Iberia Reveals Cuts to its Short- and Long-Haul Network

Spanish national carrier, Iberia, has confirmed the first stage of it route restructuring as it actions a new Transformation Plan to return the business to profitability.  The oneworld alliance member and International Consolidated Airlines Group (IAG) subsidiary has confirmed it will end services from Madrid to Athens, Cairo and Istanbul in the short-haul market and Havana, Montevideo, San Juan and  Santo Domingo in the long-haul market from next year, describing the majority of these links as “mainly holiday travel routes” where yields are weak. 

Iberia’s short-haul route cull will actually be much deeper than has been announced by the carrier this week as it has already committed to closing its flights from Madrid to Amsterdam, Berlin and Stockholm from January 10, 2013.  The regular route to Athens will close from January 9, 2013, Istanbul flights will end on January 12, 2013 and Cairo will stop being served on a scheduled basis from January 21, 2013.  However, a limited operation will continue on all three routes for varying periods through to the end of the winter schedule.

The four long-haul routes will all close from March 31, 2013.  The airline currently offers a daily flight to Santo Domingo, a five times weekly service to Havana, four weekly services to Montevideo and a three times weekly link to San Juan.  Iberia says it will continue to serve San Juan via its Miami regional hub, while Montevideo will also be served via other Iberia destinations in the region through partner carriers.

According to Iberia, the basis of its Transformation Plan is to focus on “strategic and profitable routes, where there is still growth potential,” which, it hopes, will restore profitability and secure its future.  “The new policies are crucial for returning the airline to the black and maintaining its market leadership,” it said.  The plan is intended to restore profitability to the airline, which racked up operating losses of €262 million in the first nine months of 2012.

“Iberia is obliged to transform its commercial model, and this means focusing on routes that can help turn the company around - the profitable ones that still have some margin for future growth –, and these are our most strategic long-haul routes,” said Rafael Sánchez-Lozano, Chief Executive Officer, Iberia.  “The ones we are dropping are the biggest loss makers, where we have no chance of turning a profit under current conditions. Once we are able to restore competitiveness to the airline, we will carefully look at these routes to see if we can pick them up again.”

The Transformation Plan calls for optimising the Spanish airline's route network in 2013, strengthening the most strategic and profitable routes, and dropping loss makers. Subsequently, it expects to resume growth if economic and market conditions allow, increasing revenues while cutting sales costs, to build a solid platform for future growth.

Iberia plans to improve connections to its busiest long-haul flights, achieve a better balance between business and holiday traffic, and augment its future growth possibilities.   Away from the cuts Iberia will increase capacity on key routes to long-haul destinations “like Brazil and Mexico, Miami, Central America, Chile and Ecuador,” as well as potentially to “London, Casablanca, Algiers, Dakar, Nouakchott and Malabo.”

Iberia competes on all but four of the routes it is closing so air services will be maintained to the majority of these communities.  Amsterdam is served from Madrid by Air Europa, easyJet and KLM; Aegean Airlines links Madrid to Athens, EgyptAir flies between the Spanish capital and Cairo; Havana is served by Air Europa and Cubana; Istanbul by Turkish Airlines and Santo Domingo by Air Europa.

On the routes from Madrid that Iberia faces no competition, its historical link to San Juan will be maintained with a one-stop strategy via Miami but the decision would have meant no more direct flights from the Spanish capital to Berlin Tegel (easyJet serves the city market from Madrid but to Schoenefeld Airport), Montevideo in Uruguay and Stockholm from the end of March next year, although the Spanish carrier’s low-cost partner Iberia Express could still pick up responsibility for the European routes. 

Airlines have been quick to respond to Iberia's cuts though.  Air Europa has already confirmed it will boost its own flights between Madrid and Havana and Santo Domingo from daily to eleven times weekly from April 2013, airberlin revealed on December 14, 2012 that it would launch a daily link between Madrid and Berlin from February 25, 2013, while another airline is showing interest in retaining air links between Madrid and Montevideo.  Iberia had inaugurated flights on the route in July 2004 and has held a monopoly since Pluna closed its services between the two cities in August 2008.  Now, Uruguayan carrier BQB Lineas Aereas says it expects to introduce flights between the destinations from April 2013, its first long-haul service.  It is reported to be in talks to lease a couple of Boeing 767-300ERs to serve the market on a six times weekly basis and is expected to look to codeshare with Iberia to retain important feed into the route in Madrid.

Away from its network changes, Iberia will also introduce all-new Economy and Business class sections on its long-haul flights to generate new revenues and reduce costs  The new cabin interiors, seats, and entertainment options will be available on the current fleet of Airbus A340-600s, and the new A330-300s to be delivered from early next year.  The first of eight A330-300s is due to arrive in January and will be used on routes within Europe and to the Americas.  According to the airline's latest GDS update, the 278-seat A330-300s will be introduced into scheduled operation from February 2013 on flights from Madrid to Chicago, Dakar, London Heathrow, Luanda, Miami, Rome and Tel Aviv.