LONDON, England – Monarch is looking at a dramatic overhaul of its operations, potentially taking an axe to routes and retreating from bases, as several distressed investors, including Jon Moulton, circle the travel group.
New chairman Sir Roy McNulty and chief executive Andrew Swaffield are scrutinising every part of the company’s operations as part of a sweeping strategic review, which is expected to lead to significant changes in the ownership structure.
The group on Sunday confirmed that it is reviewing “all areas of the business from operations to ownership and financing” after The Sunday Telegraph revealed that a number of distressed and private equity investors, including venture capitalist Jon Moulton’s Better Capital, HIG Europe, Towerbrook and Indigo Capital, are considering injecting cash into the company, which is controlled by the Swiss billionaire Mantegazza family.
Monarch is understood to need as much as £60m of fresh capital, despite the Mantegazzas pumping £120m into the group since 2009.
Dean Street Advisers is leading the search for an external investor but the Mantegazzas have also appointed restructuring specialists from PwC, who are working on a rescue plan in case Monarch is unable to strike a deal to bring in fresh capital.
Monarch said in a statement: “The group confirms it is undergoing a strategic review under the leadership of new non-executive chairman Sir Roy McNulty and chief executive Andrew Swaffield. The review covers all areas of the business from operations to ownership and financing, with the objective of determining the optimum structure to realise the significant opportunity to build on the respected Monarch brand and distinctive offer to its customers in the budget airline market.”
Airline analysts question Monarch’s strategy of trying to position itself as a low cost airline but with better service than the market leaders, easyJet and Ryanair. Ryanair and easyJet are difficult to beat on price due to their lower cost bases, while they have also been improving their own customer service offering to attract passengers who were previously put off by budget air travel.
Monarch, which operates principally from Gatwick, Luton, Manchester and Birmingham airports, said in December last year that it was back in the black but competition in the European airline industry has since intensified. Ryanair launched a fierce price war following two profit warnings last autumn while easyJet has also been trying to stamp out competition at Gatwick, increasing its capacity at the airport over the summer by 16pc. Norwegian Air Shuttle has also been expanding rapidly in the UK market.