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Brexit claims its first major victim


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the UK pound goes down but bills are paid in euros and US dollars go up

 

Monarch goes bust in UK’s biggest airline collapse

 

 

Monarch Airlines aircraft are pictured on the tarmac at Birmingham Airport. Pic: AFP

 

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  • 6:57AM October 3, 2017
     
     
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British short-haul carrier Monarch Airlines has gone bust in the biggest airline failure in Britain, prompting the government to take emergency action to return home 110,000 stranded passengers.

 

Monarch and its holidays business went into administration, with KPMG appointed to oversee the financial chaos that has left nearly 2000 employees having to find new employment.

 

The airline had been struggling financially for a while and won a cash injection a year ago that allowed it to continue flying and fund growth plans, as the sector faced turbulence from Brexit and terrorism.

 

The UK’s Civil Aviation Authority described the events overnight (AEDT) as “the biggest ever UK airline failure.”

 

“All future holidays and flights provided by these companies have been cancelled and are no longer operating,” it said.

 

The CAA said that the government had asked it “to support Monarch customers currently abroad to get back to the UK at the end of their holiday at no extra cost to them”.

 

Passengers are being flown back from numerous countries, including France, Greece, Israel and Turkey on aircraft leased by the CAA.

 

“I got a text message ... to say that the airline had ceased business,” Irish graphic designer Aine Cassidy said, after returning on a CAA-chartered flight from Menorca, Spain, to Luton airport, north of London.

 

“I thought it was maybe a joke or a mistake so I did a quick Google and saw that Monarch was in trouble.”

 

Among planes being leased were Airbus A320s from Qatar Airways, according to the flight-tracking site Flightradar24.

 

“The handling by the government and the CAA was excellent,” said David Banks, who returned to Luton with his wife after spending a week in Menorca.

 

“But, by Monarch, some kind of contact would have been nice.”

 

Hundreds of thousands of customers will be affected by Monarch’s collapse, most of whom have future bookings, the CAA said.

 

“We are quite upset ... we don’t know anything. I suppose it’s just a waiting game,” holiday-maker Desmond Morland said in Cyprus after being told he may face a delay returning to Britain.

 

The government said it was overseeing what it described as the biggest repatriation since the end of World War II.

 

“This is a hugely distressing situation for British holiday-makers abroad and my first priority is to help them get back to the UK,” Transport Secretary Chris Grayling said in a statement.

 

“That is why I have immediately ordered the country’s biggest ever peacetime repatriation to fly about 110,000 passengers who could otherwise have been left stranded abroad.”

 

 

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Can't say I've flown with them in years, but I think back 20 years ago flew with them a few times, and remember building a monarch plane as a kid lol.

 

Big shame, but -as stupid as Brexit seems from the outside- probably not all brexit's fault? To be honest they haven't been the same since the Low costs came in I think. Probably more a straw on the preverbial camel?

 

Just feel sorry for the staff and passengers hit by this - there's already a peak in demand thanks to Ryan Air's **** up, and now a whole carrier has gone down.

 

 

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the UK pound goes down but bills are paid in euros and US dollars go up

Suggesting that currency fluctuations caused this collapse is unlikely, there'll be a lot more to it than that.

 

Any sound Company that has liabilities in an external currency will be hedging against fluctuations.

 

Not only that but the GBP dip since Brexit is minor and has lately been in firm recovery. The GBP/USD pair stood at 1.4 at the time of the Brexit decision in June '16 and fell to 1.22 by October but since then has steadily strengthened to its current 1.34. If a 5% dip against the USD, whilst currently in firm recovery, was sufficient to send them under I'd suggest they were already seriously foundering through mismanagement, well before that.

 

As far as the EUR/GBP pair is concerned, it stood at 0.8 at Brexit, spent most of the year around 0.84 and briefly reached 0.92 in August. However since Merkel's struggles it has fallen back to 0.88. Once again, only a 10% change that continues in recovery and would have been hedged against if the company was being run competently.

 

 

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The analysis seems to point to the currency deterioration as the major issue, Monarch is unique in not being a major airline and relying on the UK as the primary market means they are stuck with customers paying in pounds. Hedging only works for so long, I think the management realised that the pound wasn't going to recover enough to turn the company around.

 

 

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I think the management realised that the pound wasn't going to recover enough to turn the company around.

I still rather doubt all that ... whose analysis?

 

The pound doesn't have to do any recovery at all, the fall in the Euro will/would have done the job for them. The currency market Tech and Sentiment both show a double whammy against the Euro. Merkel's woes are just one aspect that has the Euro likely to tumble a lot further, and the Sentiment of the whole of Europe is fearful now that they've come to terms with the UK not wanting to be a part of the EC anymore. The uncertainty is sure to push the Euro lower in the mid and longer term.

 

That combination should have provided sufficient strength for Monarch to secure bridging if their lenders had confidence in their management.

 

I'd agree that their vulnerability would seem to be lack of market spread, and that's an indication of management problems, that they haven't kept their business model up with modern trends.

 

 

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There’s no way currency alone was responsible. The AUD has been much more volatile in recent years as we also have to buy everything in foreign currency. I was surprised that when the dollar was above parity no one was taking advantage of the situation here.

 

 

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I remember a while back that QANTAS were screaming to be allowed to move offshore to compete due to the high AUD

Oh of course, just like all businesses look to reduce costs. However let's not forget why Qantas had to ask to be allowed to move when any other business could just move - not only are they subsidised by tax payers, but they also wanted to be debt-guarenteed by them too. People get annoyed if you use tax payers money to move over seas and keep your hand in the cookie jar lol. Don't get me wrong, I support subsidising Qantas - we're a nation dependant on air travel and I think on the whole tax payers benefit from the cost personally. But yeah, move over seas taking Aussie jobs? That's a bit rich.

