Monarch warns profits will dive by 35% after tough year

Rescued budget airline Monarch today said “arguably the toughest trading environment ever” had forced down earnings but it remained bullish for the year ahead.

Monarch, which was handed a £165 million lifeline by majority owner Greybull Capital two months ago, said earnings for the year to October 31 would be likely to plummet 35% to £48 million.

The result is in line with management expectations, revised when the pound plunged in value in the wake of the EU referendum.

“Most UK airlines make their revenue in pounds and pay their costs in dollars and euros, so a currency hit like that is a direct cost increase,” chief executive Andrew Swaffield explained.

Sterling’s weakness came as terrorist attacks in popular holiday destinations like Egypt and Turkey severely depressed bookings.

The airline was rumoured to be close to collapse before Greybull agreed the rescue package.

Swaffield said the environment had since improved, with bookings for its package holidays for summer 2017 up 40% year-on-year and flight reservations up 10%. “Looking forward we feel a lot more confident. British consumers are very resilient when it comes to going abroad. We see them shrugging off the exchange rate issues.”

Monarch expects to compete with rivals on price and will improve service and launch new routes.