Monarch’s aircraft maintenance arm falls into administration
David Pike, Ben Leith and David Standish from KPMG’s restructuring practice have been appointed joint administrators of Monarch Aircraft Engineering Ltd (MAEL), which has been experiencing financial challenges since the collapse of budget airline Monarch in 2017
7 Jan 2019
Established in 1967 and headquartered at London Luton Airport, MAEL employs approximately 579 staff across the UK and Europe, providing aircraft maintenance services across four main divisions – base maintenance, line maintenance, fleet technical support (the continuing airworthiness management organisation – CAMO) and a training academy.
The company completed a restructuring in October 2018, following which a number of MAEL’s customers sought alternative suppliers. KPMG said this presented the business with significant challenges, making it unsustainable in its present form, and in mid-December the company announced that it was in talks with potential partners with a view to selling all, or parts of, the business.
MAEL has now announced the transfer of the majority of its line maintenance operations to a number of different parties. Its 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 Flybe following the cessation of their maintenance contract in late November 2018.
Collectively, these acquisitions ensure continuing employment for 182 of MAEL’s employees.
However, the base maintenance business which undertakes aircraft overhaul and major heavy maintenance programmes from hangers in Luton and Birmingham, is to suspend operations immediately, resulting in the redundancy of around 250 employees.
This is the activity that suffered most from the loss of key customers following the October 2018 restructuring, and no buyer has come forward so far. The administrators say they 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.
All remaining activities of MAEL continue to trade whilst the administrators seek buyers. These include the CAMO division, which has 27 employees and provides the continuous upkeep of airworthiness records and scheduled maintenance requirements for 33 aircraft across eight customers.
It also includes the training academy, which comprises an engineering training school based out of 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 apprenticeship placements.
The remaining 200 MAEL staff are largely Luton based. 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.
David Pike, restructuring partner at KPMG and joint administrator, 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.’
Report by Pat Sweet