The Spanish national carrier Iberia has unveiled plans to create a new airline to handle its short- and medium- haul routes in an effort to reverse declining revenues, weak demand and mounting losses in the current economic crisis.

Iberia’s Boad of Directors has adopted a new strategic plan (Plan 2012) to address the situation acknowledging that the measures taken so far to be ‘insufficient’.
The airline is currently in merger talks with British Airways, but now aims to focus on long-haul flights, “where Iberia is market leader, on those that connect Europe and Latin America, in order to maintain and increase this lead,” it stated.

The second part of the plan for operations requires a 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. This change will take full effect from 2011, when 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 board also approved other cost-cutting measures to improve its financial situation, including 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 and savings of up to 37 million euros a year in overhead costs, starting in two years, in addition to those already planned.
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. The company announced in August it had plunged into the red in the second quarter as the global economic crisis battered the industry, recording a net loss of 72.8 million euros (109.2 million dollars). It made a net profit of 21.2 million euros in the same period in 2008.