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Iberia To Start A New Lowcost Airline  
User currently offlineRmcf From Spain, joined Oct 2005, 202 posts, RR: 0
Posted (4 years 11 months 2 days 17 hours ago) and read 8989 times:

Iberia has approved today the new reform of the "Plan Director 2012". Among other things, they have decided to create a new short-haul low-cost airline based in MAD (a new kind of madrilene Vueling???), with flights to Europe and Spain. The main objective of this new airline is to feed the intercontinental flights to Latin America, which are the company's biggest interest at the moment (apart from the BA deal), but at a much lower costs than Iberia (which is suffering like many other airlines the effect of the economic downturn).
The initial plan is to start operating this airline in 2011.

What do you think of this new strategy? Is it the correct move?

Service-wise IB is like low-cost so not a big change. At least now we'll have cheaper tickets. We'll see how things go in the near future.

Link to some articles:

In Spanish: http://www.expansion.com/2009/10/22/...9c3be9ff93c7a26fdadcb&t=1256250250

In English: http://www.ft.com/cms/s/0/59c9328a-bf3a-11de-a696-00144feab49a.html

38 replies: All unread, showing first 25:
 
User currently offlineKL911 From Czech Republic, joined Jul 2003, 5141 posts, RR: 15
Reply 1, posted (4 years 11 months 2 days 17 hours ago) and read 8901 times:

Very interesting! Although I don't see it work. LCC's offering interline and bagage agreements etc etc aren't really lowcost.

User currently offlineOA412 From United States of America, joined Dec 2000, 5274 posts, RR: 24
Reply 2, posted (4 years 11 months 2 days 16 hours ago) and read 8846 times:

This has been tried very little success. There was DL/Song, CO/COLite, UA/Ted, BA/Go with none of those left flying.


Hughes Airwest - Top Banana In The West
User currently offlineAustralis From Australia, joined Feb 2009, 98 posts, RR: 0
Reply 3, posted (4 years 11 months 2 days 16 hours ago) and read 8820 times:

I thought what they offered already on their European routes was already low cost???  Wink

Honestly, why do they not try to focus on improving the brand image and the service levels on board?? Surely that would attract more passengers as people would enjoy the experience across the board while improving yields...

Oh well, seems like a never ending story in Madrid


User currently offlineRojo From Spain, joined Sep 2000, 2452 posts, RR: 9
Reply 4, posted (4 years 11 months 2 days 16 hours ago) and read 8820 times:

It is not really a new LCC, but a new airline with lower employee costs that will allow IB to better compete with FR, U2, UK, JK, etc. Right now IB can't reduce staff as it would like, and the only alternative is to freeze head count in IB and get new employees on a second airline. It looks great on paper, but I really think the new CEO is playing with fire. He thinks that consulting companies like Mckinsey (for example) can come and make suggestions on how to reduce costs by creating a new legal vehicle (airline) and transfer airplanes with employees that earn less (Audeli flights which never worked for IB). I'm sure Unions will give him a hard time... very hard time!!!

This has been done in other countries already like in Mexico: Mexicana now has three airlines two with a much lower cost structure for domestic and short international flights: Click Mexicana (Aerovias Caribe) and Mexicana Link. And they think the model can be transferred to Spain.... different labor laws, different unions!!! Lets see how this ends...

[Edited 2009-10-22 17:05:17 by rojo]

User currently offlineThegreatRDU From United States of America, joined Mar 2006, 2310 posts, RR: 4
Reply 5, posted (4 years 11 months 2 days 16 hours ago) and read 8764 times:



Quoting Rmcf (Thread starter):
Is it the correct move?

I don't know what to think, the biggest question is how much overlap will there be? It's either going to cannibalize and be a huge/costly mistake or a genius move...which it looks like in theory...but I'm not big on this...



Our Returning Champion
User currently offlineOP3000 From United States of America, joined Jun 2009, 1767 posts, RR: 2
Reply 6, posted (4 years 11 months 2 days 13 hours ago) and read 8638 times:



Quoting Rojo (Reply 4):
He thinks that consulting companies like Mckinsey (for example) can come and make suggestions on how to reduce costs by creating a new legal vehicle (airline) and transfer airplanes with employees that earn less (Audeli flights which never worked for IB). I'm sure Unions will give him a hard time... very hard time!!!

