British charter Monarch Airlines has entered administration except for its engineering operations. Stripping out at a stroke an estimated six million seats of Europe-wide capacity UK-listed rivals are expected to see their own load factors (passenger numbers) improve.
Monarch is the latest casualty of a vicious battle in the skies. 'The third airline failure this year in Europe, after Alitalia and Air Berlin, is a symptom of over-capacity and overly-aggressive pricing,' says Neil Wilson, senior market analyst at ETX Capital.
Travel retailer On The Beach (OTB) has flagged a one-off exceptional cash cost associated with helping customers organise alternative travel arrangement or providing refunds. Despite the bad news, shares in the company are resilient at 396p.
HOW HAS THE NEWS IMPACTED OTHER AIRLINES?
Low-cost carriers EasyJet (EZH) and Ryanair (RYA) are both in demand with investors on Monday, the shares up 4% to £12.65 and 3% to €16.77 respectively. That's a relief for the latter which has been struggling to deal with mass flight cancellations after getting its pilot leave wires crossed.
Shares in Jet2 owner Dart Group (DTG) rallied 5.8% to 567.5p on the news while British Airways operator International Consolidated Airlines (IAG) flies 2.1% higher to 606p.
Interestingly, there is already speculation that rivals will be quick to pick at the bones of Monarch's mothballed fleet. Some reports suggest that EasyJet is considering a bid for Monarch’s assets.
‘Monarch appears to be a good potential fit and we think that EasyJet needs a new source of growth following aggressive expansion at London Gatwick airports in recent years,’ says Cantor Fitzgerald Europe’s Robin Byde.
He also flags other sector-wide issues that stunted Monarch’s turnaround such as the weaker pound pushing up costs and terrorist attacks, which have deterred travellers flying abroad.
EasyJet is not the only airline planning to exploit the failures of its rivals as Ryanair has prepared a binding takeover bid for Alitalia according to reports.
WHAT ACTION IS BEING TAKEN TO HELP STRANDED PASSENGERS?
All flights operated by Monarch from the UK and all future holidays have been cancelled with immediate effect, forcing the Civil Aviation Authority (CAA) to step in to help blindsided travellers.
The CAA will help fly affected customers back to the UK at no extra cost, although customers are advised not to travel until a new flight is confirmed.
