Turn of fortunes for Monarch – do you want some of what they’re having?
This week I bring you a story of hope. No, not the one about the kid born in a manger – although let’s have a big TMP shout-out to all you parents enduring a marathon of nativities – but one about a business, once near collapse and now returning to profitable days. And believe me, if Monarch airlines can turn things around then there really is hope for every single one of us out there.
Last year Monarch were on the rails – and the rails were rusty, bent and about to give way at any second. Years of being propped up by cash injections from the billionaire Mantegazza family – who had already given Monarch £120 million since 2009 – produced little difference in the airline’s fortunes and it was haemorrhaging money from just about every part of its structure. Even its pension fund was reported to be £300 million in the red. Ouch!
Heroes for the day.
At the eleventh hour, Greybull Capital, the investment firm founded by brothers Nathaniel and Marc Meyohas, stepped in to become Monarch’s new owners, with an offer of £125 million of permanent capital and liquid facilities. It’s a sum of money I struggle to get my head around – was it just lying around with Messrs Meyohas wondering what on earth they could do with it? I get that running an airline isn’t a cheap set-up but still…
Like the knights in shining armour that they were, Nathaniel and Marc’s offer allowed Monarch’s employees to breathe a sigh of relief – but not for long. Astute businessmen, the brothers could see the potential in Monarch but also the huge amount of work it needed doing if the business was to return to profit. And so the restructuring began.
Brutal times ahead.
Seeing where the business had lost its way – and how to turn things around – lead Greybull Capital to undertake large-scale ‘restructuring’ – such a polite word for such brutal measures – and they cut 700 jobs and reduced Monarch’s fleet from 42 aircraft to 33. But staff who survived the cull didn’t get away scot-free, with pay slashed by between 30pc and 35pc. Long-haul routes were also dropped in favour of shorter and more profitable journeys. A polite spokesperson also said that work practices had to be ‘modernised’ and revenue management ‘improved’ – great British tact at its best. It all makes good business sense, but don’t underestimate the amount of work it takes to pull something like that off. And pull it off they did.
Despite tourism taking a significant hit in two of Monarch’s key destinations – Greece and Sharm el-Sheikh – this week Monarch posted its first annual profit in three years, a tidy £40 million before interest and taxes. Compare that to a £94 million loss last year. Incredible. Yes, they’ve been helped by the current price of oil being just $44 a barrel – providing a lift of £30 million – but as chief exec Andrew Swaffield says, the restructure was designed to be “profitable at $90 and still to be profitable at $115.” That’s the way to do it, Andrew.
Monarch have achieved the near-impossible by remaining true to their customers. The changes they’ve made were chosen because they were a sure fire way of balancing the books without compromising on what the market wants from them – cheap, reliable flights. By streamlining their services, – another polite word for business brutality – shedding the detritus and focusing on their most popular holiday routes – customers have only been positively affected by the change around. Now they have an airline they can trust to get them where they want to go at a really competitive price!
Be brave and bold.
Sometimes in business you need to be brutal. In the long run it’s in everybody’s best interests – lose 700 jobs and save the jobs of the 2,000 people Monarch Airlines still employs – but how to go about such brutality?
You need to understand your organisation inside and out, really dig deep into the dark corners you’ve been too afraid to look in. You need to be brave and bold – and be 100% clear in what you need to achieve and how you’re going to get there. And that means getting to the heart of what your customers want.
The great thing about this time of year – the part that makes up for Storms Barney and Desmond – is all the reflection that goes on and the resolutions we commit to in time for the New Year. This time around, why not try to make resolutions that last longer than Dry January, oops I meant Dry first three days of January and that will have more impact than denying yourself an afternoon hit from Hotel Chocolat?
Make 2016 the year you strengthen your business by getting to know it inside and out. Commit to taking a peek at your organisation from the eyes of your most important asset. Don’t worry, it’s not too scary – when you have The Monachie Project holding your hand. You know all about us and our track record by now and this New Year’s resolution seems like such a no-brainer that there’s no point trying to give you the hard sell. We’re here and our user experience research teams are ready to help you with the most important resolution you’ll ever make.
Is 2016 going to be the year you turn your business from good to great? The Monachie Project’s customer research consultancy can do just that. What’s not to lose?