Monarch – A Company in Administration
Monarch’s Administration Affects 860,000 People – Some of Them Insolvency Practitioners!
It is a sad truism that when travel companies and/or airlines stop trading and go into administration, it tends to happen spectacularly and in the eye of the news and social media. This is because thousands of customers are often left stranded overseas, whilst many suddenly lose the holidays they have booked. In addition, staff lose their jobs and creditors are affected. Now that Monarch has stopped trading and is a company in administration, the numbers affected are frighteningly high. Not surprising, perhaps, for the 5th largest company of its type in the UK.
The repercussions and fall out will be significant as KPMG, the administrators, begin their task of unravelling the detail of what went wrong and why, and then try to do the best they can for all of those affected. We must leave any detailed comment until these details come out, and simply report on what we know has happened to date. In the meantime, Simon Parker takes a quick look at the facts as they stand at the moment, how customers will be affected and whether they will get their money back, including two from Antony Batty & Company.
Why has Monarch Gone into Administration?
The administration was actually triggered by the fact that Monarch did not survive the process for the renewal of its Air Travel Organiser’s Licence (ATOL). By law, every company involved in selling flights and/or holidays that involve flights can only do so if it holds this licence.
To renew an ATOL licence, the Civil Aviation Authority (CAA) needs to be certain a company is financially stable enough, with sufficient resources to continue trading for the next 12 months, so that its clients are not left stranded.
In Monarch’s case, it had come very close to collapse a year ago, and was rescued at the last minute. This was off the back of a £291 million loss in the year to October 2016, compared to a profit of £27 million the previous year.
Despite carrying millions of passengers per annum, the perception inside the industry is that Monarch has been struggling for years. The very rapid recent decline in its fortunes has been blamed on several factors, including:
- the fall in the value of the pound
- increased fuel costs and handling charges
- terrorism – the closure of Sharm El Sheikh and the incidents in Tunisia and Turkey
- the perception that Monarch provide a better experience for the passenger than say, Ryanair, but at the cost of precious profit margins.
Indeed, Monarch’s Chief Executive, Andrew Swaffield has said that although the company had been carrying 14% more passengers this year, it has done so for £100 million less revenue.
As insolvency practitioners with much experience as administrators of travel companies, we know that there is much more to come out as the administration progresses. Better to leave it until the dust settles before making any firm judgements.
These Travel Industry Administrations Always Come With Some Very Sad Stories
By their very nature, travel industry administrations leave thousands of customers on holiday stranded. Some need to get back quickly for health reasons, others for work and some have had their dream holiday ruined. It can be truly distressing. Whatever happens, work to resolve these issues has to happen very quickly.
Then there is the issue of money back and compensation. These are the key points:
- ATOL protects customers when they book a holiday with a UK travel company. It ensures customers do not lose money or become stranded abroad if their travel company collapses. However, this only applies to package holidays and not when the flights and holiday accommodation are booked separately. So what happens if you are not covered by ATOL?
- Firstly, avoid the problem by paying with a credit card. Despite possible credit card surcharges you have the legal protection of section 75 of the Consumer Credit Act, 1979, whereby if you don’t receive the service you have paid for, the card company have to refund your payment, subject to a £100 minimum cost.
- Another option, but only for amounts under £100, is Chargeback. This is not a legal protection, but is a core element of the protection offered by Visa, Mastercard and American Express, whether the payment is via a Credit OR Debit card. Here you ask the card provider to do a Chargeback, who asks Monarch’s bank for your money back as the service you purchased has not been received.
Sadly, we can all get caught out, as two of our team did, or nearly did.
- One team member and his wife were due to fly with Monarch to Faro and back next weekend. Flights only, so no ATOL protection, and paid for by Debit Card to avoid the additional credit card surcharge. You would think they would know better!
- Another team member’s wife returned from Malaga with a group of her tennis playing friends on a Monarch flight which touched down at midnight, before the administration the next day. The flights had been booked with a debit card, so no ATOL protection. They were saved by the 24 hour extension granted by the CAA.
As an aside, we understand that from early next year travel companies will not be able to levy a surcharge on customers who book by credit card.
When a Company is in Administration, What Happens?
Inevitably, every administration is different, and things change over time as the process continues and develops. All we know from KPMG at the moment is that they have spoken to all of the company’s employees and provided them with as much assistance as possible.
Sadly, over 1,850 employees of Monarch Airlines and Monarch Travel Group have been made redundant, and the assistance given extends to helping them make their claims to the Redundancy Payments Office. In addition, the remaining Monarch HR team has been holding jobs fairs to help people get back into work, whilst a number of employers with vacancies have been in touch with the administrator, and details have been sent to the former employees via the HR team.
Monarch Aircraft Engineering Limited, the Group’s engineering operation, which employees 736 members of staff, is not in administration and, at the time of writing (3rd October, 2017) continues to trade normally.
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If you or your business is facing insolvency, the sooner you contact us, the more we can help.
Our team of insolvency practitioners is highly experienced as administrators for travel companies that have ceased trading. In particular, we have good relationships with the regulators, and know how they work: the CAA, ABTA and IATA. The same apples to the credit card companies. This allows us to act quickly and positively for the company in administration.