Monarch Airlines

Andy McDonald Excerpts

Monday 9th October 2017 Commons Chamber

[Andy McDonald (Middlesbrough) (Lab)]

I thank the Secretary of State for advance sight of his statement.

Britain’s fifth largest airline, Monarch, collapsed because of a litany of failures by the Government, the regulator and the company’s financial backers and advisers. Its demise must also be seen in the context of a ferociously competitive aviation sector, which is adjusting to major overcapacity problems and the loss of services because of terrorism. A further backdrop to the industry is the foggy skies of Brexit, and the total lack of certainty from this Government for the British aviation industry after March 2019.

The airline’s bankruptcy has left huge losses on the shoulders of the public, rather than of the parent company or the regulator. It is the staff, customers, the taxpayer and pensioners who will pay the price. Creditor bills include the £60 million paid by the Government to repatriate holidaymakers, not forgetting the £26 million paid last year when Monarch previously came close to collapse; the £7.5 million to the Pension Protection Fund; the 45 days’ pay owed to the 2,000 staff who were made redundant; and the ticket refunds for the 750,000 outstanding bookings at the time of the collapse.

Why did the Government not do more to support Monarch and ensure that the company was viable, if only for the short term? The German Government recently stepped in to assist Air Berlin and the Italian Government have supported Alitalia. At the very least, an orderly wind-down of the airline would have been preferable to sudden administration.

Monarch is reported to have had £50 million in the bank. Why was the airline not granted a short-term ATOL licence extension, which would have allowed it to continue trading and at least bring its passengers back? Who decided not to grant Monarch an ATOL licence extension? More time would have allowed Monarch to be sold in parts. For example, Monarch’s landing slots are reported to be worth £60 million. Such assets could have been realised in an orderly wind-down. Instead, moneys from the sale of these assets will go to the secured creditor and former owner Greybull Capital, while the public purse gets nothing.

The statutory role of the CAA is to provide choice and value for money for passengers. British consumers now have one less airline to choose from. On its watch, there has been a surge in the cost of UK air fares following Ryanair’s cancellation of flights last month. Monarch’s demise will only push up flight costs further. There is an estimated £200 million in the CAA-administered ATOL compensation fund, yet it only covers about one in 20 of Monarch’s customers. Why is the public purse paying while the outdated ATOL pot sits largely untouched? Monarch Airlines continued to sell flights until Sunday 1 October, even though the airline knew it was going into administration the following day. Why did the CAA not act to stop that?

Greybull Capital’s takeover of Monarch in 2014 was the beginning of the end for the airline. Greybull is a private investment firm that has already presided over the collapse of My Local convenience stores and Comet, among others. Serious questions must now be asked about the conduct of firms such as Greybull, the way they invest and their wider stewardship.

A report in yesterday’s edition of The Sunday Times suggested that the £165 million rescue package for Monarch last year was largely funded by Boeing, as part of a cut-price deal for an order of 737 aircraft. What is the Secretary of State’s assessment of the role of Boeing in the financial engineering of Monarch? The Prime Minister recently criticised the conduct of Boeing against Bombardier in Belfast, in support of her Democratic Unionist party allies. Why is there no criticism of Boeing’s role in the loss of 2,000 jobs in Luton?

The role of KPMG must also be called into question. The firm was appointed to seek buyers for Monarch’s short-haul business prior to its collapse. It was actively doing so. Why is the same firm now acting as Monarch’s administrator? Does the Secretary of State agree with me that that is a glaring conflict of interest?

Finally, the way in which Monarch met its demise should set alarm bells ringing, so will the Secretary of State confirm that there will be a full investigation into the concerns that have been raised?

[Chris Grayling]

I am sorry the hon. Gentleman did not have a good word to say for all the efforts put in place to bring people back. I would just remind him that, interestingly, in 2008—the last time we had an aviation failure in this country, Excel Airways—the Labour Government followed a very similar path to the one we have followed, with taxpayer-funded repatriation. They did the right thing then, and we are doing the right thing now. I am simply sorry that Labour Members have forgotten that they did the right thing in government, and cannot now say that our doing the right thing this time is indeed the right thing to do. [Interruption.] They did the right thing then, and we are doing the right thing now, and I am just sorry that he could not say a good word about those involved.

The hon. Gentleman talked about the reasons for the collapse. First, this is not an issue about Brexit. The airline had been struggling for three years, and the first concerns were raised about it long before the referendum was even held.

I had hoped that this summer, after the rescue package last year, the airline would see its way through. As its chief executive said, it has been a victim of the anxieties about tourism in the east Mediterranean for security reasons. Those have led to a concentration of business in the west Mediterranean and the traditional resorts of Spain and Portugal and a price war from which the company was ill equipped to recover. That is what has happened, no more no less.

The hon. Gentleman asked about the licence, and there was no issue about its renewal. What happened was never about the renewal of the licence—the business had simply reached the end of the road. Its board came to the conclusion that it could not carry on.

The hon. Gentleman asked why the company carried on selling tickets the day before. The reality is that any airline that runs into difficulties will carry on selling tickets until it can no longer do so. The moment it stops doing so, it collapses, and that is what happened. It would happen any time an airline ran into such difficulties. There is no other way to do it. The moment it stops selling tickets, it stops doing business, and that is precisely what happened.

The hon. Gentleman talked about competition, and other airlines are already stepping into the breach. Jet2, one of our fast-growing, emerging airlines, has already said that it will step in and run some of the routes. That is what a market does. If one business fails, others step in. The tragedy of the Labour party in the last few years is that it has moved away from understanding markets to being utterly hostile to markets and the private sector.

We have a thriving aviation sector with competition between airlines delivering a good deal for consumers, and occasionally—once under a Labour Government and once under ours—something has gone wrong. In both of those situations, the Government of the day stepped in to try to make sure that we looked after the travelling public. I have no doubt that if it ever happens again, someone will do the same.

We do have to learn the lessons. We have to understand whether we can make sensible changes to the laws to ensure that this does not happen again. We are already legislating to extend the ATOL scheme to provide better protection for people who book over the internet in a different way from how they have in the past. I am clear that the job of the Government is to look after the travelling public and step in when things go wrong. We have done that, and we are seeking to get back as much money as possible, as Labour did in 2008. Above all, our job is to do our best for the travelling public and the employees. That is what we are doing. I am proud of what we are doing, and I am just disappointed that the Opposition cannot even say well done to the people who have worked so hard in support.