Monarch collapsed on Monday after years of financial difficulty;

Terrorism, the fall in the pound, and Brexit uncertainty all blamed for problems;

Efforts to compete with low-cost rivals also failed, pushing Monarch into difficulty.

LONDON — When Monarch Airlines collapsed on Monday, the company became the biggest airline failure in the history of British aviation and left approximately 110,000 travellers stranded abroad.

What went wrong?

Speculation that the 50-year-old company was close to collapse first surfaced in September last year but the airline strongly denied it was in trouble at the time. Monarch received a funding injection from private equity business Greybull Capital shortly after. It later emerged that Monarch lost £291 million in the year to October 2016.

Speaking to the Daily Telegraph on Tuesday, Greybull Capital's founder Marc Meyohas said a "bloody hurricane" of problems led to the airline's eventual collapse, adding that the European short-haul flight market is a "bloodbath."

Terror and Brexit hit the industry

Marc Meyohas told the Telegraph that the combination of a weak pound since the Brexit referendum, the increase in terrorist attacks in the Middle East and Europe, and ongoing Brexit uncertainty proved to be "pretty large headwinds" that Monarch couldn't cope with because of its relatively small size.

Airport staff speak by empty Monarch Airlines check-in desks after the airline ceased trading at Birmingham Airport, Britain October 2, 2017. REUTERS/Darren Staples Weaker sterling has been an issue for all British airlines since the Brexit vote — the slump in the pound has cost easyJet £90 million — and Monarch was no different. The weak pound both lowered the number of people able to afford a holiday and increased the airline's fuel costs.

Terrorism and the rise of ISIS have also been an issue for the industry. Tim Symes, a leading insolvency lawyer with DMH Stallard, said on Monday: "A higher terrorism threat has proved to be difficult for trading conditions; Egypt and Turkey provided a key chunk of revenue for [Monarch] and subsequent terror attacks left the airline deprived from the resulting weaker demand."

But terrorism and the fall in the pound affected the entire aviation industry — why has Monarch suffered more than others?

'Lost its way'

"Monarch had somewhat lost its way in recent years, trying to reinvent itself as a low-cost carrier but in a market already well supplied by dominant players like Ryanair and easyJet," John Strickland, an aviation consultant, told the FT on Monday.

Symes said: "The airline adopted the low-cost model in 2004 to keep pace with rivals EasyJet, but this was the beginning of its demise. Flights at some destinations were dropped due to low demand and leased planes were quickly returned."

The airline was the fifth largest in the UK, behind British Airways, easyJet, FlyBe, and Jet2, and Monarch struggled to compete with its bigger competitors in a cut-throat business.

Neil Wilson, a senior analyst at ETX Capital, said on Tuesday: "Monarch carried 14% more passengers last year but for £100 million less revenue.

"Airlines continue to cut fares to grow market share and this is coming at the expense of profit margins. The problem of over-capacity and overly-aggressive pricing is not going away until we see more consolidation."

A Monarch Airlines passenger aircraft prepares for take off from Gatwick Airport in southern England, Britain, October 9, 2016. REUTERS/Toby Melville Gerald Khoo, an analyst with investment bank Liberum, said Monarch was "widely considered to be financially doomed" for many years, according to the Financial Times.

Symes said: "The Brexit vote seemingly provided the final nail in the coffin, as the weak pound impacted on handling charges."

"Monarch was basically in the wrong place at the wrong time. It was sub-scale and failed to adapt to changes in a tough market," Khoo concluded.

Russ Mould, investment director at AJ Bell, said in an email to BI: "Airlines were always seen as a notoriously tricky business and with good reason.

"Demand can be very cyclical, varying according to how well consumers feel they and the economy are doing and customers show little brand loyalty, preferring to focus on cost and value for money. At the same time, the price of oil can move around a lot, even allowing for any short-term hedging that an airline can do to cope with sudden cost increases."

Monarch's collapse has kicked off the biggest repatriation of British citizens since the Second World War and sent shares in other British airlines higher as investors saw opportunities for growth.

It is believed that the airline owes Greybull Capital as much as £150 million, with the firm set to lose a total of £250 million, which it considers to be "close to a total write-off."