July 8th
2010

Iberia will launch a budget airline for Spain and Europe

The company Iberia deals with a new strategy after a hole of 273 million Euros in 2009 and ending a thirteen-year period of benefits.

Iberia, which accumulated thirteen years with benefits, something unprecedented in the airline industry worldwide, has succumbed to the crisis. So much that it has moved from a profit of 32 million Euros in 2008 to a loss of 273 million Euros last year, a hole of more than 700,000 Euros each day.

The decline in the market, regarding especially the executive passengers who are leaving money and the enormous price competition have affected the airline. In order to try to stop the deficit, the company has accelerated its plans to launch a new ‘low cost’ to gather customers in Spain and Europe. This company of cheap tickets will begin flying on November 1st 2010.

According to the president and CEO of Iberia, Antonio Vazquez and Rafael Sánchez Lozano, respectively, who have worked in recent months to try to close the merger with British Airways, this ‘low cost’ company will have the undertaking  to supply Barajas for long-haul flights.

The new company does not draw on planes or personal from Iberia and, in principle, does not interfere in the operations of Vueling and Air Nostrum. The two leaders stressed that the project will meet very unprofitable routes with are nowadays unfeasible due to the current structure.

Compete in low cost

With this step, Iberia wants to compete with companies like Easy Jet and Ryanair, which in the last year have ‘stolen’ thousands of passengers; not only customers who look for cheap offers, but also many executives who, forced by the austerity imposed by their companies, have abandoned the spacious seats near the cabin for tourist travel.

The market assumes that the airline is doomed to continue cutting its frequency with regard to a business that continues to decline. The company, which now also has to compete with the high-speed train AVE, lost market share in important areas. In the domestic segment it yielded 2.5% and in the Madrid-Europe routes, 2.3%.

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