 

Look, nobody is saying that the value of the pound had no effect, of course it did, but that same problem has affected all other UK based businesses. Even the ex-boss of Monarch seems to be saying it wasn't just one factor. The main factor in recent years according to monarch, being the cancellation of routes they didn't have much competition on due to terrorism, forcing them to depend on the highly competitive Spain-area routes, and the company was already in poor shape to face that fight.

 

Honestly if the pound was where it was 2 years ago, you'd have to say looking at these losses they would have still been in dire trouble.

 

Currency will always vary. The real risk from brexit for airlines over there is if anything messes with their ability to operate as if the EU destinations are essentially domestic ones like they do now.

 

 

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QANTAS recently announced the largest profit in its history thanks to the AUD dropping to USD72c

 

I wouldn't be surprised if they are using bankruptcy to move the company out of the UK so that won't have to deal with post brexit England

 

 

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QANTAS recently announced the largest profit in its history thanks to the AUD dropping to USD72cI wouldn't be surprised if they are using bankruptcy to move the company out of the UK so that won't have to deal with post brexit England

I really don't think that's what's happening - they were looking to sell/merge/be saved prior to realising that they were essentially out of options. And yes, just like before, the lower dollar helps Qantas, but so did the three year turnaround plan they formulated to cut costs and become more efficient, as well as the sharp rise in domestic passengers. It all comes back to my last point - yes currency values affect companies, and they will certainly make a stink about it hoping to get a government to act as it's out of their control, but if your company isn't on the rocks you should be able to navigate small fluctuations like the current value of the pound.

 

I'm not sure why this is so important to you to be solely because of the pound value post brexit. As a reference, the board members that made the decision have been quite public about their reasons, stating that's just a part of the problem & industry analysts have said it's just a factor. We can even google and see in trouble before brexit, nearly going bust in 2014 and only really making money in 2015 as all the airlines profited from cheap fuel savings they forgot to pass on to passengers ticket prices lol. At the end of the day there were several factors against monarch. Is your headline wrong? nope, but let's not pretend this glorious technicolor ****up is black and white.

 

I still just feel most sorry for affected staff and passengers. One thing I thought was bad was that apparently due to British regs they couldn't operate to bring people home or warn them. So they had to announce the collapse at 4am, with many passengers loosing even more money travelling to the airports unnecessarily.

 

Fortunately for staff, Monarch were not a budget airline, so their probably superiorly trained staff are appealing to some other airlines. I believe EasyJet have said they're looking to (save training costs and) hire a few hundred customer service staff (ground and air). But of course that passes on down. Lots of highly experienced airline staff come on the market, people looking to get into the industry in the UK get locked out.

 

Let's just hope Ryan Air make it through their troubles (can't believe I just said that).

 

 

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QANTAS recently announced the largest profit in its history thanks to the AUD dropping to USD72cI wouldn't be surprised if they are using bankruptcy to move the company out of the UK so that won't have to deal with post brexit England

Yea, it had nothing to do with creative accounting and oil at $45 a barrel.

 

All of their costs are in USD, can you explain how a low AUD is helpful?

 

 

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The world would be a better place if everything was not profit driven. If an airline had one dollar left over after paying all operating costs and other crap it would still be a great thing because it's employing people. I think it was Karl Marx who said competition would be the demise of capitalism.

 

 

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The world would be a better place if everything was not profit driven. If an airline had one dollar left over after paying all operating costs and other crap it would still be a great thing because it's employing people. I think it was Karl Marx who said competition would be the demise of capitalism.

I broadly agree, but I think this was loss driven. They lost over £200m in 2016, £100m this year and were projecting over £100m losses again next year.

 

Granted they employed about 2000 people, but those numbers aren't sustainable. They briefly made a slight profit in 2015 after years of losses due to fuel price mostly, but really it's not reasonable to expect the state to fund every failing business.

 

Fortunately for the workers, there does seem to be some demand for them from other airlines. It's a sad thing, but what can you do? If a company is loosing a hundred mil every year whilst their competitors make hundreds of millions per year... you have to say that really either the company is being run appallingly, or, more likely, passengers prefer to fly with someone else.

 

 

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There was a very good analysis of why Monarch went to the wall the other day on the DT web site. It was primarily due to the fact that the tourist markets they served had become terrorist hot-spots - Sharm el Sheik, Tunisia, Morocco etc even Turkey to an extent that tourists just stopped going to and they couldn't get competitive slots and hotels etc in the ones that people still visit - Spain mainly. So the writing had been on the wall for some time - costs up, passenger numbers down. It also perhaps didn't help that Monarch was owned by a private capital group and if it had been an independent company under agile management it might have been able to respond quicker, but that's just speculation now.

 

But what is for sure is that its demise had nothing to do with Brexit - it was failure in it business model.

 

 

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Tourism works both ways, a lot less tourists at the destinations that Monarch fly to want to visit England flying Monarch because it is British, which means Monarch was dependent on the UK market and the pound.

 

The DT is rubbish pro brexit murdoch rag

 

 

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Can't speak for the Aus Telegraph of course. I was referring to the UK Daily Telegraph,a centre right publication owned by the Barclay brothers. Need to be careful with terminology especially on a non-political forum like this, because anyone who disagrees with their opinions or political stances refers to various newspapers as 'rags'. But I don't think that's for discussion here, eh.

 

 

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