LONDON — The collapse Monarch Airlines on Monday could be great news for Britain’s other major airlines, analysts say, with budget carrier easyJet likely to be the big winner.
Monarch, Britain’s fifth largest airline, collapsed after a long period of financial difficulty and leaves behind a hole in the UK’s aviation market. Analysts believe the collapse, which has led to the cancellation of 300,000 bookings, could boost rivals.
“We note that easyJet and Ryanair have the highest capacity overlap with Monarch and in the event of an exit could be the biggest potential beneficiaries,” a Goldman Sachs note circulated on Monday said.
Shares in easyJet rose close to 5% on Monday, while Ryanair’s share price rose over 3%.
Monarch had just 3% of the total short-haul market in the UK but that small overall percentage could allow significant expansion for other airlines, particularly easyJet given the state of rival Ryanair.
Irish carrier Ryanair was forced to cancel thousands of booking this winter after a rostering error caused a backlog of staff holiday days due at the end of the year. The cancellations are set to impact as many as 700,000 passengers and have caused a major PR crisis for the company.
Meanwhile, easyJet is controversy-free. The airline “should benefit this winter from the struggles of four key competitors, which may be helpful for pricing in the U.K., Germany and Italy,” Credit Suisse’s airline team wrote in a note circulated on Monday.
“Monarch has now stopped flying, Air Berlin is being broken up, Alitalia is also in administration and awaiting a buyer, and Ryanair pilot issues have prompted flight cancellations and a large media focus.”
“Absorbing all of Monarch and a targeted 30 aircraft from Air Berlin could add up to 10% to earnings in each case, with limited capital investment,” the bank’s aviation analysts wrote.
“It remains to be seen how Monarch’s administrator runs the process, and we see complementary with easyJet’s network as positioning easyJet strongly should the administrator look to achieve a sale of the business as a whole – however we also expect easyJet to look to absorb slots vacated by Monarch directly from airports, perhaps as lessors reclaim aircraft.”
Monarch had a 5-6% share of flight slots at London Gatwick, London Luton, and Manchester slots.