarch Travel Group.

The initial 4am announcement informing customers that Britain’s longest-surviving airline, Monarch, had been placed into administration meant that many passengers arrived at airports only to find their flights cancelled and holiday plans incovenienced, while many were left with no means of returning to the UK. Since then, more than 30 aircraft have been requested for the task of bringing those abandoned abroad back home. The specially chartered planes constituted the largest peacetime repatriation in British history, as hundreds of thousands of travellers were left stranded on foreign soil. KPMG and the Civil Aviation Authority (CAA) arranged the alternative flights to the UK for an estimated 110,000 customers overseas, while a further 750,000 still on UK soil were informed that their bookings have been cancelled – in some cases, just minutes before they were due to board planes.

KPMG to administrate ailing UK airline Monarch

Following the turmoil of Monarch’s entering into administration, the UK’s Government is coming under pressure to implement insurance reforms and measures to enable an “orderly” winding down of the airline, while avoiding a recurrence of such a crisis in future. However, Transport Secretary Chris Grayling, dodged calls from lawmakers and pilots for a full investigation into the carrier’s financial difficulties, saying scrutiny of these issues would instead be left to a non-binding Parliamentary select committee, which he claimed would be “rigorous” enough. This will do little to appease the UK pilots’ union, Balpa, however, who had earlier called on the Government to launch a formal investigation, highlighting a £165 million bail out by owners Greybull Capital as a key area of concern, suggesting the deal, “was said to be funded by Greybull but is now reported as coming from Boeing”.

By the end of procedings, 2,100 Monarch employees may have lost their jobs, despite sources claiming the CEO of Monarch initially gave assurances that jobs would be secured. Since the initial announcement of administrative procedings, however, 1,868 of the total staff have already faced the axe. Administrators and unions said they hoped many could be taken on by other airlines that are interested in buying up parts of Monarch’s business – however over the coming days, the KPMG team will be working to assist employees in submitting claims to the Redundancy Payments Office for monies owed, as KPMG announced a raft of lay-offs.

Market turbulence

Monarch Airlines saw the brunt of the decimation, with 1,760 workers given their marching orders, while the Monarch Travel Group also saw 98 staffers lose their jobs. KPMG were at the heart of further administrative job-cuts in the Summer. While the fire-sale of Style Group Brands, which ran into financial strife earlier this year, was said to have saved around 1,719 jobs across its global network (including 1,272 in the UK), around 272 jobs remained in line to be cut.

Blair Nimmo, a Partner at KPMG, blamed building cost pressures and growth in industrial competition in the European short-haul market for the trading losses which led to Monarch’s demise. “This has resulted in Management appointing us as administrators in the early hours of this morning,” he said, following the initial announcement of KPMG’s role in procedings. “We will also be speaking to all of the Group’s employees… and commencing the process of returning the Group’s leased aircraft fleet to its owners.”

The global airline industry has long seen criticism levelled at it, for an inability to earn sufficient returns. While in 2016, for the second consecutive year, the industry generated approximately $17 billion in economic profit (EP), down from the 2015 record of roughly $25 billion, airlines outside of the market’s top ten found themselves struggling to shrug off competition from new market disruptors. Earlier in the year, Italian carriers Alitalia faced a similar fate at the hands of administrators. The airline had sought to improve its competitive position over low-cost airliners, by upping the number of seats on its aircraft, as well as a number of commercial changes to improve revenue while strategically cutting services. In a plan widely condemned by staff, Alitalia and advisors from Roland Berger also revealed a “$2.2 billion” saving scheme to shareholders, which involved cuts in pay and conditions, along with over 1,700 job-losses.

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