the monarch group online annual report 2012

The Monarch Group– Unlocking our potential

Annual Report 2012»

The Monarch G

roup Annual R

eport 2012

The Monarch Group is the UK’s leading independent travel group, with core activities in scheduled airline operations, tour operations and aircraft engineering.

Monarch Holdings Limited (MHL) is the holding company of The Monarch Group.

Our leading aviation and travel brands are:

Monarch AirlinesFirst AviationMonarch Aircraft Engineering Cosmos HolidaysAvrosomewhere2stay

www.monarchholdingslimited.com

Visit our corporate website for up-to-date information about The Monarch Group.

You can find:• Latest news• Group strategy• Vision and values• Our community and corporate

citizenship activities• Company images and videos• Group history

1The Monarch GroupANNUAL REPORT 2012

Group revenue £m

757.72010

757.82011

825.12012

Group pre-tax and pre-exceptional operating profit/(loss) £m

14.12010

(51.1)2011

(14.9)2012

HighlightsFY12Increase in Group turnover (net of intra-Group sales) from £757.8 million to £825.1 million.Group-wide operational like-for-like cost savings of £31.6 million, as planned.15.7% increase in Monarch Airlines’ scheduled passenger volumes (4.6m to 5.3m).Strong profitable growth in Tour Operations sales and yields.Further profitable growth in Monarch Aircraft Engineering turnover.20m unique visitors to Group customer online platforms (up 21% on FY11).Strengthened leadership and governance with appointments of Non-Executive and Executive Directors to holding company Board.

Contents1 Highlights2 The Monarch Group at a glance4 Adapting to a changing industry

and markets6 Our network8 From the Executive Chairman10 Business model12 Monarch Airlines16 Tour Operations20 Monarch Aircraft Engineering24 Retail and Online26 Financial review28 Board of Monarch Holdings Limited30 Group Management Board32 Corporate governance34 The Monarch Foundation36 Corporate responsibility40 Independent auditor’s report41 Consolidated profit and loss account42 Consolidated statement of total recognised

gains and losses43 Consolidated balance sheet44 Company balance sheet45 Consolidated cash flow statement46 Notes to the financial statements67 Officers and professional advisers

FY12 financial performance represents good progress towards the target of consolidated operating profitability for all trading divisions for the year to 31 October 2013.

Three-year financial performance


Avro somewhere2stay

The Monarch Group at a glance – A unified group of businesses

The Monarch Group is the UK’s leading independent travel group, with core activities in scheduled airline operations, tour operations and aircraft engineering, and a turnover of £825.1 million for the 12 months ended 31 October 2012.

Group profileHeadquartered at London Luton Airport50-year trading history2,847 employees

Monarch AirlinesMonarch Airlines is a leading UK-based scheduled leisure airline operating flights from six bases in the UK – London Gatwick, Manchester, Birmingham, East Midlands, Leeds-Bradford and London Luton airports – to leisure destinations around the Mediterranean and the Canary Islands and to ski destinations in winter.

Through First Aviation, the flight broking division of the Group, scheduled airline and traditional charter capacity is offered to tour operators, and this flexible model underpins demand and manages risk while supporting and de-risking development of the Monarch Airlines route network.

Tour Operations – Cosmos Holidays, Avro and somewhere2stayThe Tour Operations division of The Monarch Group, comprising Cosmos Holidays, Avro and somewhere2stay, offers a flexible and wide choice of holidays to some 72 destinations worldwide.

Customers look to the Cosmos brand and its long-established reputation for expertise and reliability to help them to navigate through a changing landscape for holiday travel, and to purchase fully protected holiday products with confidence. Avro provides a broad range of charter seat availability, duration and prices to meet demand from tour operators and the growing dynamic packaging sector, selling overall in excess of one million flight sectors annually, and somewhere2stay offers low-cost hotel, villa and apartment accommodation worldwide. The Tour Operations division also operates white-label offers under the brand names Monarch Holidays and Monarch Hotels.

815,000 Passenger volumes in FY12

7.4m Sector seats in FY12


£589.0mTOUR OPERATIONS

£683.5mAIRLINEOPERATIONS

£86.3mENGINEERINGSERVICES

43%

6%50%

Group gross revenue mix FY12

1%

£10.4mOTHER

Monarch Aircraft Engineering (MAEL)MAEL provides important and award-winning aircraft maintenance services from its principal bases at London Gatwick, London Luton and Manchester airports to the Monarch Airlines fleet and continues to attract blue-chip third-party clients located in east and west Europe, the Middle East, Australia and North America. In 2013, MAEL will open a new state-of-the-art maintenance facility at Birmingham Airport to complement its existing UK bases.

The company has expertise in maintaining legacy fleets and is also a leading Maintenance and Repair Organisation (MRO) for new technology aircraft, including the Boeing 787 Dreamliner, for which it is one of only six Boeing-approved GoldCare providers worldwide.

Retail and OnlineA nexus for Group e-commerce activity, the Retail and Online activity supports all of the Group’s divisions in the delivery of their online and e-commerce strategies, providing the expertise that ensures that the Group exploits new technology, online trends and continues to innovate in bringing its travel products to market.

20m Group unique visitors in FY12

29%Revenues from third-party customers in FY12


Adapting to a changing industry and markets

With a 50-year trading history, the Group’s leading aviation and travel brands have successfully adapted to continuously changing industries and customer markets.

1960 1970 1980» » »

Growth of packaged holidays to Spanish Costas

1961 Launch of Cosmos1967 Monarch Aircraft Engineering Limited launched1968 Monarch Airlines launched

Proliferation of mass market packaged holidays

1970 Monarch Airlines becomes all-jet fleetCosmos adds flights from Manchester and Birmingham and increases range of destinations to include Greece, Portugal and Yugoslavia

Monarch Aircraft Engineering expands its UK footprintMonarch Airlines carries one million passengers annuallyMonarch Airlines is the first charter airline worldwide to order next-generation Boeing 757 aircraftMonarch Airlines launches scheduled services, Monarch Crown ServiceCosmos becomes first mainstream tour operator to introduce all-inclusive European holidays

INDUSTRY TRENDS

MONARCH ADAPTS


1990 2000 2012» » »

First Gulf WarConsolidation of tour operatorsEU deregulationRyanair launches low-cost carrier (LCC) modelDecline of national flag carriers’ short-haul dominance

Cosmos Holidays acquires Avro and significantly expands destinations, including Caribbean and Indian OceanMonarch Airlines expands its long-haul fleet bringing two-class seating to the charter market

9/11Second Gulf WarLCC expansion erodes short-haul charter marketDisintermediation of distribution

Monarch Aircraft Engineering expands into EuropeMonarch Airlines expands scheduled networkCosmos launches somewhere2stay, offering flexible duration holidays

Rising fuel costs, higher taxationGlobal financial crisisConsolidation

Cosmos celebrates fiftieth anniversary Programme to modernise and reorganise the Group brings efficiency gains and focus on valueMonarch Airlines offers capacity for 8.3 million passengers in 2012/13 and strengthens scheduled servicesMAEL announces Birmingham Airport expansion


LEEDS-BRADFORD

LONDON GATWICK

LONDON LUTON

EAST MIDLANDSBIRMINGHAM

MANCHESTER

SCHEDULED ROUTESCHARTER ROUTESCHARTER & SCHEDULED ROUTESOUR BASES

ALICANTE

ALMERIA

ANTALYA

BARCELONA

BODRUM

DUBROVNIKSPLIT

BORDEAUX

FARO

FUNCHAL

GIBRALTAR

IBIZA

LARNACA

PALMA DE MALLORCA

PAPHOS

ROME

VENICEVERONA

MALAGA

MENORCA

NICE

MUNICH

SALZBURG

INNSBRUCKFRIEDRICHSHAFEN

GENEVA

GRENOBLE

CORFU VOLOS

PREVEZA

KEFALONIA

ZAKYNTHOS

CHANIAMALTA

SKIATHOS

MYTILENE

DALAMAN

RHODES

HERAKLION

KITTILA

Our network Monarch Airlines operates scheduled services from six UK bases – London Gatwick, Manchester, Birmingham, Leeds-Bradford, East Midlands and London Luton airports. The Group’s Tour Operations activity offers holiday destinations worldwide. Monarch Aircraft Engineering provides maintenance and repair services from bases in the UK and line stations overseas.


Monarch Airlines total seat inventorySCHEDULEDOPERATIONS

TOUR OPERATORS(COSMOS HOLIDAYS AND THIRD PARTIES)

70%

30%

LEEDS-BRADFORD

LONDON GATWICK

LONDON LUTON

EAST MIDLANDSBIRMINGHAM

MANCHESTER

SCHEDULED ROUTESCHARTER ROUTESCHARTER & SCHEDULED ROUTESOUR BASES

ALICANTE

ALMERIA

ANTALYA

BARCELONA

BODRUM

DUBROVNIKSPLIT

BORDEAUX

FARO

FUNCHAL

GIBRALTAR

IBIZA

LARNACA

PALMA DE MALLORCA

PAPHOS

ROME

VENICEVERONA

MALAGA

MENORCA

NICE

MUNICH

SALZBURG

INNSBRUCKFRIEDRICHSHAFEN

GENEVA

GRENOBLE

CORFU VOLOS

PREVEZA

KEFALONIA

ZAKYNTHOS

CHANIAMALTA

SKIATHOS

MYTILENE

DALAMAN

RHODES

HERAKLION

KITTILA

TRINIDAD& TOBAGO

ORLANDO

TABA

ARRECIFE

FUERTEVENTURA

BANJUL

HASSIMESSAOUD

HURGHADASHARM EL SHEIKH

LUXOR

DABOLIM,GOA

TENERIFE LAS PALMAS

TRINIDAD& TOBAGO

ORLANDO

TABA

ARRECIFE

FUERTEVENTURA

BANJUL

HASSIMESSAOUD


LUXOR

DABOLIM,GOA

TENERIFE LAS PALMAS

TRINIDAD& TOBAGO

ORLANDO

TABA

ARRECIFE

FUERTEVENTURA

BANJUL

HASSIMESSAOUD


LUXOR

DABOLIM,GOA

TENERIFE LAS PALMAS

TRINIDAD& TOBAGO

ORLANDO

TABA

ARRECIFE

FUERTEVENTURA

BANJUL

HASSIMESSAOUD


LUXOR

DABOLIM,GOA

TENERIFE LAS PALMAS

Monarch Airlines

Monarch Airlines today offers scheduled services to some 35 destinations across 112 routes, principally to leisure destinations around the Mediterranean and the Canary Islands and to ski destinations in winter.First Aviation, the flight broking division of the Group, offers scheduled airline and traditional charter capacity to tour operators across over 30 routes in summer and 20 routes in winter, including destinations in Europe, North America and the Indian Sub-Continent.

Cosmos, Avro and somewhere2stay

Tour Operations, comprising Cosmos Holidays, Avro and somewhere2stay, offers some 72 holiday destinations worldwide, with a focus on the Mediterranean, Egypt and North Africa, Goa and the Indian Ocean, Mexico, the Caribbean and Florida. Further specialist destinations include Finnish Lapland and ski destinations in winter.

Monarch Aircraft Engineering

Monarch Aircraft Engineering provides maintenance from facilities at London Luton, Manchester, Birmingham and London Gatwick airports in the UK and overseas line maintenance in Dublin, Malaga, Alicante, the Canary Islands, Kiev, Warsaw, Goa and the Maldives.

Principal offices

The Monarch Group, London Luton AirportMonarch Airlines, London Luton AirportCosmos, Avro and somewhere2stay, BromleyMonarch Aircraft Engineering, London Luton AirportFirst Aviation, London Gatwick Airport

Monarch Airlines 2012/13

112Scheduled routes

35Scheduled destinations

Tour Operations 2012/13

72Holiday destinations worldwide

10mHoliday products across four continents

NORTH AMERICA & THE CARIBBEAN

AFRICA & MIDDLE EAST

ASIA

CANARY ISLANDS


From the Executive Chairman– Returning to profitability

OverviewAll of the Group’s main divisions performed well in the financial year 2012 in what have been challenging market conditions.

Monarch Airlines achieved good yield growth in line with expectations and moved quickly to strengthen its market position following the closure of bmibaby. Tour Operations, comprising the Group’s holiday brands Cosmos Holidays, Avro and somewhere2stay, and Monarch Aircraft Engineering maintained their profitable performance of recent years and now have laid good foundations for growth.

Financial progress in line with plansI am, therefore, pleased with the progress that the Group has made over the last year in delivering results in line with our business plan objectives. For the 12 months ending 31 October 2012, Group turnover net of intra-Group sales increased from £757.8 million to £825.1 million, or 8.9 per cent. On a pre-tax and pre-exceptional basis, losses were substantially reduced, from £51.1 million to £14.9 million. These overall results for the Group reflect Monarch Airlines’ good yield growth, the ongoing profitable performance in the tour operating and engineering divisions, strong discipline on cost control, which achieved a planned operational like-for-like £31.6 million reduction in operating expenses, and the delivery of an effective e-commerce strategy.

This performance represents sound progress in the first year of our two-year turnaround plan, and we are advancing towards our target of restoring the Group to overall profitability by November 2013.

Maintaining our momentumMonarch Airlines is now well advanced with its modernisation and cost reduction programmes at a time when other larger operators continue to face important restructuring challenges, and our proposition provides clear and real choice to consumers who value a superior travel experience at a competitive price. On 29 November 2012, we announced plans for the re-equipping of the Monarch Airlines aircraft fleet, which envisages an order for a total of 62 replacement and expansion aircraft for delivery up to 2024, facilitating improvement in service levels to the Airline’s customers, better asset utilisation and efficiency, and enabling Monarch Airlines to be benchmarked against low-cost competitors. Invitations have been issued to the world’s largest aircraft manufacturers to submit proposals through a strategy which will consider both leasing and purchasing of aircraft, and this is continuing to progress in line with our plans.

“ We are advancing towards our target of restoring the Group to overall profitability by November 2013.”

Iain RawlinsonExecutive Chairman


The Tour Operations division of the Group now has potential to improve its growth prospects as it makes investments in a new inventory management software and in its new selling platform, increasing awareness of the Cosmos brand. Monarch Aircraft Engineering has announced its plans for expansion with a further engineering facility at Birmingham Airport and has recently confirmed an important new customer which will provide the critical mass to develop new business at both this facility and across its wider network.

Strengthened governance and leadership teamThe governance and leadership team of Monarch have been significantly strengthened as the Group continues to modernise and lay the foundations for the next phase of its development.

The Board of Monarch Holdings Limited (the holding company of the Group), of which I am Executive Chairman, was significantly strengthened during the year by the appointments of Robert Palmer as Group Finance Director, and of Sir Roy McNulty and Austin Reid as Non-Executive Directors. Further details of the Directors and the Group Management Board can be found on pages 28 to 31.

The industry sectors in which we operate are evolving quickly and it is a priority for the Group to engage in the ‘flow of ideas’ that are both shaping this change and bringing new opportunities for the future. With this document, which is the Group’s first published Annual Report and Accounts, as well as a new Group corporate website, we are underlining our commitment to enhancing our stakeholders’ understanding of our capabilities and prospects as a Group, and the strong industrial logic which underpins our unique combination of businesses.

The Monarch Foundation – a force for good in our communitiesThe leadership of the Group recognises that we have a responsibility to be an effective corporate citizen in the communities in which we operate and beyond. Not only do our millions of customers expect the highest standards of service delivery, they also expect our approach to business to be, as a minimum, authentic, inclusive and transparent and in the area of philanthropic activity to be ‘doing what we can’.

