2012 News - Flights - Update on Trading for the Year and Re-equipping of Monarch Airlines Fleet

29 11 2012

Commenting on The Monarch Group’s 2012 performance Executive Chairman, Iain Rawlinson, said: “I am pleased with the progress we have made over the last year in delivering results exactly in line with our business plan objectives.  We are well advanced in restoring the Group to overall profitability, on target with reductions in our cost base, and ahead of our airline growth plans set a year ago.”

SUMMARY

Performance highlights for the year to October 2012

• Increase in Group turnover (net of intra-Group sales) from £757.8 million to £827.7 million

• Achievement of Group-wide cost savings of £31.6 million, as planned

• Increase in Monarch Airlines’ total passenger volumes from 6.3m to 6.4m passengers (15.7% increase in scheduled passengers from 4.6m to 5.3m);  expansion to six airport bases, with addition of East Midlands in 2012 and in Leeds Bradford from 2013; and growth in scheduled route network to 88 routes, including successful absorption of routes formerly operated by bmibaby

• Strong profitable growth in tour operations sales and yields, driven by successful winter and summer package holiday programmes, particularly to Goa, Greece and Florida, for which sales significantly outperformed the market

• Further profitable growth in Monarch Aircraft Engineering turnover, with third-party customer revenues increasing to 29% of the total from 19% two years ago

• Significant advances being made in the Group’s e-commerce capabilities including mobile, with 20m unique visitors to the Group’s customer online platforms, up 21% on the prior year

• Strengthened leadership and governance with the appointments of Non-Executive and Executive Directors to the Holding Company Board

• Good progress being made, in line with business plan objectives, towards achievement of the Group’s turnaround plan, which targets consolidated operating profitability for all trading divisions for the year to 31 October 2013.


Re-equipping of Monarch Airlines Fleet

• The Group is also announcing that it plans to seek proposals for re-equipping the Monarch Airlines’ aircraft fleet ? and is seeking a total of 45 replacement and expansion aircraft for delivery up to 2021

• The re-equipping will enable improvement in service levels to Monarch Airlines’ customers, better asset utilisation and efficiency, and cost savings enabling Monarch to be benchmarked against low-cost competitors

• Several older aircraft in the existing fleet are now being retired from service. 

Commentary and outlook

Commenting on the Group’s 2012 performance and outlook for the year ahead to October 2013 Executive Chairman, Iain Rawlinson, said:
“All the Group’s main divisions have performed well in 2012 in what have been challenging market conditions.  The Airline has achieved good yield growth in line with expectations and moved quickly to develop and strengthen its market position following the closure of bmibaby.  The tour operations and engineering divisions maintained their profitable performance of recent years and now have laid good foundations for growth.  The Group’s overall results reflect strong discipline on cost control and delivery of an effective e-commerce strategy.  This represents sound progress in the first year of our two-year turnaround plan.


“Although the macro-economic environment remains uncertain, we are well positioned to continue this performance and have made a good start to the new year with satisfactory levels of advance bookings across our consumer brands and within the engineering activity.  Brand recognition of Monarch and Cosmos is increasing at an encouraging rate, supported by improved use of technology, and consumer offerings differentiated by service levels and choice.


”In what are generally tough trading conditions, Monarch Airlines is well advanced with its modernisation and cost reduction programmes when other larger operators continue to face important restructuring challenges, and it provides clear and real choice to consumers who value customer service at a competitive price.  Meanwhile, the Group’s Tour Operations division has potential for good growth as it makes new investments in its new selling platform and in increasing awareness of the Cosmos brand, and Monarch Aircraft Engineering has already announced its plans for expansion with a further engineering facility at Birmingham Airport.”  
  

THE MONARCH GROUP - Update on Trading for the year to 31 October 2012 and Re-equipping of the Monarch Airlines Fleet

Introduction

The Monarch Group, the UK’s leading independent travel group, today announces an update on its financial and operating performance for the financial year ending 31 October 2012, and the issue of invitations to the world’s largest aircraft manufacturers to submit proposals for re-equipping the Monarch Airlines fleet.
The Monarch Group, which comprises Monarch Airlines, the tour operating and holidays companies Cosmos Holidays, Avro and somewhere2stay, and Monarch Aircraft Engineering, increased its turnover net of intra-Group sales by 9.2 per cent to £827.7 million during the period.  This was driven by strong year-on-year growth in airline passenger volumes and yields, increases in tour operating revenue and yields and a continued expansion of third-party engineering customers and revenue.
The Group expects to report a substantial reduction in pre-exceptional operating losses on the prior year, and remains firmly on track with its turnaround plan to restore the Group to profitability by the end of financial year to 31 October 2013.