Indeed, the issue here is not the idea but the execution, which is quite hard in the case of strongly unionized carriers. The domestic low cost model has worked to some success for LA in Chile and Peru, but unions are not nearly as much of an issue in Chile and in Peru they entered the market 10 years ago so labor costs were already low. AI is going to try to do the same thing now in India, and other legacies around the world will continue to try as long as they are uncompetitive. For network issues IB and most others cannot afford to shut down the money losing domestic operations which feed their international ops.


User currently offlineSmi0006 From Australia, joined Jan 2008, 1533 posts, RR: 0
Reply 7, posted (4 years 11 months 2 days 12 hours ago) and read 8583 times:



Quoting OA412 (Reply 2):
This has been tried very little success. There was DL/Song, CO/COLite, UA/Ted, BA/Go with none of those left flying.

It has been done with an enormous amount of success by QF and JQ, with JQ providing enormous amount of support for QF through these tough times.
However it depends on how IB plan to make this really work, will it be a stand alone LCC out to make a profit or support IB, or is it's only real purpose to be eventually folded back into IB to lower the cost structure at IB?


User currently offlineGhost77 From Mexico, joined Mar 2000, 5222 posts, RR: 51
Reply 8, posted (4 years 11 months 2 days 8 hours ago) and read 8387 times:



Quoting Rojo (Reply 4):
This has been done in other countries already like in Mexico: Mexicana now has three airlines two with a much lower cost structure for domestic and short international flights: Click Mexicana (Aerovias Caribe) and Mexicana Link. And they think the model can be transferred to Spain.... different labor laws, different unions!!! Lets see how this ends...

More over my dear friend, MX has been very smart by not axing jobs in MX and by keeping a similar identity in order to make everyone feel like Mexicana. MX exactly has avoided to create new airlines and new identities like our friends north of the border with different names and c/s.

If you ask people at Click and Link what do they feel and they'll all answer that they''re happy to be part of "Mexicana". OTOH, there's more market to play with, like MX has done by sending all their buses Intl, whereas Spain and the European Union is a total war everywhere with FR and EasyJet and other LCC.

Many at Iberia and pilots specially won't be so happy for this.

g77



Ricardo Morales - flyAPM - ¡No es que maneje rapido, solo estoy volando lento!
User currently offlineAirNz From , joined Dec 1969, posts, RR:
Reply 9, posted (4 years 11 months 2 days 7 hours ago) and read 8224 times:



Quoting KL911 (Reply 1):
LCC's offering interline and bagage agreements etc etc aren't really lowcost.

Why, and what are you defining as 'low cost'?

Quoting Australis (Reply 3):
Honestly, why do they not try to focus on improving the brand image and the service levels on board?? Surely that would attract more passengers as people would enjoy the experience across the board while improving yields...

Like many (particularly on here), you are failing to recognise the changing trend in air travel. Passengers are primarily concerned with getting from A to B, (quite correctly indeed as it should be) and no matter how many here hanker otherwise, air travel was never anything more than a mere form of transportation. With the pace of 'modern' living, and the ability to travel between virtually any two points with ease, how much do you seemingly 'need' to "enjoy the experience"? Furthermore, you speak of improving yields as if it were the Holy Grail......without reflecting on the cost necessary to provide those improved yields.

Quoting OA412 (Reply 2):
This has been tried very little success. There was DL/Song, CO/COLite, UA/Ted, BA/Go with none of those left flying.

I don't particularly see how comparing the US 'models' of anything to do with air travel has any real relevance as to whether something is viable or not. Yes, I realise you included BA/Go, but that was never going to work.


User currently offlineDocLightning From United States of America, joined Nov 2005, 19708 posts, RR: 58
Reply 10, posted (4 years 11 months 2 days 7 hours ago) and read 8150 times:



Quoting Rmcf (Thread starter):

What do you think of this new strategy? Is it the correct move?

Coffee on Iberia is 2 Euros. They are already run like an LCC. How is this going to help?


User currently offlineMyt332 From United Kingdom, joined Sep 2003, 9112 posts, RR: 70
Reply 11, posted (4 years 11 months 2 days 6 hours ago) and read 8071 times:



Quoting AirNz (Reply 9):
Passengers are primarily concerned with getting from A to B, (quite correctly indeed as it should be)

In your opinion. Some people value how they fly, it's about the journey, much like life, and who are you to say otherwise? If they want to pay a premium then let them.



