An out-of-hours office appointment of an administrator, although not unusual, is not a regular occurrence in the world of insolvency. It is however, exactly what happened at 4am on Monday 2 October, as Britain’s longest surviving airline brand ‘Monarch’ entered administration. The collapse of the airline comes as a result of mounting cost pressures in an increasingly competitive market and is the third European airline insolvency in 2017, following Air Berlin and Alitalia.
An out-of-hours appointment of an administrator is available to a Qualifying Floating Charge Holder (“QFCH”) where there is a pressing need for an appointment to take effect outside Court hours. Despite the fact it was known that Monarch’s administration was imminent in the days leading up to 2 October, the appointment was effected in the early hours of the morning as this was the only time of the day where all Monarch flights were on the ground. The delay also provided time for the Civil Aviation Authority (“CAA”) to plan the operation to repatriate the estimated 110,000 stranded customers.
This operation ended up being Britain’s biggest peacetime repatriation of stranded air travellers at an estimated cost of £60 million. It is widely reported that the British Government rejected requests from Monarch for a bridging loan to keep the airline flying in the short term, such as that given to Air Berlin (written about in our previous blog) and Alitalia by their respective Governments.
Six weeks on from the administration, the latest and possibly most interesting development comes as a result of the High Court’s decision on whether to allow Monarch’s administrators to sell future take-off and landing slots which are reported to be worth around £60 million. This is a significant public law aviation case and it is thought to be the first court application in the UK to address the issue of whether an insolvent airline has an entitlement to seek and compel the allocation of landing slots for a future season.
In a blow to the administrators who were seeking to recoup money from the sale of these slots, the High Court rejected Monarch’s claim that they were entitled to be allocated take-off and landing slots for the summer of 2018 as a result of historical precedence (grandfather rights). Monarch claimed that as a result of these grandfather rights, the slots were an asset of Monarch which could be sold on the secondary trading market. However, the High Court disagreed, ruling that despite the existence of the secondary market for trading take-off and landing slots, as there was no more than a theoretical possibility of Monarch emerging as a going concern or resuming the operation of air services, Airport Coordination Limited (“ACL”) was under no duty to assign Monarch any such slots.
In an industry hampered by slim profit margins and increased competition, this decision tells us that an insolvent airline has no entitlement to future landing slots where there is no realistic possibility of the airline emerging as a going concern. The Manchester and Birmingham slots will now be entered into a pool and assigned by ACL to third party airlines. The slots at Gatwick and Luton remain reserved, pending a decision by the administrators on whether to appeal the High Court ruling after the Court delivers its full judgment. It remains to be seen whether this is the end of the landing slot saga.