Our Group has a long history of charitable engagement and this is something of which it can be proud. The size and nature of The Monarch Group is such that through more effective coordination of these activities we should be able to build up our effectiveness as a good corporate citizen in the locations where we operate and, at the same time, positively reinforce the Group’s brand values to our millions of customers. In May 2013 we are launching The Monarch Foundation, an umbrella organisation within the The Monarch Group, which will organise all of the charitable activity that is carried on by the Group and in the Group’s name. Further information about this important new initiative in the life of the Group can be found on pages 34 and 35.

Outlook Our business model and unique combination of businesses is resilient and the Group is now better placed to unlock its potential, although we remain cautious about the outlook and expect difficult market conditions to persist. We are pleased with our continuing progress in increasing the levels of recognition of the Monarch and Cosmos travel brands, supported by use of technology, and of consumer offerings differentiated by superior service levels and choice, as well with the growth in reputation of our engineering activity. We continue to focus on strengthening our commercial proposition and to look at how best to serve our customers, and we are laying the foundations for the Group’s future growth.

We thank our shareholders for their support and all our employees for their important contribution to the good results achieved in the last few years, and in 2012.

Iain RawlinsonExecutive Chairman29 April 2013

Q&A with the Executive ChairmanWhat is the industrial logic for The Monarch Group’s businesses?

Our combination of businesses and their mutual interdependency is unique in the market and provides good opportunities to yield additional margin. The airline and tour operating divisions work together to bring product to market, thereby de-risking growth, while the engineering activity is using its expertise in servicing Monarch Airlines to attract high-quality third-party customers.

How is Monarch Airlines benefiting from industry change?

The closure of bmibaby in 2012 was an opportunity for us to absorb key routes and flying capacity. This is contributing to the growth of Monarch Airlines in 2013. Much of the catalyst for current change in the airline industry arose in 2011 with the increase in fuel cost. By being able to move quickly to reorganise the business, we have been able to significantly reduce the risks of high fuel price volatility.

In what ways is Cosmos able to compete in the evolving holiday marketplace?

The implementation of the new TravelBox inventory management software ‘flattens’ the technology landscape between Cosmos and its competitors. It enables Cosmos to compete head-on with products for direct customers to purchase, and to mingle these with a wider range of travel products. Demand is increasing for traditional package products underpinned by ATOL protection, and this plays to the strengths of the Cosmos brand.

What is the potential for the aircraft engineering division?

Monarch Aircraft Engineering is in many ways the ‘hidden gem’ in the Group. We have set ourselves the task of breaking out of the traditional perimeters for this business, and with the increase in MRO capabilities and a new state-of-the-art facility at Birmingham Airport the prospects for further growth in its third-party business are significantly enhanced.

For a full video interview with Iain Rawlinson, visit The Monarch Group website www.monarchholdingslimited.com


DIFFERENTIATED,HIGH-QUALITY

CUSTOMERPROPOSITION

LEISURE-FOCUSEDTRAVEL PRODUCTSAND SUPPORTINGINFRASTRUCTURE

STABLEFINANCIALPLATFORM

MUTUALLY SUPPORTIVEBUSINESSES DRIVE

SYNERGIES

INTRA-GROUPCOOPERATION

OPTIMISES MARGIN

BALANCED MIX OF DIRECT AND THIRD-PARTYDISTRIBUTION

FLEXIBLE PRODUCTSAND INNOVATIVE

THINKING

A unified group of businesses

Business model – Unlocking value

The four unified activities within the Group – Monarch Airlines, Tour Operations, Monarch Aircraft Engineering and Retail and Online – form a secure and sustainable business model.


DIFFERENTIATED, HIGH-QUALITY CUSTOMER PROPOSITION

The delivery of ‘superior service at equivalent price’ is the principle underpinning the Group’s businesses.

Across all divisions there is a focus on continuing to deliver a high-quality product proposition, including superior customer experience at a competitive price, and on reinforcing these core strengths by maintaining product differentiation and improving ancillary revenue generation.

FLEXIBLE PRODUCTS AND INNOVATIVE THINKING

The Group’s travel brands offer unique levels of choice and flexibility for our customers and we continue to provide innovative, convenient and simplified solutions to enhance their experience, including: • Monarch Airlines’ ‘Airpacks’

enable customers to build their own booking.

• Tour Operations provides the flexibility of ‘dynamic packages’ with the service and security of traditional holiday packages.

• Monarch Aircraft Engineering’s innovative mobile App provides customers with real-time status updates.

LEISURE-FOCUSED TRAVEL PRODUCTS AND SUPPORTING INFRASTRUCTURE

Our Group is highly focused on strengthening its leading positions and the quality of its product offerings in its principal market of leisure travel, underpinned by the strategically important supporting activities of aircraft engineering and retail and online.

MUTUALLY SUPPORTIVE BUSINESSES DRIVE SYNERGIES

Intra-Group allocation of resources transfers important knowledge and skills across divisions and drives both the implementation of strategy and value maximisation.

BUILDING A STABLE FINANCIAL PLATFORM

By maximising the value of the Group’s travel brands and supporting businesses, while capitalising on intra-Group trading opportunities, we are building a stable financial platform enabling us to also lay the foundations for future growth. This is underpinned by a sound and appropriate framework for corporate governance.

BALANCED MIX OF DIRECT AND THIRD-PARTY DISTRIBUTION

Our travel brands distribute product through direct-to-consumer and third-party trade channels, and this combination optimises margin performance and minimises risk.

INTRA-GROUP COOPERATION OPTIMISES MARGIN

The sale of products and services between the Group’s mutually compatible divisions is a source of revenue and profit generation, and de-risks development activity.• Monarch Airlines provides the

security of good quality, reliable flying to support the Tour Operations proposition.

• Tour Operations provides structural underpinning of demand for the Airline’s scheduled flying programme.

• Monarch Aircraft Engineering allows for a high operational performance within the Airline, supporting both the Monarch and Cosmos travel brands.


Monarch Airlines– A unique market position

Established in 1968Our distinct model is as a scheduled leisure airline, flying principally to short-haul destinations around the Mediterranean, the Canary Islands and destinations for winter ski. We operate from six UK bases – London Gatwick, Manchester, Birmingham, East Midlands, London Luton and Leeds-Bradford airports – and offer capacity in 2012/13 of some eight million sector seats.Our scheduled leisure network today operates across some 35 destinations and 112 routes.


39Aircraft in 2013

8.3 mSector seats for 2013

9.0%Growth in revenue per seat in FY12

Alysha Smith, Cabin crew »Monarch Airlines has a long and rich heritage and its founding family values are proudly reflected through the delivery of choice, quality and superior customer service.

We provide across our network a clear and real choice to consumers who value superior customer experience at a competitive price.As a strategic priority, we offer airline capacity to tour operators both through scheduled operations and traditional charter activities.We are re-equipping and expanding our aircraft fleet to enhance our customer offering.


Key operational statistics FY12 FY12 FY11 Change

Total capacity (‘000) 7,400 7,103 +4.2%Scheduled capacity (‘000) 6,035 5,304 +13.8%Total passengers (‘000) 6,400 6,300 +1.6%Scheduled passengers 5,356 4,631 +15.7%Scheduled load factor (%) 88.8 87.3 +1.4ptsTotal revenue per seat (£) 91.43 83.88 +9.0%Total turnover (£m) 673.7 608.5 +10.8%Routes 88 56 +57%

Monarch Airlinescontinued

For the 12 months ending 31 October 2012, Monarch Airlines achieved growth in total revenues of 10.2 per cent to £683.5 million (2011: £620.2 million), driven by increased passenger volumes and yields and the successful expansion of routes and airport bases. Losses before tax were reduced by 47 per cent to £37.2 million (2011: £70.1 million), reflecting the improved trading as well as the achievement of £31.6 million of planned Group operational like-for-like cost savings, the majority of which related to the Airline.

Growth in capacity, routes and basesMonarch Airlines’ total capacity during the year increased by 1.8 per cent to 7.2 million sector seats, as 32 new routes were added to provide 88 routes in total. This increase was in large part driven by the decision in May 2012 to absorb key short-haul leisure routes from UK Midlands airports following the closure of bmibaby, and to further consolidate the Airline’s position in this region.

The absorption of new capacity enabled the Airline to introduce a new base at East Midlands Airport in summer 2012 and to launch new flights to key destinations across the Mediterranean. Already a leading scheduled carrier at Birmingham Airport, operations were expanded through the introduction of additional frequencies on existing flights, plus the addition of new routes including Barcelona, Grenoble, Madeira and Sharm El Sheikh.

#Ff

FastFacts NO.1

Monarch Airlines launched its first winter ski programme in 2012/13, serving key resorts across the Alps and Dolomites.





43%

6%50%

Proportion of Group gross revenues

1%

£10.4mOTHER

Consolidation of the Airline’s position in the Midlands underpins the plans for the Airline to grow from a capacity of 7.4 million seats in FY12 to 10 million seats over the medium term.

Airline operations from the North of England were also strengthened with the launch of a sixth UK base at Leeds-Bradford airport, where two A320 aircraft will be based from summer 2013, to provide a new choice to key leisure destinations across the Mediterranean and for winter ski.

For 2013, the Airline plans to operate 112 routes to 35 destinations from six UK bases.

Increasing passenger volumes, customer awareness and yieldsScheduled passenger volumes during the year increased by 15.7 per cent, reflecting both network expansion as well as a strong improvement in customers’ awareness and understanding of the proposition. The Airline successfully delivered its first national television advertising campaign in summer 2012, and this was supported by promotional activities across a variety of media channels. Since the year end, a new national advertising campaign has been launched with the aim of further increasing awareness and bookings for summer 2013.

A focus on enhancing our product offer to customers, which included the re-aggregation of extra legroom seats, baggage options and meals into a choice of three optional ‘Airpacks’, helped to drive a strong yield performance and revenue per seat increased by 9.0 per cent. This remains an ongoing theme for development.

Market share strengthenedThe Airline strengthened market share on its key scheduled routes and from key bases. During summer 2012 Monarch Airlines was either the number one or number two carrier on 70 per cent of its routes and, for the full-year period, it had the leading market share of all UK carriers on its routes from Birmingham (36 per cent market share) and Manchester airports (27 per cent market share) and the second-largest share on its routes from London Gatwick (17 per cent market share). This performance reflects the Airline’s differentiated customer proposition of choice, value and superior customer service, and its market positioning as a strong alternative to low-cost carriers in many scheduled leisure markets.

Underpinned by tour operator volumesWholesale seat allocations delivered to the Airline by the Group’s flight broking division, First Aviation, and sales made to the trade by Avro, the flight-only specialist within the Group’s Tour Operations division, increased in line with the Airline’s total volume growth for the period. These distribution channels to third parties, which during the year included 123,000 sector seats supplied to Thomas Cook, continue to provide a strategically important underpinning of sales across the flying network.

Growth in onlineUnique visitors to the Monarch Airlines website during the year increased by 41 per cent to 11 million, while bookings for scheduled flights increased by 11 per cent to 1.1 million. The overall online proposition was enhanced through the launch of a mobile website designed specifically for use with iPhones, as well as local-language websites in key European markets to drive in-bound customer traffic. Monarch.co.uk, the Airline’s customer website, was also named by the UK travel industry as the top airline website for 2012.

Re-equipping the fleetThe Group has embarked on plans for the re-equipping of Monarch Airlines’ aircraft fleet. This envisages an order for a total of 45 replacement and expansion aircraft for delivery up to 2021, enabling improvement in service levels to Monarch Airlines’ customers, better asset utilisation and efficiency, and cost savings. Invitations have been issued to the world’s largest aircraft manufacturers to submit proposals through a strategy which will consider both leasing and purchasing of aircraft. In advance of the fleet renewal programme, Monarch is taking delivery of two new Airbus 320 aircraft in March and April 2013, and a further two new A321 aircraft in May 2013 to replace older aircraft which are being retired from the fleet.

15.7%Growth in scheduled passengers in FY12


Tour Operations– Flexible, asset-light model

Largest UK independent tour operator, comprising Cosmos Holidays, Avro and somewhere2stay.Flexible and secure customer choice, from mainstream to specialist holidays.Secure supply of high-quality flight capacity from Monarch Airlines.




43%

6%50%


1%£86.3mENGINEERINGSERVICES

£10.4mOTHER

Tour Operations division at a glance

Cosmos Holidays – Founded in 1961. Provides a fully secure and protected package holiday offer across 72 holiday destinations on four continents.Avro – Award-winning flight-only supplier, providing a broad range of seat availability, duration and prices to tour operators, and sells over one million flight sectors annually.somewhere2stay – Offers low-cost hotel, villa and apartment accommodation worldwide.

815,000 Passenger volumes in FY12

#Ff

FastFacts NO.2

Our top five package holiday destinations by annual passenger volume are the Canary Islands, Greece, the Balearic Islands, Mainland Spain and Goa.

Antonia Frampton, Overseas resort representative »The Cosmos team is on hand at our destinations to help our customers with anything they need during their stay, which is one of the ways we can be sure every one of our customers enjoys a ‘100% holiday.’


0 20 40 60 80 100DirectThird-party retail

%

Product and distribution modelFY12/13

Package

AccomonlyFlightonly

Total

Tour Operationscontinued

Tour Operations For the 12 months ending 31 October 2012, the Tour Operations division, comprising Cosmos Holidays, Avro and somewhere2stay, achieved growth in total revenues by 3.2 per cent to £589.0 million (2011: £570.7 million) and profit before tax was £5.6 million (2011: £5.8 million).

Outperforming the market on key destinationsAgainst the backdrop of a difficult consumer environment, a strong margin performance during the year was driven by high-quality product offerings for winter 2011/12 and summer 2012, particularly package holidays to Goa, Greece and Florida. For summer 2012, sales of holidays to Greece, Cosmos Holidays’ leading package holiday destination, increased by 10 per cent in a total market which declined by 10 per cent, increasing Cosmos Holidays’ share of this key package holiday destination. An increased focus on product to Goa for winter 2011/12 and to Florida for summer 2012 achieved growth in sales of package holidays to these destinations by 75 per cent and 83 per cent respectively.

Strong brand positioning and market positionCustomers look to the Cosmos brand and its long-established reputation for expertise and reliability to help them to navigate through a changing landscape for holiday travel and to purchase holiday products with confidence. The Cosmos proposition is focused on offering the flexibility of dynamic packages to match customers’ demands, combined with simple-to-use search and booking, destination-based customer support, fully secure and ATOL-protected holidays and value for money. Cosmos continues to achieve high ratings against these brand priorities in customer research, with 95 per cent rating their holiday overall as good or excellent, and 92 per cent good or excellent value for money in January 2013.

A strong business performance during the tough trading conditions of the last 12 months has consolidated the division’s market position as the UK’s largest independent tour operator and the third-largest ATOL operator in the UK overall, with total ATOL-licensed passengers of 700,000 and market share of 3.3 per cent in 2012.

Offers flexibility of dynamic packages, with the service levels, safety and security of traditional package holidays.Mainly sells into Monarch Airlines’ scheduled air capacity as opposed to traditional, higher-risk charter allocations.Unrivalled choice of departure and duration options through Monarch Airlines’ scheduled inventory.


Meeting the evolving needs of customersThe Tour Operations division has across all brands and products a balanced mix of direct and third-party retail distribution channels. Over the next five years, this mix will evolve, most notably in direct sales to consumers of Cosmos Holidays’ package product, arising from the implementation of the new TravelBox flexible reservations platform and trade web portal which has been completed in early 2013.

This new platform is transforming the breadth of travel product across all brands, meeting the evolving needs both of our customers and suppliers and significantly increasing the speed to market of the Tour Operations business.

The implementation of new technology is a core feature of a broader business transformation programme, which is intended to modernise and bring further efficiencies into the division and to improve the technology which underpins buying, inventory management and the online customer booking path. Among the benefits to the division over the next five years are that Cosmos will become a scale travel marketplace, selling an increased proportion of own and third-party stock direct to consumers, and in business-to-business markets its share is expected to increase through strong distribution agreements and broader inventory.

