Monarch Airlines: rumours of its imminent demise may be exaggerated

Ryanair CEO Michael O'Leary's widely reported comments of 4-Sep-2017 alleging that Monarch was burning cash and might not survive the winter were staunchly rebuffed by Monarch Group CEO Andrew Swaffield. Monarch probably is burning cash, but funds received from its 90% shareholder, Greybull Capital, seem likely to be sufficient, according to CAPA analysis.

Monarch Group has not announced financial results for its most recent financial year (to Oct-2016), but quietly filed its accounts with the UK's Companies House in Aug-2017. The group fell into a heavy loss in FY2016, its fourth loss in six years, but this was due to write-downs in connection with lease commitments and had nothing to do with cash.

Nevertheless, Monarch Group has struggled to build a convincing record of profitability and has relied on shareholder loans and fresh equity to cover its annual shortfalls in cash generation.

Monarch Airlines, the group's LCC, has a very high exposure to Spain, one of Europe's most competitive markets, and has suffered heavy yield declines. It competes mainly with other low cost operators, but its unit cost is above trend for European LCCs. A fleet renewal programme, replacing mid-life A320 family aircraft with new Boeing 737MAX equipment from 2018, should help.