MT's Losses
Those that have a genuine interest and understanding of the headline loss that MT has announced will realise that the true figure is considerably less than £910m. An appreciation of write offs and write downs is needed, as well as an understanding of accounting practices.
In the past the previous Directors had vastly overvalued the assets of the Company and, I suspect, used accounting practices that were right on the edge. For this they paid themselves handsome bonuses.
If MT had made a “genuine” £910m cash loss during their last financial year they would not be here now and I am sure the banks would have pulled the plug a long time ago.
As part of the £1.3 billion financial restructuring agreement with the banks a £250m overdraft facility was arranged and an agreement that the banks would pay the £400m ATOL bond if MT ceased trading. Other lending facilities were also agreed enabling MT to have the use of £1.3 billion. For this financial arrangement and the agreement reached with the bondholders MT will pay a handsome fee.
Quite rightly the banks, the CAA and the Government have followed the fortunes of the Company closely. A number on individuals on Pprune, as well as competitor companies, have suggested that the CAA call in the bond thereby sending MT into administration. It would appear that the CAA is reasonably content that, for the time being, the Company has the backing of the banks as it restructures the business. To my knowledge the CAA has never called in the ATOL bond or revoked the licence of a major company, the banks have always acted first. If the CAA were to act first, without the support of the banks, they may well leave themselves open to legal action from shareholders, for stopping a company from trading. As a reminder, the banks put ILG/Air Europe into administration and not the CAA.
The really big shock came over a year ago, when after a series of profit warnings MT made an operating loss, and the Company nearly went down. Unfortunately, further mistakes were made with the pricing of holidays this year which has only compounded the situation.
It would appear that the banks are satisfied with the plans going forward to return the group to genuine profitability in 2005. The £144m for selling the American businesses has been received and along with income generated from sales of holidays, MT should be in a position to continue trading thereby giving it some breathing space to get its act together.
No one in the Company is in any doubt as to the difficulties that lie ahead and the next few months will be crucial for summer 2004. The tour operator has reduced the number of holidays on sale for next year by over 17% and there should be a much better use of aircraft, thereby reducing the reliance on 3rd party flying. This could well provide some worries for other airlines.
So for those of you who are climbing on the band wagon, for whatever reason, and adding fuel to the fire by suggesting that the rug should have been pulled from under the Company, I would only hope that you never have to endure the ups and downs that the employees in MT/MYT have had too. And if you do, you will certainly appreciate all the genuine support of colleagues in other companies.