95%of customers rated their Cosmos holiday overall as good or excellent (Cosmos Customer Research: January 2013)


Monarch Aircraft Engineering – Strong strategic partnerships

Established in 1967, MAEL provides important aircraft MRO services to the Monarch Airlines fleet, contributing to the Airline’s efficiency and reliability.MAEL continues to grow its global blue-chip third-party customer base.Principal bases are at London Gatwick, London Luton and Manchester airports.Further line stations are at Birmingham, East Midlands, Leeds-Bradford, Edinburgh, Dublin, Malaga, Alicante, Goa, the Maldives, Canary Islands, Kiev and Warsaw.Superior knowledge in maintaining legacy fleets and new technology aircraft, including Boeing 787.One of only six Boeing-approved GoldCare providers worldwide.

Jonathan Bell, Apprentice engineer »For 42 years MAEL has been producing high-calibre aircraft engineers through its highly regarded apprenticeship scheme and during 2012 enrolled its 700th apprentice.


#Ff

FastFacts NO.3

Opening in late 2013, MAEL’s new 110,000 sq. ft. state-of-the-art facility at Birmingham Airport will have capacity for three wide-body or 10 narrow-body aircraft.

Current third-party engineering customers include:

American Airlines, Air Arabia, Air Berlin, Alitalia, Cyprus Airways, easyJet, Emirates, LOT Polish Airlines, Aer Lingus, British Airways City Flyer, DHL, Flybe, Jet2.com, Thomson Airways, Titan Airways and Wizz.

A growing market in which to increase third-party revenues

Global market for aircraft maintenance forecast to grow from $49bn in 2012 to $65bn by 2022 (Source: Airline Economics & Aviation News Global Survey 2012).Plan in place to deliver 50% of MAEL business via third parties by 2015.Engineers from MAEL flew with customer

LOT Polish Airlines’ first Boeing 787 Dreamliner on its ferry flight from Seattle to Warsaw in November 2012.


FY12 revenue mix

BASEMAINTENANCE

LINE

MATERIALSUPPORTSERVICES

CMC*

PART M

SPARESTRADING

36%3 2

16%

10%

33%

* Component Maintenance Centre




43%

6%50%


1%

£10.4mOTHER

MAEL core skills and capabilities

Aircraft hangar maintenanceLine maintenanceGlobal response teamsDesign and installation‘True engineering’ skillsSkills training and apprenticeship

Monarch Aircraft Engineering continued


Forecast customer revenue progression 2012-15

20152012

50%

50%

70%

30%

MONARCHAIRLINES

THIRD-PARTYCUSTOMERS

THIRD-PARTYCUSTOMERS

MONARCHAIRLINES

MAEL has secured approval for Boeing 737NG maintenance, strengthening its capabilities in Boeing narrow body-type aircraft, and adding to its existing credentials as one of only six worldwide Boeing GoldCare partners. Following a further new agreement in 2012, MAEL now also provides line maintenance in Malaga, Spain to a fleet of Embraer 170 and 190 aircraft operated by Flybe, Europe’s largest regional airline.

In 2012 MAEL was awarded an important contract by LOT Polish Airlines to provide technical support from a line maintenance facility in Warsaw for the first Boeing 787 Dreamliner aircraft to be operated from Europe. This aircraft entered into service on 15 November 2012 and technical acceptance was undertaken by MAEL at Boeing in Seattle.

New hangar at Birmingham AirportSome 60 per cent of the world’s airline carriers outsource their heavy maintenance and the value of this global market is forecast to increase by over 30 per cent to $65bn over the next 10 years (Source: Airline Economics & Aviation News Global Survey 2012). As operators increasingly seek to minimise the costs of positioning their fleets for maintenance, MAEL is able to consider new opportunities for hangar capacity at international gateway airports.

In November 2012 MAEL announced the construction of a new 110,000 sq. ft. state-of-the-art maintenance facility at

Birmingham Airport to be completed in late 2013, complementing its existing facilities. The new hangar, creating up to 300 new jobs, will enable MAEL to service a greater share of the growing UK market for aircraft maintenance services (including international long-haul carriers) and to help achieve its target of 50 per cent of revenues being derived from third-party customers by 2015.

This additional capacity enables MAEL to secure new business and to enter into new sectors for aircraft technology and, in May 2013, MAEL entered into an important commercial agreement with Flybe to be a key entry customer for the new Birmingham facility. With this agreement, MAEL will provide year-round maintenance support to Flybe, including entry into new aircraft and OEM types, and will employ a large number of highly skilled and qualified engineers across the Birmingham, Manchester, London Gatwick and East Midlands airport bases.

MRO of the Year 2013MAEL received an endorsement of the progress and reputation it continues to forge as a global leader in aircraft maintenance services when, in January 2013, it was awarded MRO of the Year 2013 by aviation industry customers at the Aviation 100 Awards. The highly prestigious award followed an 11-month customer satisfaction survey in which MAEL achieved a clean sheet rating of excellence from its customers across the globe. MAEL has also been listed in the top 10 MROs for Europe, the Middle East and North Africa and, in May 2012, was elected MRO of Choice among its peer group and suppliers.

High-quality training to meet future requirementsMAEL produces through its highly regarded apprenticeship scheme a strong pipeline of skilled engineers for both its own operations and the wider aviation industry. In January 2013 the new Monarch Aircraft Engineering Training Academy (MAETA) at London Luton Airport was opened, providing new classrooms and state-of-the-art learning facilities to support several aircraft types, as well as the capacity to double the in-take of apprentices for 2013 to 24.

29%Increase in operating profit in FY12

For the 12 months ending 31 October 2012, Monarch Aircraft Engineering achieved growth in total revenues by 8.9 per cent to £86.3 million (2011: £79.2 million), of which 29 per cent was derived from third-party customers, reflecting the continued focus of the business on building maintenance and repair and consultancy services to blue-chip customers globally. Profit before tax increased by 83 per cent to £5.3 million (2011: £2.9 million).

Strong industry credentialsSynonymous with the Monarch brand, MAEL has a long-standing global reputation for quality and high standards of service and this reputation is the cornerstone of its relationships with customers, regulatory bodies and Original Equipment Manufacturers (OEMs), including Boeing, Airbus and Embraer.


Retail and Online – A nexus for Group

e-commerce activity

Supports delivery and management of e-commerce strategies across all Group platforms.Focused on technology innovation and exploiting online trends.Driving customer engagement through Twitter, Facebook and other social media channels.

#Ff

FastFacts NO.4

Across the Group’s brands, customer engagement with social media continues to advance, with a 300% increase in Facebook ‘likes’ and a 189% increase in Twitter followers in 2012.


20mGroup unique visitors in FY12

The Retail and Online activity supports the Group’s divisions in delivering their online and e-commerce strategies, and provides e-commerce expertise to ensure that the Group exploits new technology, online trends and continues to innovate in the travel market. Where appropriate, the Group’s divisions share common themes to ensure efficiency in delivery and management of online and e-commerce solutions, although this is balanced by the bespoke requirements driven by operating in very different areas of the online travel market.

Strong and rapidly growing online market positionsThe Group continues to make significant advances in e-commerce capabilities, including mobile, with 20 million unique visitors to the Group’s customer online platforms for the 12 months ended 31 October 2012, up 21 per cent on the prior year, including an increase in unique visitors to the Monarch Airlines website of 30 per cent. Some 1.1 million customer bookings were made through the Group’s websites during the year, generating £478.4 million of Group revenue (2011: £404.2 million), an increase of 18.4 per cent on the prior year.

In September 2012, Monarch.co.uk was named as the top airline website at the UK Travelmole Web Awards and was commended for its excellent graphic communication, superb online copy and salesmanship as well as its strategies and techniques for enhanced site conversion. New local-language websites and booking processes for Monarch Airlines have also been launched for Germany, Italy, Spain and France to support new routes and increase the share of in-bound customer bookings.

A priority focus within the Tour Operations division has been the roll-out of new TravelBox-powered booking processes to support the business transformation programme and to optimise conversion rates across a broader range of package, accommodation-only and flight-only products.

Mobile innovation and future developmentWithin the fast-moving mobile Internet marketplace, an online booking service was launched for Monarch Airlines, commencing with a website optimised for iPhone devices. Through this service, which can be accessed by iPhone users visiting the Monarch.co.uk website or linking from a comparison website, customers can search and book all scheduled flights, select seating and baggage options and pay for their booking using a card or PayPal’s mobile-optimised checkout.

A new Smartphone App was launched in April 2013 containing a variety of useful features designed to make customers’ journeys more enjoyable, including the ability to find, book and check the status of flights, find directions and traffic reports for journeys to airports, as well as a function for locating a parked car on return to the airport of departure.

The future strategy for Retail and Online includes a continuing focus on mobile and further innovation for the Group’s consumer-facing websites in the areas of personalisation, loyalty, social media and rich content.

Group Retail and Online key performance metrics FY12

TotalChange

(YOY)

Search unique visitors (millions) 20 +21%Booked revenue (£m) 478.4 +18%Average revenue per booking (£) 412 +10%


Financial review– Trading ahead of expectations

In the first year of its two-year turnaround, the Group has delivered an improved financial performance for the 12 months ending 31 October 2012, trading ahead of the expectations of the turnaround plan, which envisages a return to profitability in the 2013 financial year. Loss before tax on an adjusted basis fell by 71 per cent from £51.1m to £14.9m as a result of cost control, network and revenue management improvements in Monarch Airlines, and strong contributions by Tour Operations and Monarch Aircraft Engineering. Adjustments made to loss before tax are set out in more detail in note 2 to the financial statements and relate to impairment and losses on sale relating to the refinancing of A321 aircraft in 2012 and the early exit from service of legacy A320 aircraft in 2013. Loss before tax before adjustments also fell sharply by 52 per cent from £70.2m to £33.4m.

Cash flows and financial positionFollowing the completion of a shareholder refinancing in November 2011, the Group now has a solid financial footing which facilitates the return to profitability and allows the Group to plan for the future. The net cash inflow from operating activities of £32.6m (2011: £nil) was delivered through careful management of cash and the positive effects of growth on working capital. Substantial capital investment continued during the year with a £11.2m cash outflow to acquire tangible fixed assets, principally aircraft-related. Whilst restricted deposits increased by £34.9m, after shareholder financing inflows of £20.0m, cash increased by £9.3m during the year with unrestricted cash reserves of £49.9m held at 31 October 2012 in addition to £51.6m of restricted cash. Reflecting banking industry trends, restricted cash deposits are now required by a number of parties, most notably credit card providers. During the year, the Group made good progress in increasing the range of card-processing arrangements that are available, as well as in reducing both the cost of these and the related collateral required.

On 15 November 2011 the Group’s shareholders provided an additional £77.0m of funding as part of a refinancing exercise undertaken in the autumn of 2011. The £77.0m additional funding comprised of £20.0m of equity preference share capital, a £20.0m loan, a £10.0m increase in unutilised standby facilities to £25.0m, and up to £27.0m of aircraft lease deferrals during the 15-month period to December 2012.

Robert PalmerGroup Finance Director

“ Trading ahead of expectations of the turnaround plan, loss before tax on an adjusted basis fell by 71 per cent.”


The Group has held discussions with the CAA about the ATOL renewal. Based on these discussions, the Group’s forecasts, taking into account reasonably possible changes in trading performance, show that the Group is forecasting to meet the financial terms expected to be required by the CAA. Accordingly, the Group has no reason to believe that the renewal will not be granted on acceptable terms using an equivalent basis to previous years.

The Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the financial statements. Further details of the going concern basis can be found in note 1 to the financial statements, accounting policies.

Financial risk management objectives and policiesThe Group’s activities expose it to a number of financial risks including cash flow risk, credit risk, liquidity risk and price risk. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide principles on the use of financial derivatives to manage these risks. The Group does not use derivative financial instruments for speculative purposes.

Cash flow riskThe Group’s activities expose it to the financial risks of changes in foreign currency exchange rates. The Group uses foreign exchange forward contracts to hedge these exposures. Cash reserves are invested on a commercial basis to achieve returns of interest both in the short and medium term. Loans on aircraft are negotiated with a fixed margin over Sterling LIBOR.

Credit riskThe Group’s principal financial assets are bank balances and cash, trade and other debtors. The majority of Airlines’ and Tour Operations’ receipts are in advance of departure date and so the credit risk of customers defaulting on payment is small. Relationships are maintained with customers and reviews of credit are undertaken on a regular basis. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. Within the engineering division, credit insurance is maintained against the insolvency of its third-party customers. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.

Liquidity riskIn order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the Group uses a mixture of long-term and short-term debt finance (including operating leases) for the purposes of capital expenditure and also actively manages the level of working capital. Most aircraft are now financed with third-party operating lessors, with all debt being provided from the shareholders.

Having produced detailed forecasts and budgets for the Group, the Directors believe that the Group will be able to continue trading through effective use of operating cash flows, sale and leaseback arrangements and shareholder facilities.

Price riskThe Group is exposed to commodity price risk. The main commodity purchased by the Group is jet fuel and the Group uses fuel hedging contracts to try and reduce its exposure to short-term fuel price changes. The Group, however, remains exposed to longer-term changes in the fuel price.

Market riskThe Group is dependent on credit and trading lines being made available by various banking and financial institutions to allow operating leases of aircraft, credit card processing, banking facilities and hedging lines. Over the last few years, the availability of financial credit and trading lines has become less certain. The Group has sufficient lines for its present needs and is managing the risk through expanding the range of arrangements to a larger number of counterparties.

DividendsThe Directors have not proposed a dividend for the year (2011: £nil).

Policy and practice on payment of creditorsMonarch has partnership arrangements with many of its biggest suppliers and aims to pay all suppliers on time in accordance with contractual and legal obligations. At 31 October 2012, the number of creditor days outstanding was 40 days (2011: 38 days).

Robert PalmerGroup Finance Director29 April 2013

Principal risks and uncertaintiesThe Group uses approximately 400,000 tonnes of jet fuel a year. Volatility in the price of oil and petroleum products can have a material impact on operating results. This price risk is partly hedged through the purchase of jet fuel in forward markets, which can generate a profit or a loss, and through setting budget fuel price assumptions above market price.

The Airline operation faces competition from other airlines on its routes and from other modes of transport. Tour Operations competes against larger rivals and online travel agents, and MAEL tenders for business against competitors based in lower cost economies. The Group’s revenue is highly sensitive to economic conditions and, in particular, UK consumer confidence.

The airline industry is currently heavily regulated, with expected increased regulator intervention; this includes environmental, security and airport regulation in which changes are levied by regulator decision rather than by commercial negotiation. This could have an adverse impact to the Group’s reputation, cost base and market share.

The Group is subject to regulation across its network, including the Civil Aviation Authority (CAA) which issues an ATOL licence to certain Group companies which is required in order for the Group to operate. This licence is renewed annually in September subject to assessments of fitness and financial criteria, the broad framework for which is available via the CAA website (www.caa.co.uk).

The Group’s business can also be affected by macro-economic uncertainty outside of its control such as weakening consumer confidence, inflationary pressure or currency volatility. This could give rise to adverse pressure on revenue, load factors and residual values of aircraft, which the Group mitigates through regular monitoring of markets and route performance. Other issues that can adversely impact performance include pandemics, environmental factors, safety and security incidents, and industrial disputes.

Going concernThe Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the above section. As highlighted in the Principal Risks and Uncertainties section above, the Group is required to maintain an ATOL licence in order to operate.


Board of Monarch Holdings Limited

1

3

2

4


1. Iain RawlinsonExecutive ChairmanIain Rawlinson joined Monarch as Executive Chairman in 2009, bringing some 25 years’ experience in banking and investment, gained with Lazard Brothers, Robert Fleming and Fleming Family and Partners.

