Monarch denies previous refinancing ‘failed’

By Ian Taylor |  Nov 03, 2011 12:30PM GMT

The Monarch Group has denied a £75-million refinancing of its loss-making airline was necessary because a previous financial restructure had failed.

Monarch executive chairman Iain Rawlinson said: “The 2009 refinancing was a success. It allowed the business to return to profitability last year.”

The group announced the £75 million cash injection from its controlling shareholders, the Swiss-based Mantegazza family, on Thursday. The move followed a £45-million refinancing two years ago.

Rawlinson reported a £45 million loss for the year to October 31. But he told Travel Weekly: “What we are looking at here is a response to a long-term re-shaping of the market.

“We made a decision in May this year, when oil prices had been $110 a barrel for several months, that high oil prices were here to stay and we had to reshape the business. That was the priority.

“We spent May to July developing a plan for a changed, higher-price environment and that is what the shareholders have accepted. We are taking the initiative to ensure the business can operate successfully in a changed environment.”

Rawlinson said he did not expect market conditions to improve next year and consumers would have to adjust to paying higher fares.

He said: “It is inevitable the cost of flying is going to rise. Fuel costs have increased on average 25%-30% this year – although I’m not suggesting all that will be passed through to consumers. It is incumbent on all of us in the industry to run our businesses more efficiently.”

Rawlinson conceded: “We made a substantial loss [on the current year]. We are very cautious about 2012. But prospects for recovery in 2013 are better. We expect the market in 2013-14 should show some signs of recovery, based on a hopeful return of consumer confidence.”

He attributed the losses for 2010-11 solely to Monarch Airlines, reporting tour operator Cosmos and the group’s aviation engineering business, Monarch Aircraft Engineering, had been profitable.