Iberia strategy sees shift towards economy no-frills

Iberia CEO Angel Mullor has outlined a new strategic plan which will lower economy-class service costs in order to enhance business class. The plan will be in place for the next three years at the airline, following the departure of president Xavier de Irala.

Mullor says that the airline decided to terminate its previous strategic plan in late 2002 in order to respond flexibly to a changing air transport environment, and replace it with a plan through to 2005.

Despite the current crisis, the airline plans to add 25% capacity by the end of 2005 and increase its fleet by 25 aircraft before the end of this period. Mullor says: "This is necessary to maintain our market share and sufficient slots when the Madrid and Barcelona airports open their new runways and terminals. As opposed to most of our direct competitors, we will be operating out of hubs which will dramatically increase their capacity."

He says that during the next two-to-three years Iberia will face three main challenges: continued growth of low-cost operators, which will find new opportunities when the new runways open at Madrid and Barcelona; the extension of the domestic high-speed train network; and the appearance of new, highly-focused competitors in all segments of the value chain of the airline's business - such as maintenance or ground-handling.

"We will respond by reinforcing our market leadership in our strategic markets - Latin America and Europe - as soon as Madrid and Barcelona offer additional capacity," he says: "We will work on our cost base, improve the productivity of our resources, and cut distribution and on-board service costs.

"This means that, while we will improve dramatically our business class product, we will redefine our domestic and European economy class product to what the customer really wants to pay for - transportation from A to B."

Newspapers, meals, paper tickets and so on will be optional services - available at a price - on all the airline's European routes. In exchange, basic economy fares will be reduced. "Our customer service priority is to speed up check-in and boarding and to improve our on-time performance even more," he says.

Source: Flight Daily News