Iain read law at Cambridge and was called to the Bar in 1981. After joining Lazard Brothers in 1986, from 1995 to 2000 he was responsible for building and managing Flemings’ investment banking presence in Southern Africa.

In 2000 he became Chief Operating Officer of Fleming Family and Partners, the Fleming family investment business, and until 2005 held various senior executive and advisory positions in this group.

Since 2005 he has focused on independent commercial and charitable interests, many with a leadership role in business building or transformation. He is responsible for the overall leadership of The Monarch Group.

He is Chairman of Tusk, the UK charity focused on conservation, communities and education in Africa, and other philanthropic activities.

2. Robert PalmerGroup Finance DirectorRobert Palmer was appointed as Group Finance Director in April 2012.

Robert, who has previously served as Group Financial Controller of easyJet, Chief Financial Officer at British Midland International and also with Air Malta, brings a wealth of airline industry expertise to the Group, which he joined in a consulting capacity in September 2011 in a role focusing on the delivery of the turnaround plan.

His senior FTSE 250 and IPO experience underpins a demonstrated track record leading change in businesses, driving efficiency and productivity through technical expertise and commercial acumen, as well as financial management and reporting disciplines.

3. Sir Roy McNultyNon-Executive DirectorSir Roy McNulty was appointed to the Board of Gatwick Airport as a Non-Executive Director in March 2011 and became Chairman on 1 April 2013. He is currently Deputy Chairman of the Olympic Delivery Authority.

He was Executive Chairman of National Air Traffic Services Ltd (NATS) from 1999 to 2001 and subsequently Chairman of the Civil Aviation Authority, the UK’s aviation regulator, from 2001 to 2009.

Previously Sir Roy was Chief Executive and latterly Chairman of Short Brothers plc, the Belfast-based aerospace company now part of Bombardier Aerospace, and was Chair of Advantage West Midlands from 2009 to 2012.

4. Austin ReidNon-Executive DirectorAustin Reid was one of the architects of British Midland International (bmi) and served from 1985 as Finance Director and was Managing Director and Chief Executive from 1995 to 2005.

As Chief Executive of bmi, he drove the strategic direction of the airline in route expansion, helping to transform bmi into a major European carrier. He began his career with KPMG in New York. In 1975, he joined Hertz Corporation, where he rose to become Vice President of Finance for Europe, the Middle East and Africa. He is currently a Non-Executive Director of SR Technics and brings a wealth of airline and regulatory experience to the Board. In January 2013 he was appointed to the Board of Air Berlin as a Non-Executive Director.


Group Management Board

1

4

7

10

2

5

8

11

3

6

9

12

13


6. John RomoManaging Director, First AviationJoined the Company in 2004 as General Manager of First Aviation. Over 20 years’ experience in aviation, of which over 10 years were in sales and management.

7. Alan MacLeanManaging Director, Cosmos Tours and CruisesJoined Cosmos in January 2009 as Managing Director for Cosmos Tours and Cruises and Specialist products. Prior experience includes the UK operation of sister cruising company Avalon Waterways, Shearings, Sunworld, Thomas Cook and Saga Holidays.

8. Stuart JacksonGroup Business Development and Distribution DirectorResponsible for the development and deployment of Group strategy in relation to the optimisation of all distribution channels across all Group product and brand streams. Over 25 years’ experience in the travel industry.

9. Pauline ProwGroup HR DirectorJoined Monarch in June 2009 initially as HR Director for the Airline and Engineering businesses, before moving to the expanded Group HR Director role in May 2010. Prior to joining Monarch, Pauline spent 30 years in the automotive sector with General Motors, where she held a range of senior HR management roles. Pauline is Chairman of The Monarch Foundation.

10. Richard RothGroup Performance and Turnaround DirectorAppointed in June 2012. 25 plus years’ senior management experience in financial, commercial and operational areas, the last 13 of which have been within the airline industry.

11. John MarrayGeneral Counsel and Company SecretaryAppointed in September 2011. Responsibility across all legal, governance and company secretarial matters.

12. Chris DareGroup Information Services DirectorJoined Monarch in October 2011 as Group Information Services Director, and is responsible for managing all IT requirements across the Group.

13. Paul BarkerGroup Head of Corporate Communications and IRJoined The Monarch Group in June 2012. Over 15 years’ director-level corporate communications and investor relations experience including publicly listed, high-profile consumer-facing businesses.

1. Iain RawlinsonExecutive ChairmanJoined Monarch as Executive Chairman in 2009, bringing some 25 years’ experience in banking and investment, gained with Lazard Brothers, Robert Fleming and Fleming Family and Partners.

2. Robert PalmerGroup Finance DirectorAppointed as Group Finance Director in April 2012. Previously served as Group Financial Controller of easyJet, Chief Financial Officer at British Midland International and also with Air Malta.

3. Kevin GeorgeManaging Director, Monarch AirlinesJoined Monarch Airlines in January 2007 as Director of Customer Services. Became Operations Director in October 2008, before being promoted to Managing Director, Airline Operations in July 2010. Prior to joining Monarch, Kevin spent 11 years with British Airways in a range of senior commercial management roles.

4. Hugh MorganManaging Director, Cosmos Holidays, Avro and somewhere2stayAppointed Managing Director of Cosmos Holidays, Avro and somewhere2stay in July 2010. Brings over 40 years’ experience in European inclusive tour travel to his role. Member of the Board of ABTA, the UK’s leading travel association.

5. Mick AdamsManaging Director, Monarch Aircraft EngineeringFormerly Maintenance and Operations Director, with long experience of all aspects of MRO activity. Appointed Managing Director of MAEL in 2010.


Corporate structureThe holding company of The Monarch Group is Monarch Holdings Limited, the principal subsidiaries of which are Monarch Airlines, First Aviation Limited and Monarch 2011 Limited. Monarch 2011 is the parent company of both Monarch Aircraft Engineering and the Monarch Travel Group (comprising the tour operating activities of the Group).

Monarch Holdings Limited BoardAs the ultimate parent company of The Monarch Group, the Board of Monarch Holdings Limited comprises the Executive Chairman and Finance Director of the Group and two Non-Executive Directors. Monarch Holdings Limited has delegated governance of the day-to-day management of The Monarch Group to a Management Board comprising senior executives from the operating companies of Monarch Airlines, First Aviation Limited, The Monarch Travel Group (the tour operating division of the Group), Monarch Aircraft Engineering and other senior Group executives representing Group-wide functions, which is chaired by the Executive Chairman of The Monarch Group.

The Management Board is empowered by Monarch Holdings to manage all matters relating to the day-to-day operation of The Monarch Group, and certain matters affecting the management of The Monarch Group are reserved for consideration by the Monarch Holdings Limited Board. Each of the Group’s operating companies holds regular Board meetings attended by the Group’s General Counsel in the capacity of Company Secretary of each of these companies. Matters which have a Group dimension are escalated to the Management Board of the Group or the Board of Monarch Holdings for consideration.

GovernanceSignificant contractsAll significant contracts entered into by any of the Group’s operating companies are formally reviewed by a Contracts Review Board (CRB) comprising senior executives of the Group and the relevant operating company. A focus of the CRB is on the identification and mitigation of commercial and legal risk to The Monarch Group.

Risk managementEach of the Group’s operating companies has a register of Principal Risks and Uncertainties, which is continually updated and is subject to a formal monthly review by the operating company Board. These risks are also documented in a Group risk register which is formally reviewed at the monthly meeting of the Group Management Board.

Corporate governance

Iain RawlinsonExecutive Chairman


Monarch Holdings Limited

Group Management Board

Monarch Aircraft

EngineeringRetail and OnlineTour OperationsMonarch Airlines

Avro somewhere2stayCosmos HolidaysFirst Aviation

Group Finance Director

Group Business Developmentand Distribition Director

Group Director of Performanceand Turnaround

Group HR DirectorExecutive Chairman

Group Head of CorporateCommunications and IR

General Counsel andCompany Secretary

Group IT Director

Managing DirectorMonarch Airlines

Managing DirectorFirst Aviation

Managing DirectorTour Operations

Head of Retail and Online

Managing DirectorEngineering

Conflicts of interestDirectors are required at each Board meeting to declare any conflicts of interest, whether between the operating companies of The Monarch Group or with third parties outside the Group. Such conflicts are considered on a monthly basis by the Boards of each of the Group’s operating companies and are formally documented in Board minutes produced by the Company Secretary.

Additionally, a senior Director of the Group is tasked with identifying and documenting within a Conflict of Interests Register any conflicts of interest within the Group, which are then reported to and formally considered by the Group Management Board. In exceptional circumstances, these may be escalated to the Board of Monarch Holdings for consideration.

CommitteesManagement BoardThe Group’s Management Board is responsible for day-to-day activities of the Group, and is described in the chart above.

Remuneration CommitteeThe Remuneration Committee of the Board of Monarch Holdings Limited comprises the Group Executive Chairman and two Non-Executive Directors of the Board. The Committee is chaired by a Non-Executive Director.

The Remuneration Committee is authorised on behalf of the Main Board to determine and agree the framework or broad policy for the remuneration, including expenses and pension arrangements, of the Group’s Executive

Chairman, the Executive Directors, the Company Secretary and such other members of the executive management team as it is designated to consider. The remuneration of Non-Executive Directors is a matter for the Chairman and the executive members of the Main Board. No Director or manager is involved in any decisions as to their own remuneration.

Remuneration policy takes into account all factors which the Committee deems appropriate, including relevant legal and regulatory requirements, the provisions and recommendations of the UK Corporate Governance Code and associated guidance. The Committee has full authority to appoint remuneration consultants and to commission or purchase any reports, surveys or information which it deems necessary, within budgetary parameters determined by the Main Board.

The objective of remuneration policy is to ensure that members of the executive management of the Group are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Group.

Audit CommitteeThe Audit Committee of the Board of Monarch Holdings Limited comprises the independent Non-Executive Directors of the Company. The Group Finance Director and a representative of the external auditors attend meetings at the invitation of the Committee.

The Committee is authorised by the Main Board to investigate any activity within its

terms of reference, to seek any information that it requires from any employee of the Company and to obtain outside legal or independent professional advice and such advisers may attend meetings as necessary.

The responsibilities of the Committee are, in respect of the external auditor, to oversee the process for its selection, assess its independence, recommend the audit fee to the Main Board and pre-approve fees in respect of non-audit services provided by the external auditor and to review its management letter and management’s response. The Committee reviews the Company’s procedures for handling allegations from whistleblowers, management’s reports on the effectiveness of systems for internal financial control, financial reporting and risk management. The Committee also provides review and challenge, where necessary, for the actions and judgements of management in relation to the Company’s financial statements and financial reporting.

Corporate structure Management Board


The Monarch Foundation – A force for good

Group generosityA wide range of generous activity takes place each year across The Monarch Group. Over the last two years some £500,000 has been raised in money and donations in-kind from a variety of activities. This includes customer donations made on board Monarch Airlines flights and through Cosmos Holidays’ online booking path, and fundraising activities initiated by the Group’s employees.

This charitable engagement has delivered excellent results for The Monarch Group and our charity partners and is something that the Group can be proud of.

A stronger commitmentThe Group recognises that industry more widely has the capacity, and the responsibility, to make a variety of important social responsibility impacts externally and, therefore, has a responsibility to be an effective corporate citizen in the communities where it operates and beyond. The size and nature of the Group is such that, through better coordination of its charitable activity, it should be in a position to make an even more effective commitment to a wider range of charities. At the same time, the Group’s brand values can be positively reinforced to its millions of customers.

The Monarch Foundation was launched in spring 2013 as an internal entity to organise all of the charitable activity that is carried on by the Group and in the Group’s name. It is intended that The Monarch Foundation will ultimately become a defining positive aspect of the Group’s businesses and brands.

Our causesIn consultation with the Charities Group, comprising representatives from across the Group, The Monarch Foundation has given consideration to the charitable areas that are most relevant to the business activities of The Monarch Group and its brands, and which the Group should support for the immediate term from both its own resources and, where employees are involved, through activities carried out in the name of the Group. During the initial establishment phase of The Monarch Foundation in 2012/13, the Charities Group has identified five main causes on which The Monarch Foundation will focus its efforts and be the defining areas of all charitable engagement carried out in the Group’s name:• disadvantaged families;• children and young people;• education;• environment and sustainability; and• injured military service people and

their families.

Charity partners 2013Macmillan Cancer Support www.macmillan.org.ukWhen You Wish Upon A Star www.whenyouwishuponastar.org.ukChildren in Need www.bbc.co.uk/programmes/b008dk4bHome-Start UK www.home-start.org.ukToe in the Water www.toeinthewater.orgThe Homeless World Cup www.homelessworldcup.orgDick Camplin Education Trust www.facebook.com/DickCamplinEducationTrust

Monarch Airlines has proudly supported Macmillan Cancer Support for 24 years, raising a total £3.8 million, principally through the collection of passengers’ on-board donations and supporting Macmillan’s annual fundraising event, the World’s Biggest Coffee Morning.

www.pennies.org.ukMonarch Airlines and Cosmos are partnering with Pennies, the electronic charity box which collects charitable donations from our customers when they purchase flights and holidays online. These generous donations benefit the charities supported by The Monarch Foundation.


2013 Charity PartnersThe Monarch Foundation continues to work with the Group’s existing charity partners, Macmillan and the children’s charity When You Wish Upon A Star, and has selected five new charities which it will partner with from 2013.

The Monarch Foundation’s 2013 Charity Partners are:• Macmillan Cancer Support – improving the

lives of people affected by cancer.• When You Wish Upon A Star – specialising

in making dreams come true for children with life-threatening illnesses.

• Children in Need – providing grants to over 2,500 projects in the UK which focus on children and young people who are disadvantaged .

• Home Start UK – helping families with young children deal with whatever life throws at them.

• Toe in the Water – inspiring service men and women who have sustained often traumatic injuries to move beyond their disability and to become reinspired by life.

• Dick Camplin Education Trust – providing scholarships for financially disadvantaged students, who have gained places at university having attended Salford City College or Loreto College in Manchester.

• The Homeless World Cup – using the power of football to energise homeless people so they can change their own lives.

Currencies for engagementThe Monarch Foundation is supporting these charities by using a range of resources at the disposal of The Monarch Group: • Money and financial support• Skills transfer• Benefits in kind• Volunteering• Ambassadorship• Networking through a Charities Forum.

Employee engagementThe Group’s employees are encouraged to continue their engagement with the wider charitable sector and in 2013 a limited number of ‘Matching Grants’ of up to £1,000 are available where there is a direct and relevant association with the five charitable causes mandated by The Monarch Foundation. These activities additionally benefit from promotion across the Group’s internal communications channels.

Long-term potentialOver the longer term, The Monarch Foundation has the potential to become an important positive aspect of the Group’s businesses and brands, acting as a force for good in the communities where The Monarch Group operates, and engendering among its employees and millions of customers a strong sense of loyalty and achievement in the association with effective and responsible charitable activities. The Monarch Foundation enables the Group to do what it should be doing in the charitable sector, which is everything it can.

In April 2013, Monarch Airlines Captain Peter Clark undertook an 80km trek across a section of the Great Wall of China to raise funds for Help for Heroes, a charity for injured service people and their families, one of the five important causes supported by The Monarch Foundation. The Foundation donated £1,000 to this challenge, helping Peter Clark to raise a total of approximately £4,000 for Help for Heroes.


Corporate responsibility

Our industrySafety is our priorityAs a leading provider of airline capacity and aircraft engineering, the Group’s primary objective is the maintenance of the highest possible levels of operational safety. It is essential that the Group’s customers have absolute confidence in their safety when they choose to fly with Monarch Airlines.

