Rawlinson

The Monarch Group


Introduction

Acting as an adviser to the Mantegazza family, he was Executive Chairman of The Monarch Group from 2009 to 2014, and on behalf of the shareholders, Iain initiated a reorganisation and modernisation of this long established UK based travel group.

Turnarounds in 2010 and 2013 

Throughout his Chairmanship he lead two successful turnarounds of the Group in 2010 and 2013 without redundancy programmes or cost to the public purse.  The oil price budgeted in the period of the 2011-2013 turnaround was US$115/bbl, during which the Group’s businesses were put on a stronger commercial footing, with a clear strategy for the future, while over £50 million of annualised costs were taken out of the Group.

Competitive pressures in 2014

He believed that the correct industry response to the severe competitive pressures experienced in European commercial aviation in 2014 was the consolidation of carriers, creating alliances which would result in efficiencies and the safeguarding of employment and pensions.  From early in 2014 when the sector came under renewed pressure, he initiated “Project Sandringham” which were talks with investment banks and merger partners to introduce new capital into the business, he reorganised the management of the airline with the appointment of a new senior executive, and finalised a three year negotiation with Boeing to re-equip Monarch’s 40 strong aircraft fleet with Boeing 737MAX aircraft – which was announced at the Farnborough Airshow on 14 July 2014.

He built up and communicated a distinct investment case and track record for each of the Monarch Group’s three businesses to allow the underlying value of each to be demonstrated, which resulted in expressions of interest being received from interested parties for these businesses.

In June 2014, however, with strong competitive pressure continuing, it was clear the Group would require additional capital as expected, and after the current owners had declined to invest any more money, Iain appointed Dean Street Advisors to advise the Board on a competitive process involving finding merger or investment partners.  Through Dean Street Iain introduced financial investors, and was simultaneously engaging in merger discussions on behalf of the airline with a leading UK travel group with highly complementary airline interests of similar size.  He declared his independence from either transaction to the CAA and the Monarch Board to avoid any conflict of interest, and expressed his clear preference for the merger outcome in order to safeguard jobs and pensions.  However, representatives of the shareholders instructed new management to proceed with financial investors, abandoning the merger discussions, resulting in Iain leaving the Group in July 2014.

Restructuring after July 2014

In the later 2014 restructuring transaction conducted by the new management, by then involving only a single financial investor – Greybull, in spite of the falling oil price and with an inexperienced leadership, Monarch made redundancies, and staff faced wage and pension cuts.

The improvements to the Group made during the period 2009 to July 2014, including the value of the Boeing transaction, allowed the Group to weather the extreme market conditions in 2014 and pass into new ownership before returning to profit in 2015.  However, the restructuring transaction which was negotiated after Iain’s departure later in 2014 was completed at a cost to jobs and pensions, which throughout his 5 years as Chairman of the Group he had successfully been committed to avoid.

Context

The UK outbound travel industry in this period was highly competitive, while the UK aviation sector overall is one of the most competitive and low margin regional short haul markets in the world, where product differentiation and critical mass are important business foundations.

A main theme in the period to 2014 was to achieve better corporate understanding of the DNA of the Group and its businesses, which centred on the unique characteristic of Monarch’s superior customer service ethos.

“Our industry should be one where customers are valued and have choice. It should be an industry which is respected, safe, offers true value…”

Monarch’s leadership on this issue was widely broadcast internally and in the public domain which echoed the changing mood across the industry from 2013.  Emphasis was also placed his during this time at Monarch on safeguarding the interests of the employees of the Group, and working towards lower, competitive unit costs in the airline – in spite of  the high oil price environment which prevailed for much of 2013 and 2014.