Intl Con Airline Grp IAG Iberia's transformation plan

  Intl Con Airline Grp (IAG) - Iberia's transformation plan

RNS Number : 7204Q
International Cons Airlines Group
09 November 2012




IBERIA'S TRANSFORMATION PLAN



A comprehensive  plan to  save Iberia  after record  losses and  return it  to 
profitability was  announced  today  by International  Airlines  Group  (IAG). 
Iberia's transformation plan will introduce permanent structural change across
all areas of the business  with the aim of  stemming losses and returning  the 
Spanish airline to profitability.



Transformation Plan Highlights:



· Stem Iberia's cash losses by mid-2013;

· Turnaround in profitability of at  least €600 million from 2012  levels 
to align Iberia with IAG's target return on capital of 12 per cent by 2015;

· Network capacity  cut by 15  per cent  in 2013 to  focus on  profitable 
routes

· Downsizing its fleet by 25 aircraft - five long haul and 20 short haul.

· Reduction of  4,500 jobs to  safeguard around 15,500  posts across  the 
airline. This is in line with  capacity cuts and improved productivity  across 
the airline.

· New commercial initiatives to  boost unit revenues including  increased 
ancillary sales and website redesign.

·  Discontinue  non-profitable   third  party   maintenance  and   retain 
profitable ground handling services outside Madrid.

· The transformation will be funded from Iberia's internal resources



In the short  term the transformation  will focus on  stemming the losses  and 
creating a profitable route network. This will include suspending loss  making 
routes and frequencies  and ensuring  there is effective  feed for  profitable 
long haul flights.



As well  as halting  Iberia's financial  decline we  will establish  a  viable 
business that can  grow profitably  in the long  term. Short  and medium  haul 
operations will be transformed to  compete effectively with low cost  carriers 
who have successfully established themselves in Iberia's home market. The plan
will see  comprehensive  productivity  improvements and  the  introduction  of 
permanent salary adjustments to achieve a competitive and flexible cost base.



Iberia has many advantages. It has an excellent geographical position to serve
Latin America, along with historical ties;  a strong brand and the ability  to 
grow long term at it hub.



A deadline  of January  31, 2013  has been  set to  reach agreement  with  the 
unions. If agreement is not reached, deeper cuts and a more radical  reduction 
in the size and  scale of Iberia's  operations will take  place to secure  the 
natural long haul traffic flows at Madrid and safeguard the company's future.



Rafael Sánchez-Lozano, Iberia's chief executive, said: "Iberia is in fight for
survival. It  is  unprofitable in  all  its markets.  We  have to  take  tough 
decisions now to save  the company and return  it to profitability. Unless  we 
take radical action to  introduce permanent structural  change the future  for 
the airline  is bleak.  However this  plan gives  us a  platform to  turn  the 
business around and grow.



"The Spanish and  European economic  crisis has  impacted on  Iberia, but  its 
problems are systemic  and pre-date  the country's  current difficulties.  The 
company is burning €1.7 million every  day. Iberia has to modernise and  adapt 
to the new competitive  environment as its cost  base is significantly  higher 
than its main competitors in Spain and Latin America.



"Time is not on our side. We have set a deadline of January 31, 2013 to  reach 
agreement with our trade unions. We enter those negotiations in good faith. If
we do not reach consensus we will have to take more radical action which  will 
lead to greater reductions in capacity and jobs".



Willie Walsh, IAG's  chief executive said:  "We want Iberia  to be strong  and 
successful. For too long the narrow self  interest of the few has damaged  the 
long term future  for the many.  We will  not hesitate to  take the  necessary 
steps to protect  the interests  of our  shareholders, our  customers and  our 
employees.



"This turnaround plan is critical for Iberia  and for the future of Spain.  A 
strong and profitable Iberia can create  jobs and boost tourism, a key  driver 
in Spain's economic recovery".



                                     Ends

November 9, 2012 
 IAG13



Forward-looking statements:

Certain information included in these statements is forward-looking and
involves risks and uncertainties that could cause actual results to differ
materially from those expressed or implied by the forward-looking statements.

Forward-looking statements include, without limitation, projections relating
to results of operations and financial conditions and International
Consolidated Airlines Group S.A. (the 'Group') plans and objectives for future
operations, including, without limitation, discussions of the Company's
Business Plan, expected future revenues, financing plans and expected
expenditures and divestments. All forward-looking statements in this report
are based upon information known to the Company on the date of this report.
The Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future
events or otherwise.

It is not reasonably possible to itemise all of the many factors and  specific 
events that  could  cause  the  Company's  forward-looking  statements  to  be 
incorrect or that could otherwise have a material adverse effect on the future
operations or results of an airline operating in the global economy.  Further 
information on  the primary  risks of  the business  and the  risk  management 
process of the Group is  given in the Annual  Report and Accounts 2011;  these 
documents are available on www.iagshares.com.

                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


MSCUGGQAGUPPPGR -0- Nov/09/2012 07:01 GMT
 
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