Safety considerations will always take precedence over other aspects of Monarch Airlines’ business. Awareness and diligence by every member of staff is encouraged to ensure maintenance of the required standards. Monarch is committed to a process of continuous review and improvement of its methods of management, aircraft maintenance and operation. In this way, it ensures that the highest standards of safety and regulatory compliance are consistently achieved.

Monarch affords the highest priority to the safety of its passengers. It is regulated by the UK Civil Aviation Authority (CAA) which issues the company’s Air Operator’s Certificate (AOC).

The Monarch Group is fully committed to a programme of working collaboratively with its communities, people and industry to make a positive difference and be a force for good.The Group’s goal is to maintain the highest possible levels of operational safety, and at every level it has a responsibility to ensure that the trust customers place in it is justified.The Group takes its environmental impacts seriously, and it takes care of its business by managing the resources it uses effectively.

The UK airline industry has moved in recent years to the European Joint Aviation Regulations standards (JAR-OPS). Monarch was one of the first airlines to be issued with a JAR-OPS Air Operator’s Certificate in November 1997. As part of JAR-OPS, Monarch was one of the first airlines to introduce a Flight Operations Quality System, which ensures the maintenance of the highest operational safety standards.

Key memberships and affiliationsThrough membership and affiliation to key industry organisations, the Group aims to promote an environment that is beneficial to the safety and efficiency of civil aviation and responsible tour operations. The Group is a member of the International Air Carrier Association (IACA), British Air Transport Association (BATA), ABTA and ATOL. Monarch Aircraft Engineering is an approved maintenance, design authority and training organisation which is certified by a number of worldwide airworthiness authorities.


EnvironmentCommitmentsThe Group strives to improve its environmental performance with the objective of ensuring that its activities contribute to the sustainable development of the communities where it operates.

The Group has a commitment to:• comply with and wherever possible exceed

all relevant environment legislation;• set environmental objectives, monitor

environmental performance and aim for continuous improvement;

• seek to minimise emissions, reduce waste and recycle as much as possible;

• actively engage and communicate with its employees on the means of achieving these commitments;

• endeavour to purchase from suppliers who share a concern for the environment and whenever possible purchase and use recyclable products or products from sustainable sources; and

• maintain a quality waste management system to reduce the costs of waste disposal and protect the environment for the future.

Sustainable aviationThe Group has been involved in the Carbon Trust’s Action Energy initiative to reduce carbon emission, and has participated in energy-saving surveys carried out by a Carbon Trust-nominated consultant and provided the data and platform on which to build a programme for continuous improvement.

The Group joined the EU Emissions Trading Scheme in January 2012. Initial emissions allowances allocated will be 97 per cent of total emissions in 2010. Operators who exceed this allowance will be required to purchase extra allowances in the carbon market. 85 per cent of allowances will be issued free.

Between 1990 and 2005, the Group improved its fuel efficiency by 20.9 per cent, which was achieved by the addition of new fuel-efficient aircraft within its fleet and through a series of modifications to ground and flying procedures. By the end of 2015 the Group’s target is to improve by a further 6.8 per cent, which will equal a cumulative total of 27.6 per cent. This will be achieved through fuel efficiency through a programme of fleet modernisation and further operating efficiencies.

Five-year-old flight enthusiast Joshua Anderson enjoyed a ‘day in the life of Monarch’ in December 2012.

In 2013, Monarch Airlines became the first UK airline to operate aircraft fitted with Airbus Sharklets, designed to save fuel and reduce carbon emissions.


Monarch Airlines is also a participant in the UK initiative Sustainable Aviation, which is a grouping of airlines, airports, manufacturers and air traffic control with the aim of responding to the challenge of building a sustainable environmental future for the industry.

Sustainable tourismThe Group believes that it should promote responsible travel to help the tourism industry to reduce its impact on the environment and local culture, while helping to generate income and employment for local people.

The Group’s Tour Operation division aims to provide a tourism experience which benefits its guests, suppliers and the destinations in which it operates.

Corporate responsibilitycontinued

132Participants in ‘Lead to Succeed’ management programme in 2012

‘Lead to Succeed’ is at the heart of the Group’s people strategy.

In pursuit of the above, the Group’s commitment is to:• promote and communicate local traditions,

lifestyles and heritage to guests and employees;

• support communities by abiding by local, national and international laws, discouraging illegal, abusive or exploitative forms of tourism; and

• care for the environment by conserving landscapes, plants, animals and protected areas and by encouraging guests and employees to take a responsible approach in their use of natural resources.

The Group aims to make lives better for its teams and communities through learning and development programmes and community initiatives.The Group recognises that its customers care, and that it too should strive to make a positive difference by offering trusted products and informed decisions.


PeopleUnified vision and valuesThe Monarch Group’s vision is to be the customer’s choice for outstanding service and value, and this vision is at the heart of everything it does and it is what drives people across the Group’s businesses.

The Group and its people operate to five core values, which are: passionate, meticulous, brave, responsive and candid.

The Monarch Group strives to attract the right people with the right skills and the drive to make its vision a reality and to bring its values to life. The Group employs some 2,900 talented people across a diverse range of roles located in a number of bases and locations across the UK and beyond, all focused on providing high-quality travel products and supporting services combined with superior customer service.

People strategyThe Group’s recruitment processes aim to identify the people who possess the potential to add the most value to its businesses. A comprehensive candidate selection and recruitment process is complemented by an in-depth induction for all new joiners, making each new member of the Group’s teams fully aware of The Monarch Group’s work ethos, vision, mission and values.

Learning and developmentThe Group operates in a changing environment, and is focused on creating a culture which equips its leaders with the skills to drive business transformation.

During 2012, 132 leaders across the Group embarked on the first phase of ‘Lead to Succeed,’ a management development programme tailored to the needs of the Group and its change priorities. This initiative is part of a wider learning and development framework which focuses on key aspects of the people strategy, including the retention of talented employees, the maintenance of professional standards, the development of a pipeline of new talent, increasing internal mobility and creating an engaged workforce.

Engagement and communicationThe Monarch Group’s employees work across a number of locations and countries and consistent communication and engagement is a priority.

Monarch Aircraft Engineering opened its new, state-of-the-art training academy in January 2013.

During 2012, all of the Group’s bases and head office locations participated in focus group research to find out more about what employees want to hear from the Group’s businesses and how and when. The purpose of this is to shape a new internal communications strategy for the Group, which is being implemented during 2013.

A Group-wide Intranet serves as a one-stop shop for news and information from all the Group’s businesses, and provides essential forms and policies to employees. Complementing this is a bi-weekly e-newsletter focusing on the achievements and dedication of the Group’s people and keeping the entire company up to date with new products, services and supporting initiatives.

The Group’s people enjoy a range of attractive benefits, including pension plans and a variety of travel-related discounts and offers.

As part of the Group’s overall commitment to stakeholder engagement, close working relationships are maintained with union representatives, pension trustees and charitable partners.


Independent auditor’s report to the members of Monarch Holdings Limited

We have examined the summary financial statement for the year ended 31 October 2012 which comprises the Consolidated Profit and Loss Account, Consolidated Statement of Total Recognised Gains and Losses, Consolidated Balance Sheet, Consolidated Cash Flow Statement and the related notes 1 to 28.

This report is made solely to the company’s members, as a body, in accordance with section 427 of the Companies Act 2006. Our work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, for our audit report, or for the opinions we have formed.

Respective responsibilities of directors and auditorsThe directors are responsible for preparing the annual report in accordance with applicable United Kingdom law.

Our responsibility is to report to you our opinion on the consistency of the summary financial statement within the annual report with the full annual financial statements and the Directors’ Report, and its compliance with the relevant requirements of section 427 of the Companies Act 2006 and the regulations made thereunder.

We also read the other information contained in the annual report as described in the contents section, and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the summary financial statement.

We conducted our work in accordance with Bulletin 2008/3 issued by the Auditing Practices Board. Our report on the company’s full annual financial statements describes the basis of our opinion on those financial statements and on the Directors’ Report.

OpinionIn our opinion, the summary financial statement is consistent with the full annual financial statements and the Directors’ Report of Monarch Holdings Limited for the year ended 31 October 2012 and complies with the applicable requirements of section 427 of the Companies Act 2006, and the regulations made thereunder.

We have not considered the effects of any events between the date on which we signed our report on the full annual financial statements (29 April 2013) and the date of this statement.

Deloitte LLPChartered Accountants and Statutory AuditorsSt Albans, United Kingdom 28 May 2013


Note2012

£’0002011

£’000

Turnover 1, 2 825,148 757,765Cost of sales (767,525) (720,632)

Gross profit 57,623 37,133Administrative expenses (including £11.5m (2011: £nil) relating to impairment of A320 aircraft

and £nil (2011: £11.6m) relating to impairment of A321 aircraft) (83,392) (92,161)Other operating income 435 927

Operating loss 4 (25,334) (54,101)Profit on sale of tangible fixed assets 202 –Loss on disposal of fixed asset investment – (7,460)Net finance charges 5 (8,270) (8,666)

Loss on ordinary activities before taxation 2 (33,402) (70,227)Tax credit on profit on ordinary activities 6 7,259 20,887

Loss for the financial year (26,143) (49,340)

All amounts relate to continuing activities.

Consolidated profit and loss accountFor the year ended 31 October 2012


Consolidated statement of total recognised gains and lossesFor the year ended 31 October 2012

Note2012

£’0002011

£’000

Loss for the financial year (26,143) (49,340)Actuarial loss relating to the pension scheme 20 (42,564) (174)Deferred tax charge in relation to the pension scheme due to rate change (3,642) (2,743)Deferred tax credit in relation to the pension scheme due to movement in year 10,633 59Deferred tax in relation to the rate of tax change (169) (169)Deferred tax adjustments in respect of estimates made in prior years – (1,911)Deferred tax origination and reversal of timing differences – (2,037)Other reserves (11) –

Total recognised gains and losses relating to the financial year (61,896) (56,315)


Note2012

£’0002011

£’000

Fixed assetsIntangible assets 8 4,296 5,043Tangible assets 9 156,492 179,190

160,788 184,233Current assetsStocks 11 4,336 4,300Debtors – due within one year 12 152,191 147,176Debtors – due after one year 12 13,067 9,330Investments 13 51,578 16,645Cash at bank and in hand 49,858 40,584

271,030 218,035Creditors: amounts falling due within one year 14 (147,220) (103,553)

Net current assets 123,810 114,482

Total assets less current liabilities 284,598 298,715Creditors: amounts falling due after more than one year 15 (5,544) (20,690)Provisions for liabilities 16 (40,336) (55,057)Accruals and deferred income (240,215) (219,910)

Net liabilities/assets excluding pension liability (1,497) 3,058Net pension liability 20 (140,211) (102,870)

Net liabilities including pension liability 2 (141,708) (99,812)

Capital and reservesCalled up share capital 17, 21 20,050 50Merger reserve 21 4,963 4,963Profit and loss deficit 21 (166,721) (104,825)

Total shareholders’ deficit 21 (141,708) (99,812)

The financial statements of Monarch Holdings Limited, registered number 01165001, were approved by the Board of Directors and authorised for issue on 29 April 2013.

They were signed on its behalf by

D I Rawlinson R PalmerDirector Director

Consolidated balance sheet31 October 2012


Company balance sheet31 October 2012

Note2012

£’0002011

£’000

Fixed assetsInvestments 10 33,398 61,537Intangible assets 8 35,000 35,000

68,398 96,537Current assetsDebtors – due within one year 12 151 277 – due after more than one year 12 2,000 2,000Investments 13 10,000 –

12,151 2,277Creditors: amounts falling due within one year 14 (41,353) (61,199)

Net current assets (29,202) (58,922)

Total assets less current liabilities 39,196 37,615Creditors: amounts falling due after more than one year 15 (10,925) (10,925)

Net assets 28,271 26,690

Capital and reservesCalled up share capital 17, 21 50 50Profit and loss account 21 28,221 26,640

Total shareholders’ funds 21 28,271 26,690

The financial statements of Monarch Holdings Limited, registered number 01165001, were approved by the Board of Directors and authorised for issue on 29 April 2013.

They were signed on its behalf by

D I Rawlinson R PalmerDirector Director


Note2012

£’0002011

£’000

Net cash inflow from operating activities 23 32,611 18Returns on investments and servicing of financeInterest received 597 332Interest paid (2,363) (4,425)Finance lease and hire purchase interest 5 (146) (128)

Net cash outflow from returns on investments and servicing of finance (1,912) (4,221)TaxationUK corporation tax received/(paid) 1,791 (328)Capital expenditure and financial investmentsPayments to acquire tangible fixed assets (11,227) (44,867)Receipts from sales of tangible fixed assets 7,612 84,644

Net cash (outflow)/inflow from capital expenditure and financial investments (3,615) 39,777

Net cash inflow before management of liquid resources and financing 28,875 35,246Management of liquid resources(Increase)/decrease in restricted deposits (34,933) 22,138

Net cash (outflow)/inflow from management of liquid resources (34,933) 22,138FinancingNew finance leases – 4,954Capital element of finance lease payments (684) (5,670)Shareholder loans received – 20,000Bank loan repayments (3,984) (57,021)Issue of preference shares 20,000 –

Net cash inflow/(outflow) from financing 15,332 (37,737)

Increase in cash in the year 24, 25 9,274 19,647

Consolidated cash flow statementYear ended 31 October 2012


Notes to the financial statementsYear ended 31 October 2012

1. Accounting policiesThe principal accounting policies adopted are described below. They have all been applied consistently throughout the current and preceding financial year.

Basis of accountingThe financial statements are prepared under the historical cost convention, with exception of the revaluation of other fixed asset investments, and in accordance with appropriate United Kingdom accounting standards.

Basis of preparation The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Financial Review. The Financial Review also describes the financial position of the Group; its cash flows, liquidity position and borrowing facilities; the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk.

The Group meets its day-to-day working capital requirements through a combination of operating cash flows, sale and leaseback arrangements and shareholder facilities. The shareholder facilities were extended during the year for the period from 1 May 2012 to 31 October 2014. The Directors have considered the uncertainties presented by current economic conditions in relation to demand and pricing, inflation, foreign exchange rates and the ability to raise finance in the foreseeable future.

The Group’s forecasts and projects, taking into account reasonably possible changes in trading performance, show that the Group should be able to trade using operating cash flows for at least 12 months from the signing date of these accounts. This forecast is based on budget and experience of prior years, adjusting for known changes, although the nature of the industry and the market make it difficult to be precise about possible outcomes. The Board has completed a sensitised review of the budget and believes that there is sufficient headroom using its available resources.

The Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

As highlighted in the Financial Review, the Group is required to maintain an ATOL licence in order to operate. The Group has held discussions with the CAA about the ATOL renewal. Based on these discussions, the Group’s forecasts, taking into account reasonably possible changes in trading performance, show that the Group is forecasting to meet the financial terms expected to be required by the CAA. Accordingly, the Group has no reason to believe that the renewal will not be granted on acceptable terms using an equivalent basis to previous years. Principal risks and uncertainties are discussed in more detail in the Financial Review.

The Annual Report and Accounts is a summary of information derived form the annual accounts of the Company, contains additional information derived form the Directors’ Report, and does not contain the full text of that report. The full copy of the annual accounts and the Directors’ Report is available from Companies House.

TurnoverAirline Division turnover represents the invoiced value of airline traffic revenue and related income exclusive of intra-Group trading, value added tax and other taxation. Airline traffic revenue is recognised from the date of customer departure. Other related revenue, such as bar sales, is recognised as revenue at the date that the right to receive consideration occurs. Services invoiced prior to the year end, in respect of customer departures in future accounting periods, are carried forward as deferred income in the balance sheet.

