Monarch Airlines’ private equity owner slashed its exposure to the airline through a complex deal with aviation giant Boeing just a year before it collapsed, it has been revealed.
Last year’s lifeline from Boeing, added to a potential £60m that could be raised from selling runway slots and £48m of cash left in the bank, means that the airline’s owner, Greybull Capital, will escape with losses far less severe than first thought.
Monarch’s spectacular collapse stranded 110,000 holidaymakers and led to 300,000 future bookings being cancelled. Through a convoluted “sale-and-leaseback” agreement, Boeing, not Greybull as was initially assumed, financed the bulk of the bail-out, which granted the airline a stay of execution, The Sunday Times reported.
After reports into the agreement, Greybull defended the deal, saying that details behind the financing “remain, and have to remain, commercially confidential but the existence of such agreements was reported in 2016”.
Greybull said that its involvement with Monarch “kept the airline flying and its employees in work for three years when no other rescue bid was on the table”, adding that it had provided significant capital to the airline and “did not receive dividends, interest or any repayments of its loans”.
Monarch was placed into administration last week, a turnaround too far for the private equity firm, which specialises in taking on risky ventures.
Keen to get the upper hand in its battle for orders with rival Airbus, Boeing injected the money through Petro Jersey Ltd, Monarch’s offshore holding company, after Greybull stuck a bargain deal with the US giant to pay far below the market value for an eventual total of 45 new planes, according to The Sunday Times.