Posted on: 04 January 2019 by Mark Howells
Monarch Aircraft Engineering Limited has finally succumbed to overwhelming financial pressures and entered into administration, with the initial loss of 450 jobs across its UK operations.
KPMG has been appointed to carry out the administration process for the former MRO division of Monarch Airlines, which itself collapsed in October 2017. David Pike, Ben Leith and David Standish from KPMG’s Restructuring practice were appointed Joint Administrators at the request of MAEL’s directors.
The MRO, based at London Luton Airport, was established in 1967 and employs approximately 579 staff, providing aircraft maintenance services across four main divisions – base maintenance, line maintenance, fleet technical support (Continuing Airworthiness Management Organisation – CAMO) and a training academy.
Earlier this week MAEL confirmed the transfer of the majority of its line maintenance operations to a number of different parties. KPMG revealed the split out of the operations as follows:
• MAEL’s UK line maintenance operations at Gatwick, Birmingham, East Midlands, Newcastle and Glasgow Airports have largely transferred to Morson Group, with the Luton Airport line maintenance operations transferring to Storm Aviation. Certain Gatwick-based employees have also transferred to Boeing.
• Further operations at Manchester and Birmingham Airports, including related employees, were transferred to regional carrier Flybe following the cessation of their maintenance contract in late November 2018.
Collectively, these acquisitions ensure continuing employment for 182 of MAEL’s employees.
The company completed a restructuring in October last year, which KPMG said led to a number of the MRO’s customers seeking alternative suppliers. “This presented the business with significant challenges, making it unsustainable in its present form. On 14 December 2018, MAEL therefore announced that it was in talks with potential partners with a view to selling all, or parts of, the business.”
Monarch’s base maintenance activities worst hit
The activity that has suffered most following the restructuring is MAEL’s base maintenance business out of hangers in Luton and Birmingham. “Unfortunately, with significant losses being incurred on this activity and with no offer having been received, operations will be suspended immediately, resulting in the redundancy of circa 250 employees. The administrators will be seeking a purchaser for the base maintenance facilities and will be working with the small number of base maintenance customers affected by this cessation of trade,” said the administrator.
All remaining activities continue to trade whilst the administrators seek buyers, it added.
• The CAMO division, with 27 employees, which provides the continuous upkeep of airworthiness records and scheduled maintenance requirements for 33 aircraft across eight customers.
• The training academy, which comprises an engineering training school in Luton with a total of seven employees, and an apprenticeship programme with 53 trainees. The administrators are seeking to sell the training school and intend to retain the apprentices for a period while assisting them in finding new placements.
The remaining circa 200 MAEL staff are largely Luton-based. “Regrettably, the majority will be made redundant with 83 employees retained to support the wind down of the business, in addition to those retained in the CAMO and training businesses,” stated KPMG.
One of the joint administrators, David Pike, said: “Following the administration of other Monarch entities in 2017, MAEL sought to build its customer base to replace the loss of business from the former airline. Through the insolvency of the airline however, the company inherited significant debts and claims. Every effort has been made to turnaround the business, including launching a CVA which sought to resolve these legacy debts. Unfortunately, following the CVA, a number of customers reduced or sought to terminate their relationship with MAEL, further adversely impacting the business.
“As a result, MAEL recently entered into talks with a number of potential parties with a view to selling all or parts of the business. While it is pleasing agreements with a number of operators have been secured to ensure continuity of service at the majority of MAEL’s line maintenance stations, with only partial offers forthcoming for the rest of the business, the directors have taken the difficult step to appoint administrators.
“We remain hopeful that buyers will be found for the CAMO and training businesses and encourage any interested parties to get in contact.”
MAEL’s owner Greybull Capital became the majority shareholder in October. In December it confirmed plans to sell the MRO.