Ibeia announces new strategic plan to cope with crisis in the air industry

22-Oct-2009 Today, Iberia's Boad of Directors has adopted the a new strategic plan (Plan 2012) to address the dramatic situation now faced by the airline, with declining revenues, weak demand and mounting losses, as the negative performance of the economy has shown the measures taken so far to be insufficient.

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.

Iberia’s COO, Rafael Sánchez-Lozano, describes the current situation as unsustainable. "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”. The measures prescribed in Plan 2012 are aimed at bringing Iberia back to profitability.

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 is market leader on those that connect Europe and Latin America, in order to maintain and increase this lead.

• A similar reduction in seat supply on short-and medium-haul routes, in addition to that already underway, and a change in the production model for these flights. 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 37 million euros a year 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 per cent drop in income in the first half of this year, due to the lower demand in general and business passenger traffic in particular, the company is implementing a battery of 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.

This new strategic plan, whose aim is to ensure the soundness and viability of the company, restoring it to profitability and also strengthening Iberia’s position regardless of the outcome of corporate operations.