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Monarch Airlines takeover speculation amid claims of market turbulence

Published 26/09/2016

Monarch said it was 'trading well' and expected to make £40 million before tax and other deductions by the end of the financial year to October
Monarch said it was 'trading well' and expected to make £40 million before tax and other deductions by the end of the financial year to October

The owner of Monarch Airlines 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.

Monarch was forced to deny "negative speculation" over the weekend that it is in financial trouble, and sources close to the situation confirmed that the airline is in no immediate danger of going bust.

A spokesman for Monarch said: "Over the weekend, there has been negative speculation about Monarch's financial health. Our flights are operating as normal, carrying Monarch passengers 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.

But aviation analyst Alex Macheras told the Press Association: "Out of all the carriers we have in the UK it wouldn't surprise me if Monarch were to declare bankruptcy, purely because we've known that they've been in such a fragile state for so long.

"Even up until June, just a couple of months ago, they wanted to reiterate the fact that they are still in desperate times despite the profit that they're making."

Air industry consultant John Strickland believed it is unlikely that an airline would go bust in September.

He said: "It's pretty unusual that it would be in the peak summer season when traffic volumes are good, revenue flows should be pretty good and cash flows too.

"It's not the depths of February when people are not going on holiday."

Mr Strickland said the statement issued by Monarch "makes sense".

He went on: "It has been a challenging market and it's certainly a very competitive market.

"Many of the markets that they would have been active in and previously wanting to count on, like Turkey and Egypt, are now off limits because of terrorism scares."

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

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