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Monarch must renew operating licence to continue selling package holidays

Published 27/09/2016

Monarch has been the subject of recent market speculation
Monarch has been the subject of recent market speculation

Monarch must renew its operating licence this week to continue selling package holidays, a regulator has said.

The firm was forced to deny "negative speculation" over the weekend that it is in financial trouble.

It is part of the go vernment-backed Atol scheme, which compensates travellers in full and ensures they are not stranded if a holiday company collapses.

The UK's specialist aviation regulator, the Civil Aviation Authority (CAA), said Monarch's Atol licence expires on Friday and if it is not renewed it will be unable to sell package holidays.

Holidaymakers currently abroad or due to travel after Friday would still be protected if the licence is not renewed as the scheme is dependent on when a trip is booked rather than when it takes place.

The CAA said there are no set criteria for approving applications for Atol licences, but the process involves assessing a company's finances, business model, corporate governance and group structure.

The potential impact on consumers of an applicant going bust is also taken into account.

Roughly half of Atol licences across the industry are due for renewal on Saturday, the CAA said.

According to reports, the regulator was responsible for chartering large aircraft which were positioned at airports served by Monarch in southern Europe on Sunday in case the airline was unable to fly passengers home.

A CAA spokesman said: " As a responsible regulator that puts consumers first, we have robust contingency plans for a wide range of potential issues.

"These flexible contingency plans enable us to be prepared to act in the interests of consumers on a variety of issues, whenever it is necessary.

"We do not comment on specific operational, financial or licensing matters relating to any of the businesses we regulate."

Monarch's owner is in talks with several interested parties about a potential takeover of the carrier as it prepares to throw it a multimillion-pound lifeline.

Greybull Capital is understood to be in discussions with Chinese firm HNA Group, the company behind Hainan Airlines, about a potential deal, with others thought to be waiting in the wings.

A spokesman for Monarch said: " Over the weekend there has been negative speculation about Monarch's financial health.

"Our flights and holidays are operating as normal, carrying Monarch customers as scheduled.

"To weather tougher market conditions and to fund its ongoing growth, Monarch expects to announce a significant investment from its stakeholders in the coming days."

The spokesman added that the airline is "trading well" despite the " difficult period for the holiday industry" due to terror attacks, Brexit and the weakening of sterling.

Greybull, which acquired a controlling stake in Monarch in 2014, is thought to be finalising details of a cash injection over the coming days. Part of the money is expected to go towards helping pay for a new fleet of 30 Boeing MAX 8s.

The firm booked a £19.2 million pre-tax profit in the 12 months to the end of October 2015 following a £57.3 million loss a year earlier, according to accounts filed at Companies House.

Monarch, which has its headquarters at Luton Airport, employs around 2,800 people.

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