Monarch chief executive Andrew Swaffield addressed the Travel Convention hours after announcing a £165 million investment to secure the group’s future. Ian Taylor reports
Andrew Swaffield’s absence from Abta’s Travel Convention in Abu Dhabi on Tuesday triggered media reports that the Monarch managing director had gone AWOL while the group’s future was in jeopardy.
So it was a smiling Swaffield who appeared on stage at the Convention on Wednesday, hours after announcing a £165 million investment in the group by owner Greybull Capital and renewal of the airline’s Atol license by the CAA.
Swaffield told the Convention: “I wanted to express thanks to the trade for supporting us. Monarch has always been dependent on the travel trade and I wanted to say thank you.
He said: “I actually got an alert saying I was absent from the Convention when I was on a flight to Abu Dhabi. I’m here, and I hope to be here for many years. I’m extremely optimistic.”
Swaffield explained the delay in the CAA renewing Monarch’s Atol at the end of September saying: “The extension to the license was a response to a request from Monarch.”
He declined to comment on the fact that the CAA had arranged for aircraft to be in position to repatriate passengers from October 1 in the event Monarch ceased flying, but Swaffield told the convention: “The issues with relicensing have been unfortunate. It did have an impact on bookings – more on holidays than flights.”
However, Swaffield insisted: “Monarch has enjoyed a great relationship with the CAA. The past two weeks have been difficult, but the regulator has a job to do.”
He said the turnaround at the group had proceeded well following the restructure and purchase by Greybull in October 2014, saying: “2015 went well. We delivered a £125 million profit turnaround.
“Things began to turn” following the crash of a Russian holiday jet after departing Sharm el-Sheikh in October last year. The UK Foreign Office subsequently advised against air travel to Sharm, and a ban on flights from the UK remains.
Swaffield said: “We’ve had endless terrorist attacks. We’ve had Turkey decimated. We’ve had huge capacity into Spain. We’ve seen increases in fuel and ground-handling charges as a result of the fall in sterling following the Brexit vote. It’s not just a Monarch issue, but we had to ensure Monarch was properly capitalised.
“We don’t expect terrorism to disappear. We don’t expect the pound to suddenly bounce back, and we have the uncertainty of Brexit. It’s essential we ensured we had the capital in the business to ensure we flourish.”
Swaffield told reporters: “This has been the most challenging year of my career and that includes 9/11 and the financial crisis. When you look at the combination of events for airlines, it has been a perfect storm.
“We predict a relatively difficult market – low yields, a low [exchange rate of the] pound to the dollar and to the euro, and reasonably similar levels of terrorism. So it is a relatively hostile environment. The equity injected into the business is designed to address that.”
He declined to give details of the renegotiated terms of a deal with Boeing to buy 30 of the latest, more fuel-efficient 737 MAX aircraft. But speaking outside the convention, Swaffield said: “The aircraft order will bring significant savings. We spend £120 million a year on fuel. The fleet order will be transformative for us. By 2021 we’ll have the youngest fleet of any airline in Europe.
“We’ve restructured the deal significantly, but there is a high degree of confidentiality about it. There is an understanding Monarch may enter into the sale and leaseback [of the aircraft], but that is a decision for 2017 – maybe as early as January, maybe later in the year.”
He confirmed: “The investment has come from Greybull. The capital injection is built around our six-year business plan and takes us to the end of that, with the last Boeing 737 coming in and the last Airbus leaving in 2022.”
Swaffield added: “The investment is from now, not spread over the six years. Some [of the capital] is there already, some will be invested over a few weeks. The CAA is satisfied with the arrangements.
“The shareholder has demonstrated support for us and I intend to show it was a wise decision.”
He revealed: “We were focused on [obtaining] investment for months, but these things take time.”
Asked whether he believes Greybull has invested for the long term, Swaffield said: “There has been speculation in the press about people being interested in Monarch. I won’t comment except to say there has been interest from multiple parties and there is clearly a trend of consolidation in aviation.
“My focus is on Monarch as a standalone business. We’ve put that interest to one side. We’re very happy with our owners. They have shown their support.”
However, he said: “I’m not going to say Greybull would never sell the business.”
Asked if he now foresees growth at Monarch, Swaffield said: “We lost 700-1,000 jobs as part of the restructure. We’ve grown some back. My hope would be that over the six-year business plan we would begin to grow again. That is the long-term objective – for relatively modest growth. It would take us beyond where we were in 2014.”
Monarch will now seek to reassure consumers and trade that it is here for the long term. Swaffield said: “Part of our challenge is to rebuild confidence. We were doing extremely well. I hope ending the uncertainty has done the trick in terms of confidence.
“We will need to reach out to customers and to the trade. We have increased our marketing spend. You will see a louder voice from Monarch. Traditionally, Monarch spent about half what its peer group did on marketing. Now we’re matching their funding so you will see more from Monarch.
“We’re really trying to grow the brand awareness. We’re top of the second division of airline brands with Thomas Cook, Thomson and Flybe, but we would like to push that north [up]. Our brand is one of our greatest assets. We’ll be a lot more aggressive.
“Our goal is to become Europe’s most-recommended airline.”
Swaffield praised Monarch’s staff for their performance through the latest crisis, saying: “I’ve seen a heroic effort by staff to maintain that [service] with a smile. Our people have been outstanding.”
Sharm el-Sheikh remains closed to UK airlines, pending a Department of Transport decision on security at the airport and a change to Foreign Office advice.
Swaffield said: “The government hasn’t given any reason to believe it’s ready to re-open Sharm airport. My own view is the airport will be ready, but it’s not my job. We’re dependent on the government reaching that decision.
“It’s a very important market. It’s hot, it’s affordable and it’s not far away. Sharm being out of the market is a big problem.
“The Canary Islands are more expensive. We fly to Eilat but it is expensive. There is a big group of people who don’t want to fly long-haul.
“It’s a crying shame to see somewhere suffer because of terrorism. But it’s the job of the government. I hope they come to a decision. We stand ready to go back in as soon as Sharm is ready.
“However, the deadline for Christmas is almost past. You’re probably talking the February half term now [as the earliest possible return of flying]. Once that [opportunity] has gone it’s probably not worth talking about summer 2017 [for a return].”
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