After a turbulent 15 months that saw the collapse of its parent Monarch Airlines and the subsequent challenges of rebuilding its third-party customer base, Monarch Aircraft Engineering Ltd. (MAEL) entered bankruptcy on Jan. 4, resulting in the immediate loss of more than 400 jobs.
MAEL’s board of directors appointed professional services company KPMG as administrators in early January to oversee the process after the company ran into financial difficulties and was unable to find a buyer.
Around 408 jobs were cut immediately, 250 of them at the company’s base maintenance operations in Luton and Birmingham, England. The former, home to MAEL’s headquarters since 1967, will also see a large cut to its staff as part of a further 158 layoffs. In the longer term, 178 staff will remain in their positions, with 83 staying temporarily to help wind down operations.
Just one day before the bankruptcy was announced, it was confirmed that MAEL’s line maintenance activities had been sold in multiple transactions for an undisclosed amount, saving 182 jobs, according to KPMG.
Most of MAEL’s aircraft maintenance jobs at London Gatwick, Birmingham, East Midlands, Newcastle and Glasgow airports were transferred to Morson Group, a UK-based industry recruitment specialist, while Storm Aviation, a domestic MRO, will take on the staff at Luton, boosting its line maintenance operations.
Some of Monarch’s roles at Gatwick, where it had been a partner in Boeing’s aftermarket network, will be transferred to the aircraft manufacturer. Line maintenance jobs at Manchester and Birmingham were transferred to Flybe’s technical division in December 2018.
As of January, KPMG is still seeking potential buyers to take control of Monarch’s continuing airworthiness management organization business, which offered fleet technical management services for Boeing and Airbus aircraft. The unit employs 27 people.
KPMG is also courting interested parties for MAEL’s Luton-based training academy, which delivered European Aviation Safety Agency Part 147 and United Arab Emirates General Civil Aviation Authority CAR 147 aircraft type training. At the time of the administration announcement, the training academy employed seven staff and operated an apprenticeship program including 53 trainees.
Operating since 1967, MAEL has endured a turbulent 15 months since its affiliate carrier Monarch Airlines ceased operations in October 2017. Despite continuing as a standalone entity, the demise of Monarch Airlines resulted in the MRO unit inheriting historic debts estimated at more than £100 million ($126 million).
After private equity firm Greybull Capital took majority control of MAEL about one year after the airline’s collapse, it sought to restructure the MRO’s legacy debts in the form of a company voluntary arrangement (CVA), a legally binding agreement between the company and its creditors allowing repayment of a proportion of debts over a set period. This followed speculation about a possible winding-up petition (a legal order that would force liquidation) from UK tax authority HMRC over unpaid taxes, which MAEL denied.
Compounding its financial problems was the loss of in-house fleet work resulting from Monarch Airlines’ demise. At the time of its collapse, the carrier operated 35 aircraft—25 Airbus A321-200s, nine Airbus A320-200s and a single Boeing 737-800—with its own fleet accounting for around 50% of MAEL’s maintenance output.
The effects of the loss of work were felt particularly in MAEL’s winter base-maintenance schedule, with the Monarch fleet accounting for around 80% of its MRO output during the season. Despite renewing ties with Virgin Atlantic, Spanish low-cost carrier Vueling, Air Malta and long-term cargo customer DHL Express over the 2017-18 winter season, the company saw a dropoff in its customer base in the second half of 2018.
According to MAEL’s managing director, Chris Dare, the loss of customers was further accelerated by entering the CVA, which in turn influenced directors and shareholders to put the company up for sale late last year.