Overview
Since completion of the 2011 Refinancing announced on 3 November 2011 implemented in response to the weak airline market conditions and high fuel costs experienced in that year, The Monarch Group has been focused on its turnaround strategy which targets unlocking the full value of its well- known travel brands, and achievement of profitable operations in all divisions by the end of the year to October 2013.
This turnaround is planned to be the final stage of the process of modernisation and updating of this long-established group which began with a management reorganisation in June 2010, and includes reconfiguring the Group’s businesses to compete in a high fuel cost environment, maximisation of the business opportunities arising from its unique combination of travel businesses, and the introduction of up-to-date governance and business management structures supported by the latest technology solutions.
In the last year significant progress has been made in achieving its financial targets, strengthening the leadership of the Group, building awareness of the Group’s brands with a particular focus on Monarch Airlines and Cosmos, and achieving its efficiency and cost reduction goals.  The Group is now competing successfully in its markets and has opportunities for further growth in all its sectors of operation in commercial aviation, tour operations and aircraft engineering.   


Monarch Airlines

Monarch Airlines is a leading scheduled leisure airline, flying principally to destinations around the Mediterranean, the Canary Islands and winter ski destinations, which provides a clear and real choice to consumers on its network who value superior customer service at a competitive price.
During the period, the Airline achieved growth in total revenues by over 10 per cent to some £670million (2011: £608.5 million).Total capacity increased by 1.8 per cent to  7.2 million sector seats in the year to October 2012 and the Airline operated from five bases – London Gatwick, Manchester, Birmingham, East Midlands and London Luton airports.  Monarch has announced the establishment of a sixth base at Leeds Bradford Airport (which serves some three million passengers per annum) from summer 2013 to further strengthen the Airline’s market position in the North of England.


Monarch Airlines’ scheduled passenger volumes increased by 15.7 per cent in the year, as a result of improved customer awareness of its well-established scheduled network, the introduction of 32 additional routes to provide 88 routes in total, and expansion into routes formerly operated by bmibaby.  Through First Aviation’s wholesale allocations with the Airline and sales made to the trade via Avro, the proportion of seat sales direct to the tour operator sector increased in line with volume growth, and these distribution channels continue to provide a strategically important underpinning of sales across the flying network.
Key operational statistics* for the Airline were as follows:

                                                      FY12        FY11               Change
Total capacity (‘000)  
             7,230       7,103               +1.8%
Scheduled capacity (‘000)    6,035       5,304               +13.8%
Scheduled passengers         5,356       4,631               +15.7%
Scheduled load factor (%)      88.8         87.3               +1.4ppts
Total revenue per seat (£)    91.43       83.88              +9.0%
Total turnover (£m)                   670           609              +10.7%
Routes                                            88             56               +57%

Monarch Airlines is the UK’s third-largest carrier to all Monarch scheduled destinations, and on 60 routes, which account for 80 per cent of capacity, it occupies the number one or number two market positions.  This reflects the Airline’s strongly-differentiated customer proposition of choice, value and superior customer care, and its market positioning as a strong alternative to low-cost carriers in many scheduled leisure markets.


Unique visitors to the Monarch Airlines website during the year increased by 41 per cent, while bookings for scheduled flights increased by 11 per cent.  In addition, its overall online proposition has been enhanced by the launch of a mobile website designed specifically for use with iPhones as well as local-language websites for Spain, Germany and Italy to drive in-bound customer traffic. Monarch.co.uk, the Airlines’ website, was also named by the UK travel industry as the top airline website for 2012.
During the year, the Airline embarked on a far-reaching cost reduction and efficiency programme and this has successfully delivered the vast majority of the Group’s overall £31 million cost reduction.


The Group is also announcing plans today for the re-equipping of Monarch Airlines’ aircraft fleet.  This envisages an order for a total of 45 replacement and expansion aircraft for delivery up to 2021, enabling improvement in service levels to Monarch Airlines’ customers, better asset utilisation and efficiency, and cost savings. 
Monarch has issued invitations to the world’s largest aircraft manufacturers to submit proposals  through a strategy which will consider both leasing and purchasing of aircraft.
In advance of the fleet renewal programme, Monarch will be taking delivery of two brand new Airbus 320 aircraft in March and April 2013, and a further two brand new A321 aircraft in May 2013 to replace older aircraft which are being retired from the fleet.


