The Monarch Group is aiming to become debt-free within three years ahead of new generation, more fuel efficient Boeing aircraft coming into the fleet from 2018.
Speaking to Travel Weekly the day after he completed a rescue deal for the company, chief executive Andrew Swaffield (pictured) said his goal was to ensure Monarch was never again in the position it found itself in this year.
He blamed growth being prioritised over yield for Monarch’s financial problems that prompted the Mantegazza family, three generations of which have run the company, to decide now was the time to sell.
Swaffield said the deal with Greybull Capital, announced on Friday night hours before Monarch’s Atol licence was due to expire having been extended by the CAA, secures its future.
A £125 million facility agreed with Greybull will be drawn on to get Monarch through the winter months when airlines traditionally lose money and into the new year when it will operate profitability.
Swaffield said: “My goal is to get the business in a really strong shape financially to make sure it’s never in the position again it’s found itself in this year.
“That’s going to happen not by taking money from the shareholders, that’s going to happen by generating money ourselves.
“The essence of the business case for Greybull is that we have stripped out a huge amount of cost, we have taken away a load of liabilities, we have made our workforce costs competitive with our peer group.
“Now we have to perform to that business plan, and we will become profitable and cash positive during the first few months of next year and then begin to generate our own funds.
“The money that we have will get us through the low point this winter and we have plenty of head room now to get through this winter.
“We will start generating cash in the new year and we will have to draw down again next winter based on our current plans but thereafter we won’t need to, but the facility will exist if we need it.
“My plan is to get the business debt free within two or three years and then build the balance sheet to a state of much more credit worthiness which will generate a lot of working capital benefits.”
Monarch’s new fleet of Boeing aircraft, due to arrive from April 2018, will be 15% more fuel efficient and improve the airline’s bottom line by tens of millions of pounds.
Swaffield said Monarch’s reported £150 million pension black hole had been a significant issue and an agreement to have it taken over by the Pension Protection Fund effectively saved the company.
This saw the Mantegazzas put in “very significant” sum, said to be in the tens of millions of pounds, and Greybull also put money in in the form of loan notes.
Although some recent reports suggested the pension issue remained a key sticking point in getting the takeover agreed Swaffield said the agreement was finalised on September 24.
“It became clear to us if we couldn’t get the cooperation of the Pension Protection Fund then we would not have been able to sell the company and we would have disappeared,” Swaffied said.
“The process was agreed on September 24 and it has a 28 day cooling off period, so it wasn’t a sticking point. No buyer was willing to buy Monarch with a huge pension fund deficit.”
Swaffield said the agreement with Greybull had saved 2,500 jobs although as part of the deal the firm has had to shed 700 roles.
He described the deal as incredibly complex and that this was the reason for the process appearing to go right to the wire on Fridayas the final legal papers were completed.
“It’s incredible to me the amount of stuff that has to happen to sell a company that’s 50 years old,” he said. “I lost count of the number of documents I signed, it’s in the hundreds of hundreds.”