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Iberia to create new short/medium haul airline to cope with crisis in the air industry

23-Oct-2009 8:09 AM

Iberia's Board of Directors adopted (22-Oct-2009) a new strategic plan (Plan 2012) to address the "dramatic situation" now faced by the airline, with declining revenues, weak demand and mounting losses amid an "unsustainable" situation. The new plan calls for greater emphasis on the generation of revenues, cost savings and efficiency, improved service, and a shift in the airline’s approach to the short- and medium-haul segment. Details include:

  • Measures relating to flying operations: "Given the difference in the performance and competitiveness of Iberia’s long-haul business in contrast to the short- and medium-haul routes, the company is posing two well-defined strategies that allow it to be larger while simultaneously cutting losses. These are:
    • Growth in the long-haul routes, where Iberia stated it is a "market leader on those that connect Europe and Latin America";
    • A similar reduction in seat supply on short-and medium-haul routes, in addition to that already under way, and a change in the production model for these services. To achieve this paradigm shift, which is to be effective in 2011, the airline plans to create a new network airline based in Madrid which will feed and distribute traffic to Iberia’s growing long-haul network.
  • Cost-cutting measures: The measures to reduce costs that are specified in Plan 2012, additional to those already being implemented, include:
    • A freeze of new entrants for the duration of the plan;
    • A company-wide wage freeze in 2010 and 2011;
    • Lay-offs of all cabin attendants older than 55;
    • Expansion of the current lay-off plan to cover about 200 ground employees;
    • Savings of up to EUR37 million euros p/a in overhead costs, starting in two years, in addition to those already planned;
    • Other productivity measures for all the airline's employees.
  • Revenue increase and quality measures: After the 18% reduction in income in 1H2009, due to the lower demand in general and business passenger traffic in particular, the company is implementing new measures to increase revenues in the short and medium term. Among these measures are a re-launch of Business classes, with a new Business Plus class on long-haul routes. Additionally, more aggressive commercial actions will be implemented, with new approaches to large and small businesses, ethnic groups, tour operators, and other groups that may generate additional traffic. A more proactive approach to customers and urgent measures to improve services within the Customer Service Quality Improvement Programme that is now underway. The objective is to maintain Iberia's leadership in the markets where it flies to. [more]

Iberia: "The airline industry has never experienced such a dramatic situation. It is essential for us to use imaginative means to transform Iberia into a sound and viable project,”Rafael Sánchez-Lozano, COO. Source: Company Statement, 22-Oct-2009.