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Monarch failure: UK insolvency rules hindered rescue plan

A rescue plan for Monarch was hindered by UK aviation insolvency rules that prevented it operating while in administration, its boss claimed yesterday.

The carrier had been trying to sell off its short-haul business to ensure its survival in the weeks leading up to its failure.

This would have allowed Monarch to switch to long-haul routes using a fleet of new Boeing 737 Maxs with fuel efficiency which would have given it a cost advantage over rivals.

Under the plans, the management, led by chief executive Andrew Swaffield, had established a shell company to house the new long-haul business, The Times reported.

However, a buyer could not be found for the short-haul operation, which was suffering amid intense competition in Europe after terror attacks in Egypt and Tunisia and the failed coup in Turkey.

One source close to negotiations to salvage Monarch pointed out that Air Berlin had been able to continue operating as the German government sought to find a buyer for the insolvent airline and that every leading US airline had been in Chapter 11 bankruptcy protection in recent history.

But Monarch was grounded when the Civil Aviation Authority would not grant it a new licence because of its projected losses.

Swaffield told BBC Radio 4’s Today programme: “The UK’s insolvency framework doesn’t allow airlines to continue flying, unlike in Germany or Italy, where we see both Air Berlin and Alitalia continuing in administration . . . We couldn’t figure out a way of reducing those losses significantly, either by selling the short-haul airline or by improving it.”

He described the airline’s failure as “heartbreaking”. Almost 2,000 employees were made redundant.

The 49-year-old airline was rescued from the brink of bankruptcy in 2014 by Greybull Capital in a deal that offloaded its pension scheme to the Pension Protection Fund, the industry-backed “lifeboat”. In return the PPF took a 10% stake in the business and a £7.5 million secured loan note.

That secured debt means that the PPF lines up alongside Greybull as a secured creditor if KPMG, the administrator, realises any value by selling Monarch’s assets.

EasyJet, Norwegian Air, Wizz Air and British Airways owner International Airlines Group are among the suitors believed to be looking at the failed airline’s airport take off and landing slots.

Monarch Aircraft Engineering, the group’s engineering arm which employs 736 staff, is not in administration and continues to trade normally.

Between them the two Monarch companies employed about 2,100 people

Joint administrator Blair Nimmo, a partner at KPMG, said: “Since our appointment, one of our key priorities has been to speak to all of the companies’ employees across all locations and provide them with the support and assistance they need at this distressing time.”

A total of 1,858 employees were made redundant following the collapse of the company ion the early hours of Monday morning. Of these, 1,760 worked for Monarch Airlines, while 98 were employed by Monarch Travel Group.

Nimmo said: “Importantly, we have retained the company’s 17-strong HR team to provide assistance to the rest of the workforce, including help in making claims to the Redundancy Payments Office.

“Their support, at what is also a very difficult time for them, has been crucial and we are very grateful to them.

“Within the next 48 hours, all employees will be receiving a substantial pack of correspondence from the joint administrators to assist them with making their claims.

“In addition, and with support from the secured creditors, the Monarch HR team will be holding jobs fairs over the coming days and weeks to try to get as many people as possible back in to work as soon as possible.

“We have also been in contact with Unite and Balpa, who have been proactive in speaking to airlines to source job opportunities, providing them with any information they need to assist.

“Finally, we have also been contacted by a number of employers both in Luton and elsewhere who have vacant positions available, and we are ensuring that we are diligently cascading this information to the Monarch HR teams and the unions.”

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