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Monarch ‘rescued’ for $200m

Private equity firm Greybull Capital has bought 90 per cent of UK travel group Monarch for just £125m ($200m). The deal signed on Friday (October 24) was agreed after Monarch’s previous owners – the Switzerland-based Mantegazza family – agreed to contribute to a further £50m of capital and staff agreed to pay cuts of up to 30 per cent. Monarch Airlines was formed by the Mantegazza family in the 1960s as a charter airline, expanding to scheduled operations in 1985, and currently boasts capacity of more than eight million seats. The group also includes MRO Monarch Aircraft Engineering and tour operator Cosmos.

In recent years Monarch has struggled. In 2011 the group posted losses of more than £51m ($82m) and while it returned to profit last year the pretax figure was a lacklustre £17m ($27m).

In a bid to turnaround the group, Monarch performed a “strategic review” of its entire operations this year, concluding that the carrier’s future lay as a European low-cost carrier.

In line with this ambition the airline will be dumping its long-haul and charter services from April 2015, to “specialise on Monarch’s ‘heartland’ of scheduled short-haul European leisure routes”.

Monarch is also set to cut its fleet from 42 to 34 aircraft and replace the A320s and A321s it currently operates with a fleet of 30 737 MAX aircraft, which are to be delivered over two years from 2018. The group said the change will “provide a cost-effective and uniform fleet”. 

Overall the group claimed the restructure, which has also resulted in 700 redundancies, will enable it to cut annual costs by £200m ($322m). 

Monarch’s decision to focus on short-haul routes and become an LCC sits in stark contrast to the turnaround strategy being adopted at fellow European carrier Alitalia. 

Etihad, which has taken a 49 per cent stake in the Italian carrier, has confirmed it wants to make Alitalia a premium brand. Furthermore, it has decided to focus on long-haul routes, introducing new routes and increasing Alitalia’s widebody fleet by a third.

It will be interesting to see how these two very different strategies pan out over the coming years.

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