Monarch, the UK’s fifth largest airline, was today granted a one day extension to its licence after emergency talks with regulators.

Monarch’s ATOL licence is due to expire, but its bosses were trying to convince the Civil Aviation Authority (CAA) to grant it a renewal. 

With the airline’s future in doubt, the CAA said it would provide a “daily update” on the status of its ability to operate its package holiday arm.

This temporary arrangement comes amid concerns that the airline’s losses were spiralling out of control.

If left without its CAA granted licence the company could have to call in administrators for its package holiday arm, and leaveup to 100,000 holidaymakers uncertain about their homeward travel across the EU and Turkey.

A source close to the airline also told The Daily Telegraph the CAA had raised concerns over the company’s substantial recent losses. These potentially fatal conditions for the company have come amid “bloodbath” trading for short-haul airlines, the source said, as terrorism attacks and security concerns in traditionally strong sales areas such as Tunisia and Turkey have hit consumer demand.

“Our flights are operating as normal, carrying Monarch customers as scheduled. Our ATOL licence – for packaged holidays – is with the regulator. Flight only bookings do not require an ATOL licence, in line with other airlines,” a Monarch spokesman said.

The Civil Aviation Authority (CAA) has chartered a fleet of planes to fetch Monarch customers from across Europe if the airline folds, the Sunday Times reported.

Two Qatar Airways aircraft are on standby at Stansted airport in Essex at the request of the CAA and eight more in Qatar’s capital Doha, MailOnline reported, citing sources. 

The company’s tour-operating arm which requires an ATOL represents just 5pc of the group’s revenues, but there are fears that the loss of confidence among airport and payment partners could have a significant negative impact on the rest of its operation.

Ahead of its licence renewal last September, the airline had to seek a cash injection of £165m from investors Greybull, its fourth in as many years. This action helped Monarch required a 12-day extension before its ATOL licence was renewed.

Accounts filed by the company in August, for the year up to October 2016, showed a loss of £219m, down from a profit of £26.9m in 2015. The company said "a number of trading headwinds" had caused difficulties, in particular the closure of Sharm El-Sheikh airport.

Sources told Sky News that the CAA had been making contingency plans in recent weeks in order to prepare for a rejection of Monarch’s licence due to financial concerns, but that airplane capacity was limited due to hurricane related evacuations from the Caribbean.

Another source at the airline said on Saturday afternoon that a temporary extension was likely, but warned that the situation was fast-moving and that there was a real possibility that the regulator could reject Monarch’s application altogether.

In addition to the 100,000 passengers who could be immediately affected, half-a million customers have bookings with the airline in the coming months. The airline, which serves over 40 destinations, also employs nearly 2,500 staff.

Reports last week claimed that the company was working with KPMG to find future options for its short-haul business by securing a joint venture with a second airline. Suggestions were made that Wizz Air, which largely serves Eastern Europe, was interested in a parternship, particluarly as it would offer it a short-cut to a UK-based Air Operator’s Certificate (AOC).

EasyJet and Norwegian Air Shuttle are also tipped as having made recent bids for parts of the Monarch business.

 Considering the current status of the company’s finances it is unclear if a temporary licence renewal from the CAA would prevent the company from going into administration, raising significant questions for the more than six million passengers expected to fly this year from airports including the company’s base in Luton, London Gatwick, Birmingham, Leeds, and Manchester.

In a statement, a Monarch spokesman said: “In recent months we have undertaken, and continue to undertake, a comprehensive review of Monarch designed to determine its optimal future shape, size and strategy.

“We are having regular discussions on a number of options with potential strategic partners and we will announce any material developments, if and when they happen.”

“The CAA will provide a daily update with regard to the protection that is available to Monarch’s customers,” a CAA spokesperson said. 

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