Engineering Division turnover represents amounts receivable in the normal course of business from engineering services and incidental revenue, exclusive of value added tax.

Travel Division turnover represents amounts derived from the provision of goods and services which fall within the Group’s ordinary activities after deduction of trade discounts and value added tax. Turnover is recognised from the date of customer departure.

Deferred income and related expenditureServices invoiced prior to the year end, in respect of customer departures in future accounting periods, are carried forward as deferred income in the balance sheet. Costs incurred prior to the year end in respect of those services are also deferred until the date of customer departure. Brochure and promotional costs are charged to the profit and loss account over the season to which they relate where recovery of the costs is reasonably assured.


1. Accounting policies continuedIntangible assets – intellectual property rightsIntellectual property assets are stated at cost, and are amortised over a period of 10 years. Provision is made for any impairment.

Intangible assets – goodwillGoodwill arising on the acquisition of subsidiary undertakings and businesses, representing any excess of the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired, is capitalised and written off on a straight line basis over its useful economic life, which is 20 years. Provision is made for any impairment.

Intangible assets arising on the purchase of brands are carried at historical cost and are deemed to have an indefinite useful economic life, subject to an annual impairment review, and are therefore not amortised.

Intangible assets – carbon allowancesCarbon allowances received free of charge under the EU Emissions Trading Scheme, which became effective for the aviation industry on 1 January 2012, are recognised as intangible assets at market value on the date of receipt. Purchased allowances are also recognised initially at cost (purchase price) within intangible assets.

Consistent with Statement of Standard Accounting Practice 4 ‘Accounting for Government Grants’, the value of allowances received is deferred and recognised in income on a systematic basis over the period to which the grant relates. The estimated gross cost of settling the liability for CO2 emitted in the period is recognised in the profit and loss account as incurred.

Tangible fixed assetsTangible fixed assets are stated at cost, less accumulated depreciation and any provision for impairment.

Fixed assets are depreciated from the date when available for use at rates estimated to reduce them to their residual values over their estimated useful lives or the periods of applicable leases. The principal bases used are as follows:

Long leasehold property Straight line over 50 years

Short leasehold property Straight line over term of lease

Aircraft and engines Straight line over 22 years to the relevant residual value

Rotables Net expenditure is written off over a period of up to 22 years to a residual value of 20% of cost on a straight line basis

Aircraft modifications and special work Straight line over periods of up to 22 years. A residual value of 20% of cost is applied in respect of owned aircraft

Plant and equipment Straight line over 3 to 10 years

Engine overhaul and maintenance costs Amortised on a straight line basis over the period until the next scheduled overhaul

An element of the cost of a new aircraft is attributed on acquisition to prepaid maintenance of its engines and airframe and is amortised over the period until the next scheduled major overhaul. Subsequent costs incurred which extend the useful life to future periods, such as long-term maintenance and major overhaul of aircraft and engines, are capitalised as incurred.

Leased aircraft maintenance costsThe Group incurs liabilities for maintenance costs in respect of aircraft leased under operating leases. These arise from the legal and constructive contractual obligations relating to the condition of the aircraft when it is returned to the lessor. To discharge these obligations, the Group may need to carry out maintenance work prior to the return of the aircraft to the lessor.

The provisions recorded and charged to the profit and loss account are dependent on the life of the component or maintenance interval used and the individual terms of the lease. Once the component or maintenance interval has passed the point such that the Group is contractually obliged to carry out the required maintenance work, a full provision for the related cost is recorded, and a corresponding maintenance asset is recognised within fixed assets. The asset is depreciated over the expected period to the next contractual obligation.

Maintenance deposits paid to lessors, which may be offset against the eventual cost of maintenance, are recognised as other debtors within the Group financial statements until such time as the maintenance work is undertaken.


1. Accounting policies continuedEstimates are required for the likely utilisation and condition of the aircraft and the expected cost of the maintenance check at the time it is expected to occur. The bases of all estimates are reviewed once each year and, in addition, when there is an indication of a material change to an estimate arising from a specific event, such as renegotiation of the end of lease return conditions, increased or decreased utilisation, or unanticipated changes in the cost of heavy maintenance services.

StockStock, including aircraft consumables, and work in progress is valued at the lower of cost and net realisable value. Cost is the original purchase cost. Provision is made for obsolete or defective items.

Foreign currencyForeign currency transactions are translated at the rates ruling when they occurred or, if explicitly hedged with a foreign currency forward contract, and not separately hedged against the cost of an aircraft as described below, at the forward contract rate. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date or, if appropriate, the forward contract rate. Any differences are taken to the profit and loss account.

InvestmentsThe Company’s investments in subsidiary undertakings are held at cost less any provision for impairment.

Current asset investments are shown at the lower of cost and net realisable value. Cash on deposit is classified as a current asset investment if it is not available, without penalty, within 24 hours.

TaxationCurrent UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date.

Deferred taxation is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.

LeasesAssets held under finance leases and hire purchase contracts are capitalised and are depreciated over their estimated useful lives. Finance costs are charged to the profit and loss account over the period of the lease or hire purchase contract so as to produce a constant periodic rate of charge on the remaining balance of the obligation for each accounting period. Amounts payable under operating leases are charged to the profit and loss account as incurred. Crew training and aircraft introductory costs in respect of aircraft under operating leases are written off as incurred.

Pension costsContributions to defined contribution pension schemes are charged to the profit and loss account when payable. Any differences between the amounts payable and paid are recorded as either accruals or prepayments on the balance sheet.

The Group operates two defined benefit schemes, both of which are closed to new entrants. Past service costs are recognised immediately in the profit and loss account if the benefits have vested. If the benefits have not vested immediately, the costs are recognised over the period until the vesting occurs. The interest cost and the expected return on assets are shown as a net pension funding cost in interest receivable and payable. Actuarial gains and losses are recognised in the consolidated statement of total recognised gains and losses.

The defined benefit schemes are funded, with the assets of the scheme held separately from those of the Group, in separate trustee administered funds. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on high quality corporate bonds of equivalent currency and term to the scheme liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The resulting defined benefit schemes’ assets or liabilities, net of the related deferred tax, are represented separately after other net assets on the face of the consolidated balance sheet.

Notes to the financial statements continuedYear ended 31 October 2012


1. Accounting policies continuedFinancial liabilities and equityThe Group has not adopted FRS 26 Financial Instruments; Recognition and Measurement. This would require the recognition of financial instruments such as open currency and jet fuel hedges on the balance sheet and revaluation to fair value. Instead, commitments relating to unrecognised gains and losses on derivative transactions are disclosed in note 19 under other finance commitments.

2. Turnover, loss before tax and net liabilitiesGroup gross and net turnover, loss before tax and net liabilities are analysed as follows:

Gross turnover

2012 £’000

Eliminations 2012

£’000

Net turnover

2012 £’000

Gross turnover

2011 £’000

Eliminations 2011

£’000

Net turnover

2011 £’000

Description of class of business:Airline operations 683,531 (174,189) 509,342 620,241 (162,407) 457,834Engineering services 86,317 (61,952) 24,365 79,286 (58,166) 21,120Tour operations 589,016 (297,575) 291,441 570,775 (291,964) 278,811Group 10,395 (10,395) – 5,804 (5,804) –

1,369,259 (544,111) 825,148 1,276,106 (518,341) 757,765

(Loss)/profit before tax Net (liabilities)/assets

2012 £’000

2011 £’000

2012 £’000

2011 £’000

Description of class of business:Airline operations (37,234) (70,128) (18,122) 7,290 Engineering services 5,306 2,898 18,859 16,348 Tour operations 5,581 5,823 (3,196) (3,490)Group 1,215 (810) 962 (17,090)Net interest (4,870) (4,531) – –FRS 17 adjustment (3,400) (3,479) (140,211) (102,870)

(33,402) (70,227) (141,708) (99,812)

The £37.2m Airline operations loss before tax includes an impairment adjustment of £11.5m on two A320 aircraft and a £6.9m write down of unrecoverable amounts due to the termination of a maintenance contract for B757 engines on 31 March 2013 which has been reflected in these financial statements. In the year ended 31 October 2011 there was an impairment adjustment of £11.6m on two A321 aircraft.

The Group operates two defined benefit pension schemes for staff in the airline operations, engineering services and tour operations divisions. The assets and liabilities of these schemes cannot be split between these divisions. Consequently in the analysis above each division has accounted for these schemes as defined contribution schemes, and only recognised their contributions payable to the schemes.

2012 £’000

2011 £’000

Turnover by origin is analysed by geographical market below:United Kingdom 812,474 743,478Europe 6,785 8,967North America 5,478 4,784Africa 77 271Asia 334 265

825,148 757,765

The principal revenue-earning assets of the Group are its aircraft fleet. Since the Group’s aircraft fleet is employed flexibly across its route network, there is no suitable basis of allocating such assets and related liabilities to geographical segments.


2. Turnover, loss before tax and net liabilities continuedThe operating loss and loss on ordinary activities before taxation can be analysed as follows:

2012 2011

Operating loss

£’000

Loss before tax

£’000

Operating loss

£’000

Loss before tax

£’000

Reported result (25,334) (33,402) (54,101) (70,227)Impairment of aircraft 11,521 11,521 11,600 11,600Termination of B757 maintenance contract 6,948 6,948 – –Loss on sale of aircraft – – 7,497 7,497

Reported result before impairment of aircraft, termination of maintenance contract and loss of sale of aircraft tangible fixed assets (6,865) (14,933) (35,004) (51,130)

3. Information regarding Directors and employees2012

£’0002011

£’000

Directors’ remuneration:Emoluments 1,417 702

The emoluments of the highest paid Director were: 646 358

The accrued pension of the highest paid Director from the defined benefit scheme at 31 October 2012 was £nil (2011: £nil) per annum.

2012 Number

2011 Number

The number of Directors in a defined benefit pension scheme – –

Average number of employees of the Group during the year, including Directors, was as follows:Airline operations 1,593 1,744Engineering services 389 353Tour operations 302 196Administrative 563 539

2,847 2,832

2012 £’000

2012 £’000

2011 £’000

2011 £’000

Staff costs during the year (including Directors):Wages and salaries 104,128 99,444Social security costs 12,256 11,410Pension costs:– FRS 17 service charge 20 81– Amounts included as other finance costs 3,379 4,135– Contributions to money purchase scheme 6,445 5,031– Amounts recognised in statement of total recognised gains and losses 42,564 174

52,408 9,421

168,792 120,275



4. Profit on ordinary activities before taxation 2012

£’0002011

£’000

Operating loss is after charging:Loss on sale of tangible fixed assets – 7,460Depreciation of tangible fixed assets– owned 31,832 36,356– held under finance leases and hire purchase contracts 844 563Amortisation of intangible assets 747 747Operating lease rentals – plant and machinery 55,851 57,191 – other 2,260 2,125

The analysis of auditor’s remuneration is as follows:2012

£’0002011

£’000

Fees payable to the Company’s auditor for the audit of the Company’s annual accounts 26 26Fees payable to the Company’s auditor and their associates for other services to the Group:The audit of the Company’s subsidiaries pursuant to legislation 254 244

Total audit fees 280 270

Non-audit fees2012

£’0002011

£’000

– Tax services 90 97– Other assurance services 59 51

Total non-audit fees 149 148

Fees payable to the Company’s auditor and their associates in respect of associated pension schemes:Audit 12 25

5. Finance charges (net)

2012 £’000

2011 £’000

Interest payable and similar charges Bank loans and overdrafts 5,307 4,715Finance leases and hire purchase contracts 146 128

5,453 4,843Investment incomeInterest receivable and similar income (562) (313)Other finance chargesNet finance charges on pension scheme 3,379 4,135

Total net finance charges 8,270 8,666


6. Tax charge on profit on ordinary activities(a) Tax charge on profit on ordinary activities

2012 £’000

2011 £’000

Deferred taxOrigination and reversal of timing differences (6,543) (18,986)Adjustment in respect of prior years (353) (410)Change in effective tax rate 237 (552)FRS 17 charge (600) –

Movement on deferred tax liability – note 16 (7,259) (19,948)Movement on pension deferred tax asset taken to profit and loss account – (939)

Total deferred tax charge/(credit) (7,259) (20,887)

Tax charge/(credit) on profit on ordinary activities (7,259) (20,887)

(b) Factors affecting current tax credit for the yearThe tax assessed for the period is lower (2011: lower) than the standard rate of corporation tax in the UK of 24.8% (2011: 26.8%). The differences are explained below:

2012 %

2011 %

Standard rate of corporation tax 24.8 26.8Effects of: Expenses not deductible for tax purposes (4.4) (2.3) Capital allowances in excess of depreciation (9.1) (10.6) Movement in short-term timing differences (0.1) (0.1) Total prior period adjustments – – Tax losses carried forward (9.9) (4.6) FRS 17 movement (1.8) (1.4) Consol adjustments with no tax effect 0.5 – Taxable foreign exchange in reserves – (7.8)

Current tax credit for the year – –

(c) Factors affecting current tax credit for the yearThe Finance Act 2012, which provides for a reduction in the main rate of corporation tax from 24% to 23% effective from 1 April 2013, was substantively enacted on 3 July 2012. This rate reduction has been reflected in the calculation of deferred tax at the balance sheet date.

The Government intends to enact a future reduction in the main tax rate down to 21% by 1 April 2014. As this tax rate was not substantively enacted at the balance sheet date, the rate reduction is not yet reflected in these financial statements in accordance with FRS 21, as it is a non-adjusting event occurring after the reporting period.

7. Profit attributable to the CompanyThe profit for the financial year dealt with in the financial statements of the parent company was £1,581,000 (2011: £11,000 loss). As permitted by Section 408 of the Companies Act 2006, no separate profit and loss account is presented in respect of the parent company.



8. Intangible fixed assets

GroupGoodwill

£’000

Patents/trademarks

£’000Total

£’000

CostAt 1 November 2011 and at 31 October 2012 15,854 500 16,354

AmortisationAt 1 November 2011 10,811 500 11,311Charge for the financial year 747 – 747

At 31 October 2012 11,558 500 12,058

Net book valueAt 31 October 2012 4,296 – 4,296

At 31 October 2011 5,043 – 5,043

CompanyBrand £’000

CostAt 1 November 2011 and 31 October 2012 35,000

AmortisationAt 1 November 2011 and 31 October 2012 –

Net book valueAt 31 October 2012 35,000

During the year ended 31 October 2011, the Company acquired the Monarch brand from Monarch Airlines Limited for a total consideration of £35m, supported by an independent valuation. From 1 November 2011 the Company now receives an annual royalty payment from Monarch Airlines of 0.5% of revenue and from Monarch Aircraft Engineering Limited based on 0.25% of third party revenue. 9. Tangible fixed assets

Long leasehold property

£’000

Short leasehold property

£’000

Aircraft and engines

£’000Rotables

£’000

Aircraft modifications

and special work

£’000

Plant and equipment

£’000

Engine overhaul and maintenance

costs £’000

Total £’000

Cost At 1 November 2011 14,194 7,824 103,971 45,339 25,258 45,453 162,346 404,385Additions 1 – 7,868 1,852 1,681 5,868 11,842 29,112Transfers 2,802 (3,097) (41) – 41 295 – –Disposals – – – (1,098) (21) (631) (16,840) (18,590)

At 31 October 2012 16,997 4,727 111,798 46,093 26,959 50,985 157,348 414,907

Accumulated depreciationAt 1 November 2011 6,241 4,153 63,279 25,341 18,854 36,054 71,273 225,195Charge for the year 336 239 890 3,642 3,070 2,932 21,568 32,677Transfers 1,061 (1,097) (14) – 12 38 – –Impairment – – 9,829 – 358 – 1,334 11,521Disposals – – – (875) (131) (592) (9,380) (10,978)

At 31 October 2012 7,638 3,295 73,984 28,108 22,163 38,432 84,795 258,415

Net book valueAt 31 October 2012 9,359 1,432 37,814 17,985 4,796 12,553 72,553 156,492

At 31 October 2011 7,953 3,671 40,692 19,998 6,404 9,399 91,073 179,190


9. Tangible fixed assets continuedDuring the year ended 31 October 2012, the Group did not sell and lease back any aircraft. In the year ended 31 October 2011, five A321 aircraft with a net book value of £83,728,000 were sold and leased back. Sale proceeds for the five aircraft totalled £76,230,000.

