Iberia Cancels Flights Board Of Directors Develop New Business Model

 

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Iberia Cancels Flights Board Of Directors Develop New Business Model

By Bill Goldston
 
Iberia Airlines

October 26, 2009 - A strike called for by the CTA and SITCPLA Cabin Attendants Unions, has forced Iberia to canceled some 400 flights scheduled for October 26 and 27th. Iberia code series flights IB5000, IB8000 and IB7000, operated by Vueling, Iberia Regional/Air Nostrum and other airlines using Iberia codes, will not be affected. Flights to and from the Canary Islands and the Balearic Islands will also operate normally, as will most Iberia long-haul flights. 

Iberia has decided to make fares more flexible to facilitate changes for customers who had planned to travel on the days of the strike. Customers with Iberia IB075 tickets with stages of any flight taking place during the strike days may change or cancel their tickets without penalty, regardless of the fare.

 

This does not apply to flights by other carriers using Iberia codes (IB7000 to 8999 and IB5000 to 5999) since, as mentioned above, these flights will operate normally. Refunds and change of dates are allowed through November 15, 2009, and new tickets may be issued for travel until March 31, 2010. Changes of flying dates are subject to availability of seats in the same class and with the same fare as the original ticket. 

However, the airline is trying to avoid an unjustified strike and is calling on the responsibility of the unions organizing the strike to cancel it. There is also a strike planned for November 10 and 11. The strike has been called for and organized by CTA and SITCPLA Cabin Attendants Unions which represents over 4,300 employees. The goal is to end a four-year pay freeze. Workers have been motivated in part to a pilot wage increase.  

On Thursday, Iberia's Board of Directors adopted a new strategic plan (Plan 2012) to address a number of issues faced by the airline; declining revenues, weak demand and mounting losses.  The 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, describe 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 are aimed at bringing Iberia back to profitability. 

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.

  • 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.

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.
  • Early retirement plan 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.

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.
 
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