Tour Operations - Cosmos Holidays, Avro and somewhere2stay

The Tour Operations division of The Monarch Group comprises Cosmos Holidays and also includes the flight-only operator Avro and somewhere2stay for accommodation-only.  Customers look to the Cosmos brand and its long-established reputation for expertise and reliability to help them to navigate through a changing landscape for holiday travel and to purchase fully-protected holiday products with confidence.  Avro provides a broad range of charter seat availability, duration and prices to meet demand from the growing dynamic packaging sector, selling overall in excess of 1 million flight sectors annually, and somewhere2stay offers low-cost hotel, villa and apartment accommodation worldwide.  
Across all its activities, Tour Operations increased total revenue by 1.2 per cent to £282 million (2011: £279 million) and grew average passenger yields by 5 per cent.  This performance was driven by strong programmes for winter 2011/12 and summer 2012, particularly package holidays to Goa, Greece and Florida.  For summer 2012, sales of holidays to Greece grew by 10 per cent, in a market which declined by 10 per cent, and Cosmos Holidays’ share increased to 4 per cent from 3 per cent in the prior year.  An increased focus on product to Goa for winter 2011/12 and to Florida for summer 2012 achieved growth in sales of holidays to these destinations by 75 per cent and 83 per cent respectively.
This strong performance during the tough trading conditions of the year has consolidated Tour Operations’ market position as the UK’s largest independent tour operator and the third-largest ATOL operator providing a secure and protected customer proposition.

Cosmos Holidays also announced on 27 November 2012 that it is implementing Codegen’s TravelBox flexible reservations platform and trade web portal into its business, thereby enhancing its high-quality holiday offering.  This will transform the breadth of travel product across all brands, meet the changing needs of customers and suppliers and will significantly increase the speed to market of the business.  This implementation is a core feature of a broader business transformation programme being carried out within Cosmos, which is intended to modernise and bring further efficiencies into the division, and to improve the technology which underpins buying, inventory management and the online customer booking path.  The target date for completion of the initial phase of this programme is early 2013.

Monarch Aircraft Engineering (MAEL)

MAEL provides important aircraft maintenance services from its principal bases at London Gatwick, London Luton and Manchester to the Monarch Airlines fleet, and continues to attract new blue-chip third-party customers globally. Revenues during the period increased by 5 per cent to £82 million (2011: £75 million), of which 29 per cent was derived from third-party customers, up from 19 per cent two years ago.  Third-party engineering customers include amongst others easyJet, Alitalia, Thomson Airways, Wizz, Cyprus Airways, DHL, Air Arabia, Emirates, and LOT Polish Airlines.

MAEL was recently awarded a contract by LOT Polish Airlines to provide technical support from a new line maintenance facility in Warsaw for the first Boeing 787 Dreamliner aircraft to be operated from Europe ? this aircraft entered into service on 15 November 2012 and technical acceptance was undertaken by MAEL at Boeing in Seattle.  MAEL has also recently secured approval for Boeing 737NG maintenance, which strengthens its capabilities in Boeing narrow body-type aircraft.

MAEL has also strengthened its market positioning and reputation in a fast-growing global market for aircraft Maintenance and Repair Organisation (MRO) services, and is ranked number one in the UK, sixth in Europe and twelfth in the world according to Airline Economics/Aviation’s 2012 customer survey.

MAEL also announced on 20 November 2012 the construction of a new 110,000 sq. ft. state-of-the-art maintenance facility at Birmingham International Airport to be completed in late 2013, complementing its existing facilities at London Gatwick, Luton and Manchester airports.  The new facility will enable MAEL to service a greater share of the growing UK market for aircraft maintenance services (including international long haul carriers) and to help achieve its target of 50 per cent of revenues being derived from third-party customers over the next three to five years.

Strengthened governance and leadership team

During the period, the Board of Monarch Holdings Limited (the holding company of the Group), of which Iain Rawlinson is Executive Chairman, was strengthened by the appointments of Robert Palmer as Group Finance Director, and of Sir Roy McNulty and Austin Reid as Non-Executive Directors.  Sir Roy McNulty is currently a Non-Executive Director of Gatwick Airport Limited and previous roles include Executive Chairman of National Air Traffic Services Ltd, Chairman of the Civil Aviation Authority, the UK's aviation regulator, and Chief Executive and latterly Chairman of Short Brothers plc, now part of Bombardier Aerospace.  Austin Reid was one of the architects of British Midland International (bmi), serving as its Managing Director and Chief Executive and, prior to this, as its Finance Director.  Robert Palmer was formerly Group Financial Controller at easyJet, Chief Financial Officer at British Midland International and interim Chief Commercial Officer at Air Malta and he has brought a wealth of airline industry experience to the Group.
These appointments have significantly strengthened the governance and leadership team of Monarch as the Group continues to modernise, to execute its turnaround plan, and lay the foundations for the next phase of development.

 

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