At 31 October 2012 an impairment review was performed. This resulted in the write down of £11,521,000 (2011: £11,625,000) in the income statement of two A320 aircraft (2011: A321 aircraft).

The plant and equipment cost of the Group and Company includes £6,581,000 (2011: £6,665,000) in respect of assets which are subject to hire purchase and finance lease contracts. The accumulated depreciation of these assets is £2,763,000 (2011: £1,918,000). The related depreciation charge for the year was £844,000 (2011: £77,000).

The cost of the long leasehold property includes £68,000 (2011: £68,000) of capitalised interest.

Commitments for capital expenditure

Group 2012

£’000

Group 2011

£’000

Company 2012

£’000

Company 2011

£’000

Contracted for but not provided in the financial statements – – – –

10. Fixed asset investments

Company

Shares in subsidiary

undertakings £’000

Loans to subsidiaries

£’000Total

£’000

Cost or valuationAt 1 November 2011 48,537 13,000 61,537Additions – – –Disposals (28,139) – (28,139)

At 31 October 2012 20,398 13,000 33,398

Provisions for impairmentAt 1 November 2011 and at 31 October 2012 – – –

Net book valueAt 31 October 2012 20,398 13,000 33,398

At 31 October 2011 48,537 13,000 61,537

Principal Group investmentsThe Company and the Group have investments in the following subsidiary undertakings and investments, which principally affected the profits or net assets of the Group. The principal investments include the following:

Subsidiary undertakingsCountry of incorporation and operation Principal activity Holding %

Avro Limited England and Wales Sale of airline seats 16,100,000 ordinary £1 shares 100

Cosmos Holidays Limited England and Wales Tour operator 25,200,000 ordinary £1 shares 100

Monarch Aircraft Engineering Limited England and Wales Aircraft engineering and maintenance 100,000 ordinary £1 shares 100

Monarch Airlines Limited* England and Wales Airline operator 20,100,000 ordinary £1 shares 100

Monarch Airlines Leasing Limited England and Wales Leasing of equipment 2 ordinary £1 shares 100

Monarch Technical Support Limited England and Wales Engineering and technical services 2 ordinary £1 shares 100

Monarch Travel Group Limited England and Wales Holding company 20,000 ordinary £1 shares 100

First Aviation Limited* England and Wales Charter aircraft broker 25,000 ordinary £1 shares 100

Monarch 2011 Limited* England and Wales Financing 1 ordinary £1 share 100

Monarch Group Management Limited* England and Wales Group recharging 2 ordinary £1 shares 100

* Held directly by Monarch Holdings Limited.



11. StocksGroup

2012 £’000

Group 2011

£’000

Engineering stock 4,035 4,147Cabin consumables 301 153Goods held for resale – –

4,336 4,300

In the opinion of the Directors, the replacement cost of stocks is not materially different to the above amounts for both accounting period ends.

12. DebtorsGroup

2012 £’000

Group 2011

£’000

Company 2012

£’000

Company 2011

£’000

Amounts falling due within one year:Trade debtors 25,050 45,875 – –Amounts owed by Group undertakings – – 151 108Corporation tax recoverable – 183 – –Other debtors 20,040 6,064 – 169Prepayments and accrued income 107,101 95,054 – –

152,191 147,176 151 277

Amounts falling due after more than one year:Amounts owed by Group undertaking – – 2,000 2,000Deposits held by lessors 13,067 9,330 – –

13,067 9,330 2,000 2,000

Total debtors 165,258 156,506 2,151 2,277

13. Current asset investmentsGroup

2012 £’000

Group 2011

£’000

Company 2012

£’000

Company 2011

£’000

Restricted cash 51,578 16,645 10,000 –

51,578 16,645 41,578 16,645

Restricted cash provides security on facilities made available by banks in respect of advanced bookings, security for certain hedging arrangements and guarantee arrangements.

14. Creditors: amounts falling due within one yearGroup

2012 £’000

Group 2011

£’000

Company 2012

£’000

Company 2011

£’000

Bank loans and overdraft (secured) 14,381 3,988 – –Shareholder loans (secured; see note 25) 83,858 60,000 – –Obligations under hire purchase contracts and finance leases 765 684 – –Trade creditors 32,752 28,245 – –Amounts owed to Group undertakings – – 40,707 60,047Other taxation and social security costs 11,227 7,089 646 –Other creditors 4,237 3,547 – 1,152

147,220 103,553 41,353 61,199

Further details regarding loans, finance leases and hire purchase contracts are shown in note 17. The ‘other loan’ is secured against certain aircraft owned by the Group.


15. Creditors: amounts falling due after more than one yearGroup

2012 £’000

Group 2011

£’000

Company 2012

£’000

Company 2011

£’000

Bank loans (secured against certain aircraft) – 14,381 – –Obligations under hire purchase contracts and finance leases 3,114 3,879 – –Amounts owed to Group undertakings – – 9,775 9,775Other loan 1,150 1,150 1,150 1,150Other creditors 1,280 1,280 – –

5,544 20,690 10,925 10,925

Borrowings repayable in more than five years – – – –

Obligations under hire purchase contracts and finance leasesOn demand or within one year (note 14) 765 684 – –Between one and two years 3,114 765 – –Between two and five years – 2,460 – –After five years – 654 – –

3,879 4,563 – –

Amounts owing to Group undertakingsAfter five years – – 9,775 9,775

Other loanAfter five years (see note 25) 1,150 1,150 1,150 1,150

The obligations under finance leases and hire purchase contracts are effectively secured on the assets held under those leases.

The amount owed by the Company to a Group undertaking of £9,775,000 was not interest-bearing during the year (2011: £9,775,000). This amount is repayable after more than five years; there are no other terms for repayment.

The other loan is interest free and is repayable after more than five years. There are no other terms for repayment.

16. Provisions for liabilities

Group

Un-utilised leasehold

£’000

Emission reserves

£’000

Maintenance reserves

£’000Deferred tax

£’000Total

£’000

At 1 November 2011 1,336 – 50,462 3,258 55,056Credit to profit and loss account (210) – – (6,658) (6,868)Provisions made in year – 4,820 1,530 – 6,350Utilised in the year – – (14,371) – (14,371)Charge to the statement of total recognised gains and losses – – – 169 169

At 31 October 2012 1,126 4,820 37,621 (3,231) 40,336



16. Provisions for liabilities continuedDeferred taxationThe total potential amount of deferred tax on timing differences and the amount for which recognition at 23% (2011: 25%) has been made is:

Group recognised

2012£

Group provided

2011 £

Tax losses (9,420) (8,481)Accelerated capital allowances 5,447 10,853Other timing differences (592) (563)Foreign exchange 1,334 1,450

(3,231) 3,259

Un-utilised leaseholdThe provision relates to part of a property lease which is currently being marketed for tenants.

Emission reservesEmission reserves represent a commitment to purchase emissions allowances to meet the requirements of the EU Emissions Trading Scheme, which became effective for the aviation industry on 1 January 2012. The provision is made for the CO2 emitted in the period based on emission allowance utilised. The provision will be utilised at the end of the period when the initial allowance was granted for.

Maintenance reservesWhere the Group has a commitment to maintain aircraft held under operating leases, provision is made during the lease term for the rectification obligations contained within lease agreements, when the condition of a specific component falls below that specified in the lease. The provisions are based on estimated future costs of major airframe, certain engine maintenance checks and one-off costs to be incurred at the end of the lease.

17. Called up share capital

2012 £’000

2011 £’000

Authorised, called up, allotted and fully paid50,000 ordinary shares of £1 each 50 50

20,000,000 redeemable preference shares of £1 each 20,000 –

Under the terms of the 2011 Refinancing, on 15 November 2011, Amerald Investments NV (ultimate and immediate parent and controlling party) provided £40m of funds to Monarch 2011 Limited, a newly incorporated subsidiary of the Group, as additional working capital. The £40m comprised £20m of preference share capital and a £20m loan.

18. Contingent liabilities Bank guarantees have been made to various suppliers of the Group, including airports, fuel suppliers, ground handling agents, customs agencies and lessors, totalling £9,547,586 (2011: £13,469,000). These guarantees are in addition to the restricted cash disclosed in note 15 and financial commitments disclosed in note 21.

During the year ended 31 October 2009 the Group sold its equity shares and loan stock in Airline Group Limited to the Monarch Airlines Limited Retirement Benefits Plan for £37,000,000. As part of the transaction, the Group agreed to reimburse the pension scheme for any loss incurred if the equity shares and loan stock are sold for less than the acquisition price. The Directors consider it unlikely that any liability will arise in relation to this agreement.

During the financial year the Group paid contributions at 50% of the due rates in line with the Schedule of Contributions into the Monarch Airlines Limited Retirement Benefits Plan. The Group are due to pay the balance of contributions when the ‘Pension Contribution Payback Trigger’ has been met. The amount due has been estimated at approximately £633,600.

The Group is involved in various disputes or litigation in the normal course of business. Whilst the result of such disputes cannot be predicted with certainty, the Company believes that the ultimate resolution of these disputes will not have a material effect on the Group’s financial position or results.


19. CommitmentsOperating leasesAt 31 October 2012, the Group had annual commitments under non-cancellable operating leases as set out below:


£’000

Land and buildings

£’000Other £’000

Total £’000

Operating leases which expire: Within one year 4,509 129 – 4,638 In the second to fifth year inclusive 42,425 490 169 43,084 After five years 5,186 1,359 1,251 7,796

52,120 1,978 1,420 55,518

At 31 October 2011, the Group had annual commitments under non-cancellable operating leases as set out below:


£’000

Land and buildings

£’000Other

£’000Total

£’000

Operating leases which expire: Within one year 7,627 272 36 7,935 In the second to fifth year inclusive 31,846 500 – 32,346 After five years 12,066 1,257 741 14,064

51,539 2,029 777 54,345

Other finance commitmentsAt 31 October 2012, the Group had commitments under fixed forward exchange contracts entered into in the ordinary course of business amounting to £431.4m (2011: £278.6m).

At 31 October 2012, the Group had jet fuel swaps entered into in the ordinary course of business amounting to £173.8m (2011: £177.4m).

At 31 October 2012, the Group and Company had carbon credit swaps entered into in the ordinary course of business to hedge an amount of £5.8m (2011: nil) of their future carbon credit purchases.

The fair value of derivative transactions entered into to hedge future operating costs is not recognised in the accounts. At 31 October 2012, the Group had an unrecognised loss on its forward exchange contracts of £5.2m (2011: profit of £0.6m), an unrecognised profit on its jet fuel swaps of £1.8m (2011: profit of £0.6m) and an unrecognised profit on carbon credit swap was £0.4m (2011: £nil). 20. Pension arrangements For the year ended 31 October 2012, the Group has applied FRS 17 as outlined by the Accounting Standards Board.

Defined contribution schemesThe Group made contributions to the defined contribution scheme of £6.3m (2011: £5.0m). There were outstanding contributions at the year end of £0.6m (2011: £0.5m).

Defined benefit schemesMonarch Airlines Limited Retirement Benefits PlanCertain subsidiaries operate a jointly funded defined benefit pension scheme for UK employees. The assets of the scheme are administered by trustees and are held in separate funds.

The scheme has been closed to new entrants since 2002 and ceased future benefit accruals from 30 April 2010. The benefits of certain employees retain a link to salaries in line with a pre-agreed formula. On 1 March 2011, the remaining Permanent Health Insurance members became members of a new defined contribution scheme.



20. Pension arrangements continuedThe scheme is subject to a triennial valuation by independent actuaries. A full actuarial valuation was last carried out at 30 June 2010; a summary of the following position as at 30 June 2010, produced in accordance with the Pensions Act 2004, showed a shortfall in the scheme relative to the Statutory Funding Objective of £234.8m.

Cosmosair Pension and Life Assurance SchemeCertain subsidiaries operate a funded defined benefit scheme for qualifying employees. The assets of the scheme are held in separate funds.

The scheme is subject to a triennial valuation by independent actuaries with the last full actuarial valuation carried out at 1 June 2009. The employers’ contribution rate over the average remaining service lives of the members of the scheme takes account of the surplus disclosed by the valuation. The financial assumptions under FRS 17 used by the actuaries were:

2012 2011

Cosmosair Pension and Life Assurance

Scheme

Monarch Airlines Limited Retirement

Benefits Plan

Cosmosair Pension and Life Assurance

Scheme

Monarch Airlines Limited Retirement

Benefits Plan

Rate of increase in salaries 2.60% 2.90% 2.80% 3.30%Rate of increase for pensions in payment 2.30% 2.83% 2.50% 2.88%Discount rate 4.00% 4.25% 5.00% 5.00%Inflation assumption 2.60% 2.65% 2.80% 2.80%Increase in deferred pension 2.00% 2.00% 2.00% 2.00%

Mortality before retirementMales PMA92 84% S1PA PMA92 PMA92

Medium Cohort CMI 2010 Medium Cohort Medium Cohort(Y.O.B.) 1% Per Annum (Y.O.B.) (Y.O.B.)

Females PFA92 95% S1PA PFA92 PFA92Medium Cohort CMI 2010 Medium Cohort Medium Cohort

(Y.O.B.) 1% Per Annum (Y.O.B.) (Y.O.B.)

Mortality before retirementMales PMA92 84% S1PA PMA92 PMA92

Medium Cohort CMI 2010 Medium Cohort Medium Cohort(Y.O.B.) 1% Per Annum (Y.O.B.) (Y.O.B.)

Females PFA92 95% S1PA PFA92 PFA92Medium Cohort CMI 2010 Medium Cohort Medium Cohort

(Y.O.B.) 1% Per Annum (Y.O.B.) (Y.O.B.)

Weighted average life expectancy to determine benefit obligations:

Member age 65 (current life expectancy):Males 22.2 23.2 22.2 22.6Females 25.1 24.4 25.0 25.7

Member age 45 (life expectancy at 65):Males 23.2 24.6 23.2 24.4Females 26.0 25.9 26.0 27.8

Assumptions and sensitivities The Directors have chosen assumptions as at 31 October 2012 which reflect a consistent approach with previous years. Key sensitivities within those assumptions are as follows:• The discount rate is determined with reference to AA-rated corporate bond yields of appropriate term and currency to the liabilities of the Plan.

This year’s determination of a 4.25% discount rate used the Markit iBoxx AA 15 year index rate and adjusted it relative to the Bank of England gilt spot rate for a plan with liabilities of an 18 year duration.

• A 0.25% movement in the discount rate would impact liabilities by approximately £20m.• A 0.25% movement in inflation would impact liabilities by approximately £13m.


20. Pension arrangements continuedExpected return on fund assetsThe return on bonds and cash has been determined by taking the market values and/or yields on AA corporate bonds and government bonds applicable at the reporting date. The expected return on equities was set by adding an equity risk premium to the yield available on fixed interest government bonds with a 15 year term as at the balance sheet date.

