High Court ruling set to place failed Monarch Airlines slots back into slot pool for reallocation

9 November, 2017

The administrators of Monarch Airlines have lost their legal bid to retain control of its lucrative take-off and landing slots of the failed UK carrier and independently sell them to pay creditors. The ‘ownership’ of these slots has been the source of fierce debate since the airline collapsed and entered administration at the start of Oct-2017, but two High Court judges have ruled that as the airline was no longer flying and was unlikely to do so in the future it no longer held grandfather rights to the slots.

KPMG had sought a judicial review to establish if they had the right to sell airport slots. It had hoped to raise up to £60 million by selling the slots, especially those at London’s Gatwick Airport which had secured significant interest from both current operators and potential new entrants. “We are disappointed with today’s ruling and will be seeking leave to appeal as a matter of urgency,” said Blair Nimmo, partner at KPMG and joint administrator of Monarch.

The High Court judges Lord Justice Gross and Mr Justice Lewis decision says that with the suspension of its licence, administration, return of leased aircraft and departure of staff, “there is no more than a theoretical possibility of Monarch emerging as a going concern or resuming the operation of air services”. On the ruling it says: “it is one thing to permit a ‘secondary market’ in slots. It is another to extend it to companies in insolvency”.

KPMG had argued that unless and until Monarch’s operating licence was revoked, it had an entitlement to be allocated slots at the same time as other airlines applying for them. Airlines which adhere to their slot times for at least 80% of the time in one Summer or Winter season are entitled to the allocation of those slots for the next equivalent season.

The High Court ruling now clarifies this situation and these summer 2018 slots will now revert to Airport Coordination Limited (ACL) for reallocation to airlines. The slots at Birmingham and Manchester are being immediately returned to the pool and will be allocated 50% to new entrants and 50% to incumbent operators.

The slots at the London airports – Gatwick and Luton – will remain unallocated in the short term after the court ordered a stay of its decision on highly sought after slots. This will be held until 17-Nov-2017 pending KPMG’s application for permission to appeal. However, just because they seek an appeal, it does not necessarily mean they will get one.

ACL says it now awaits “with interest the full judgment of the Court, and any further guidance it may provide on how the slot allocation process should best operate in accordance with the Slots Regulation in future”. KPMG had been pushing hard for an early decision on the slots in public interest, but seemingly will now seek to drag things on having not received the decision it wanted.

Speaking to The Blue Swan Daily at last month’s CAPA-ACTE Global Summit in London, Bjørn Kjos, CEO of Norwegian, and Willie Walsh, CEO of IAG, both expressed an interest in Monarch’s London Gatwick slots. Skuli Mogensen, CEO of WOW air and Jozsef Varadi, CEO of Wizz Air, have both subsequently expressed interest in the Gatwick and Luton slots, respectively.

Monarch had offered flights from Birmingham, Leeds Bradford, London Gatwick, London Luton and Manchester. The Blue Swan Daily analysis of summer 2017 schedules shows that the airline was serving over a 100 routes from the five UK airports offering around 15,000 seats on peak days. During the summer schedule it was offering up to 23 departures per day from Birmingham, 22 from London Gatwick, 19 from Manchester, ten from London Luton and four from Leeds Bradford.

We have already seen the likes of Jet2.com and Ryanair announce additional summer 2018 flights to fill the void from Monarch’s collapse, while Thomas Cook Airlines has also expanded its activities out of Leeds Bradford. The consensus of opinion is that most of the Monarch capacity will be backfilled as these slots are reallocated for summer 2018.