Reconciliation to balance sheetThe fair value of the assets and the present value of the liabilities in the schemes and the expected rate of return at each balance sheet date were:

Monarch Airlines Limited Retirement Benefits Plan



2012 %

2012 £’000

2011 %

2011 £’000

2010 %

2010 £’000

Equities 7.00 207,031 7.00 194,966 6.95 204,682Bonds 4.25 56,481 5.00 56,677 4.65 54,956Other – cash 2.80 1,346 3.10 2,018 0.50 816

Total market value of assets 264,858 253,661 260,454Present value of scheme liabilities (447,134) (391,069) (394,243)

Deficit in the scheme (182,276) (137,408) (133,789)Related deferred tax asset 41,924 34,352 36,123

Net pension liability on an FRS 17 basis (140,352) (103,056) (97,666)

Cosmosair Pension and Life Assurance Scheme

Cosmosair Pension and Life Assurance Scheme

Cosmos Pension and Life Assurance Scheme

2012 %

2012 £’000

2011%

2011£’000

2010%

2010 £’000

Equities 6.0 994 7.0 1,225 6.7 1,194Fixed interest and cash 2.8 1,890 3.1 1,746 3.7 1,715Property 6.0 319 7.0 348 6.7 467Purchased annuities 4.0 1,171 5.0 1,180 3.7 798

Total market value of assets 4,374 4,499 4,174Present value of scheme liabilities (3,814) (3,844) (3,433)

Surplus in the scheme 560 655 741Unrecoverable surplus (376) (407) (413)Related deferred tax liability (43) (62) (89)

Net pension asset on an FRS 17 basis 141 186 239

2012 £’000

2011 £’000

2010 £’000

Net pension liability:Net pension liability of Monarch Airlines Limited Retirement Benefits Plan (140,352) (103,056) (97,666)Pension asset of Cosmosair Pension and Life Assurance Scheme 141 186 239

Total net pension liability included in consolidated balance sheet (140,211) (102,870) (97,427)

Analysis of the amount charged to operating profit2012

£’0002011

£’000

Current service cost 20 81



20. Pension arrangements continued2012

£’0002011

£’000

Expected return on pension scheme assets 16,051 16,594Interest on pension liabilities (19,430) (20,729)

Net charge (note 5) (3,379) (4,135)

Actual return on plan assets 22,862 5,902

Analysis of the amount recognised in the statement of total recognised gains and losses (‘STRGL’)2012

£’0002011

£’000

Actuarial loss recognised in the STRGL (42,595) (180)Change in restriction on unrecoverable surplus 31 6

(42,564) (174)

Cumulative loss recognised in the STRGL 90,427 47,817

Movement in net deficit during the year2012

£’0002011

£’000

Changes in benefit obligations Benefit obligations at beginning of year 394,913 397,676 Current service costs 20 81 Interest cost 19,430 20,729 Plan participants’ contributions 4 8 Curtailment benefit – – Actuarial losses 49,375 (10,466) Benefits paid (12,794) (13,115)

Benefits obligations at end of year for plans that are wholly or partly funded 450,948 394,913

Change in plan assets Fair value of assets at beginning of year 258,160 264,628 Expected return on plan assets 16,051 16,594 Actuarial gains 6,811 (10,692) Employer contributions 1,000 737 Member contributions 4 8 Benefits paid (12,794) (13,115)

Fair value of plan assets at year end 269,232 258,160

Restrictions due to unrecoverable surplus (376) (407)

Net amount recognised (182,092) (137,160)

Represented by: Monarch Airlines Limited Retirement Benefits Plan (182,276) (137,408) Cosmosair Pension and Life Assurance Scheme 184 248

Net pension deficit (182,092) (137,160)


20. Pension arrangements continuedFive year history

2012 £’000

2011 £’000

2010 £’000

2009 £’000

2008 £’000

Benefit obligation at end of year (450,948) (394,913) (397,676) (382,386) (253,838)Fair value of assets at end of year 269,232 258,160 264,628 246,448 193,907Unrecoverable surplus (376) (407) (413) (345) (1,248)

(182,092) (137,160) (133,461) (136,283) (61,179)

Difference between actual and expected return of scheme assets: Amount (£’000) 6,811 (10,692) 14,524 32,842 (89,752) Percentage of scheme’s assets (%) 2.5% (4.1%) 5.5% 13.3% (46.3%)

Experience gains and losses on scheme liabilities: Amount (£’000) (49,375) (9,484) (1,352) (1,837) 2,834 Percentage of scheme’s liabilities (%) 10.9% 2.4% 0.3% 0.5% (1.1%)

21. Reserves

Group

Called up share capital

£’000

Preference share capital

£’000

Merger reserve

£’000

Profit and loss account

(deficit) £’000

Total 2012

£’000

Total 2011

£’000

At the beginning of the year 50 – 4,963 (104,825) (99,812) (43,497)Issue of preference shares – 20,000 – – 20,000 –Realisation of revaluation surplus – – – – – –Loss for the financial year – – – (26,143) (26,143) (49,340)Actuarial loss relating to the pension scheme (note 20) – – – (42,564) (42,564) (174)Deferred tax charge in relation to the pension scheme due

to rate change – – – (3,642) (3,642) (2,743)Deferred tax credit in relation to the pension scheme due

to movement in year – – – 10,633 10,633 59Deferred tax in relation to rate of change of tax – – – (169) (169) (169)Deferred tax adjustments in respect of estimates made

in prior years – – – – – (1,911)Deferred tax origination and reversal of timing differences – – – – – (2,037)Other reserves – – – (11) (11) –

At the end of the financial year 50 20,000 4,963 (166,721) (141,708) (99,812)

Company

Called up share capital

£’000

Profit and loss account

£’000

Total 2012

£’000

Total 2011

£’000

At the beginning of the financial year 50 26,640 26,690 26,701Profit/(loss) for the financial year (note 7) – 1,581 1,581 (11)

At the end of the financial year 50 28,221 28,271 26,690



22. Reconciliation of movements in Group shareholders’ funds

2012 £’000

2011 £’000

Loss for the financial year (26,143) (49,340)Other recognised gains and losses relating to the year (35,753) (6,975)

(61,896) (56,315)Preference shares issued 20,000 –

Net additions to shareholders’ funds (41,896) (56,315)

Opening shareholders’ funds (99,812) (43,497)

Closing shareholders’ funds (141,708) (99,812)

23. Reconciliation of operating profit/(loss) to net cash inflow from operating activities2012

£’0002011

£’000

Operating loss (25,334) (54,101)Profit on sale of fixed assets 202 –Amortisation – intangible fixed assets 747 747Depreciation – tangible fixed assets 32,677 36,919Impairment – tangible fixed assets 11,521 –(Increase)/decrease in stocks (36) 5,574Increase in debtors (22,415) (50,020)Increase in creditors, pensions and other items 35,249 60,899

Net cash inflow from operating activities 32,611 18

24. Reconciliation of net cash flow to movement in net debt

2012 £’000

2011 £’000

Increase in cash in the year 9,274 19,647Cash used to repay debt 814 57,733Cash inflow from financing activities (20,000) (20,000)Increase/(decrease) in liquid resources 34,933 (22,138)

Change in net debt resulting from cash flows 25,021 35,242Opening net debt (26,853) (62,095)

Closing net debt (1,832) (26,853)

25. Analysis of net debtAt 1 November

2011 £’000

Cash flows £’000

Non-cash changes

£’000

At 31 October 2012

£’000

Cash at bank and in hand 40,584 9,274 – 49,858

Bank loans due after one year (14,381) – 14,381 –Bank loans due within one year (3,988) 3,988 (14,381) (14,381)Shareholder loans due within one year (60,000) (23,858) – (83,858)Finance leases and hire purchase obligations (4,563) 684 – (3,879)Other loan (1,150) – – (1,150)

(84,082) (19,186) – (103,268)Current asset investments 16,645 34,933 – 51,578

Total (26,853) 25,021 – (1,832)


26. Related party transactionsSet out below is a summary of related party transactions between:• the Company or subsidiary undertakings of the Company; and• companies or individuals who are related parties of the Company or Group where the transaction or balance is not specifically exempted from

disclosure by FRS 8 ‘Related Party Disclosures’.

All such transactions have been executed on an arm’s length basis.

A) Arrangements with companies and individuals related to the ultimate controlling partiesThe following transactions and arrangements are with companies or individuals which the Directors believe are owned or controlled by the ultimate controlling parties as set out in note 26 below in the same or similar proportions as to those holdings in the Group.

Transaction Related party

1 Loan to Monarch Holdings Limited on interest free terms and with no fixed terms for repayment. The amount due to the related party at 31 October 2012 was £1.15m (2011: £1.15m)

Amerald Investments NV as lender.

2 Operating leases to Monarch Airlines Limited of aircraft, engines and rotable components at a cost of £12.3m (2011: £27.3m) in the period. These leases are for periods of between 1 and 12 years at rentals ranging from £0.5m to £3.8m per annum (2011: £0.5m to £5.9m). The amount due to the lessors at 31 October 2012 was £0.3m (2011: £1.5m)

Various lessors.

3 From 14 October 2011, shareholder-owned aircraft lessors suspended lease payments on eight aircraft leased by Monarch Airlines. Deferred payments totalled £22m at 31 October 2012.

Various lessors.

4 Provision of insurance and insurance services to the Group in respect of the aircraft fleet, property, and motor vehicles amounting to £4.9m (2011: £6.2m) in the year. The amount due to the related party at 31 October 2012 was £3.3m (2011: £3.9m). There were also amounts due from Voyager to Monarch Airlines Limited to the value of £0.4m (2011: £2.0m) in relation to insurance claims agreed and awaiting settlement.

Voyager Insurance Company Limited as provider of insurance and insurance services.

5 Under a Rebate Assignment dated 15 April 1988, and supplemental agreements dated 15 July 1991 and 29 June 1992, the Company is providing security for the obligations of Andrair Limited, to the head lessor (an unrelated third party) of an aircraft which is subleased by Andrair Limited to Monarch Airlines Limited. The annual lease rental was £1.0m. However, a liability will only arise if Andrair Limited defaults in its lease payment obligations. The quantum of any such liability would be based on the net proceeds of sale of the aircraft which cannot be determined at the present time.

Andrair Limited as lessee of an aircraft and beneficiary of security agreements.

6 During the year, Monarch Airlines Limited incurred costs of £47,000 (2011: £131,000) in respect of guarantee fees payable in connection with the acquisition of aircraft.

SMG Asset Management Limited as guarantor.

7 Sale of seats to the related party by subsidiary undertakings of the Company amounting to £281,000 (2011: £183,000). At 31 October 2012 £nil (2011: £nil) was due from the related party.

Cosmos Transport Services Limited as seat broker.

8 The sum of £nil (2011: £265,000) was due to the related party at 31 October 2012 in respect of scheduled airline seats paid for by the related party on behalf of a subsidiary undertaking.

Cosmos Coach Tours Limited.

9 Fee for provision of resort and administrative services and liability insurance £1,079,000 (2011: £1,137,000).

Tourama Limited as provider.

10 The balance due to Tourama Limited at 31 October 2012 was £11,097,227 (2011: £12,784,000). This covers transaction 10 and payments made by Tourama Limited to unrelated third parties as paying agent of a subsidiary undertaking.

Tourama Limited as creditor.

11 Fee for provision of management services to a subsidiary undertaking of £nil (2011: £50,000). Cosmosguide Holding International NV as provider.

12 Licence fee for use of the ‘Cosmos’ name £138,000 (2011: £130,000). The balance due at 31 October 2012 was £138,000 (2011: £130,000).

Cosmos European Travels Aktiengesellschaft as proprietor.



26. Related party transactions continued


13 Administration fees, contribution to central overheads and supply of UK airport departure point services charged to the related parties amounted to £1,988,000 (2011: £2,501,000) in the year, and purchases of scheduled service seats from the related parties of £2,624,000 (2011: £3,371,000). The balance due from these related parties at 31 October 2012 was £257,000 (2011: £120,000) and includes holiday booking monies received on behalf of Cosmos Coach Tours Limited.

Cosmos Coach Tours Limited, Archers Tours Limited, and Cosmos Transport Services Limited as users and providers of services.

14 In October 2009, Monarch Airlines Leasing Limited borrowed £15m from Transcontinental Aviation Limited. Interest on the loan of £1,793,000 (2011: £1,733,000) was incurred during the year ended 31 October 2012.

Transcontinental Aviation Limited as lender.

15 In December 2009, Monarch Airlines Limited borrowed £25m from Transcontinental Aviation Limited. Interest on the loan of £1,917,000 (2011: £1,493,000) was incurred during the year ended 31 October 2012.


16 On 23 March 2011, Transcontinental Aviation Limited provided a £2m guarantee to Morgan Stanley on behalf of Monarch Airlines Limited to enable Monarch Airlines Limited to hedge fuel.

Transcontinental Aviation Limited as guarantor.

17 On 25 August 2011, Transcontinental Aviation Limited provided a £10m guarantee to Barclays Bank PLC on behalf of Monarch Airlines to provide guarantees to suppliers.


18 On 31 October 2011, Amerald Investments NV loaned Monarch 2011 Limited £20m as an advance on the £40m of refinancing provided in November 2011.

Amerald Investments NV as lender.

19 During the year, Transcontinental Aviation Limited provided short-term loans totalling £6,027,000 to Monarch Airlines to cover third party rent payments on aircraft initially covered by the shareholder lease suspension facility but sold by shareholders and leased back by Monarch Airlines during the year. By 31 October 2012, these loans and subsequent payments to third parties had been rolled in to the lease suspension facility disclosed above.


20 On 11 May 2012, Transcontinental Aviation Limited loaned Monarch Airlines Limited £10m to cover FX hedging margin requirements. The loan was repaid on 17 July 2012.


21 Mr F Mantegazza, one of the ultimate controlling parties of the Group, was paid £104,000 for services to the Group in the year. At 30 October 2012 the amount due to Mr F Mantegazza was £nil.

Fabio Mantegazza as ultimate controlling party.

22 On 24 April 2013, Monarch Airlines entered into an agreement with Transcontinental Aviation Limited to transfer the benefit of a US$100m hedge transaction undertaken in early May 2012.

Transcontinental Aviation Limited as hedging counterparty.

B) Arrangements with other related parties


1 Rawlinson Partners Limited invoiced Monarch Airlines £172,000 (2011: £461,000) for its consulting services during the year. As at the year end there were no outstanding amounts for invoices owed to Rawlinson Partners Limited.

D I Rawlinson as a Director of Rawlinson Partners Limited and Monarch Holdings Limited.



27. Ultimate parent company and controlling partyThe Directors consider that the Company’s ultimate and immediate parent company and its controlling party is Amerald Investments NV, a company incorporated in the Netherlands Antilles, the accounts of which are neither consolidated nor publicly available.

The Directors consider that Mr F Mantegazza, Mr G Mantegazza and Mr M Albek are together the ultimate controlling parties of the Company.

28. Post balance sheet eventsOn 7 November 2012 the Group completed the sale and leaseback of two Airbus A321 aircraft, the proceeds from which were used to pay down the outstanding debt. Sale proceeds for the two aircraft totalled £31,677,000.

On 27 February 2013 the Group sold and leasebacked two Airbus A320 aircraft. At 31 October 2012 an impairment review of these assets was carried out, resulting in write down of net book value of £11,521,000 in the income statement. Sale proceeds for the two aircraft totalled £3,372,000.


Officers and professional advisers

DirectorsD I RawlinsonR M Palmer

Non-Executive DirectorsR McNultyA Reid

SecretaryJ Marray

Registered officeProspect HouseProspect WayLondon Luton AirportLutonBedfordshireLU2 9NU

Independent auditorDeloitte LLPChartered AccountantsSt Albans


Notes

The Monarch G

roup Annual R

eport 2012

The Monarch Group

Prospect HouseProspect WayLondon Luton AirportLutonBedfordshireLU2 9NUUK

T: 0871 225 0250F: 0871 225 0252www.monarchholdingslimited.com

»

the monarch group online annual report 2012

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