One Life, Live it.
User currently offlineMIgAiR54 From Spain, joined Jun 2007, 1726 posts, RR: 0
Reply 12, posted (4 years 11 months 2 days 6 hours ago) and read 8066 times:

I hope they learn the clickair lesson and this time they do something good.

IMO they should had bought Vueling years ago, but they decide to create clickair and tried to kill vueling, then ryanair and easyjet were so happy growning and growning in MAD old terminals..........now when IB can´t kill vueling after all the damage they merge with them.............

and now they want to create a new airline????????

IB must imporve its own product and fight FR and U2 offering something better than them like (BA, AF, LH...) do. We all know that low cost are the newest IB problem but it is not the only one, the continous downgrade in the IB product is amazing, actually IMO is worst than some low cost or smaller airlines, the in-flight product is appalling and the ground service is even worse.

Quoting DocLightning (Reply 10):
Coffee on Iberia is 2 Euros. They are already run like an LCC. How is this going to help?

I hope they do things very well but I don´t really think so.

Quoting Rojo (Reply 4):
I'm sure Unions will give him a hard time... very hard time!!!

Hard only!!!! he will have nightmares everynight..........when Air Europa tried to do this (Universal), they have to stop because the unions and they won´t do again.


User currently offlinePlymSpotter From Spain, joined Jun 2004, 11655 posts, RR: 60
Reply 13, posted (4 years 11 months 2 days 6 hours ago) and read 8032 times:

Why on Earth don't they just expand Vueling at MAD???


...love is just a camouflage for what resembles rage again...
User currently offlineKelual From Spain, joined Jul 2008, 79 posts, RR: 0
Reply 14, posted (4 years 11 months 2 days 5 hours ago) and read 7847 times:

I think that we are confusing things here. IB its not and won't be a LCC. Basically IB and the rest of the Companies are tanking advantage and using new business tricks from the LCC (which is clearly different). All Companies are doing the same...Slim seats On IB KLM Swiss Finnair... No inflight meal in economy IB BA AF... Charging for bags BA AF... Massificated aircrafts IB AF LH...Reducing number of cabin crew IB LH BA AF (LH is flying the A320 with 3 Cabin Crew and BA is reducing the crew in all equipment)... but that doesn't make them LCCs.

The fact is that charging for drinks doesn't make you a LCC. IB feeds its hub Mad like the rest of the Legacy carriers... but this is been long enough discussed. This situation in Europe if we look to the US ... well what can we say about US airlines...

Creating a new airline, well its what BA is trying to do as well. The made a trial with LGW based crew (Flying long and short, earning per hour and reducing the crew to the minimum) with success, now they are imposing the same at their LHR base, they will create a parallel BA with new contracts and make this part grow mean while the old BA will not grow there for a long term extinction. That's what IB is planning to do. Not another LCC cause for that matter why not using VUELING that is already working? Let's think about it.

I think we all would love to have a SIA or JAL based in our hometown airport, but the reality is that the situation has and is changing for all airlines, and Asian Companies are the last to be affected by this, but they are already starting to suffer and they will have to adapt.

Flying unfortunately it's no longer about glamour, it's all about business...


User currently offlineSmi0006 From Australia, joined Jan 2008, 1533 posts, RR: 0
Reply 15, posted (4 years 11 months 2 days 3 hours ago) and read 7634 times:



Quoting Kelual (Reply 14):
Creating a new airline, well its what BA is trying to do as well. The made a trial with LGW based crew (Flying long and short, earning per hour and reducing the crew to the minimum) with success, now they are imposing the same at their LHR base, they will create a parallel BA with new contracts and make this part grow mean while the old BA will not grow there for a long term extinction. That's what IB is planning to do. Not another LCC cause for that matter why not using VUELING that is already working? Let's think about it.

Ahh yes makes sense!! QF have done the same thing for several years now, out sourcing their labour needs to their own whole owned subsiduries, it appears from the outside wo have worked exceptionally well, kept the old staff happy (well maybe not happy but happier than they would have been if they faced pay cuts in order to lower costs) and provided long-term cost reduction, ie there are four labour groups of cabin crew:

Qantas Cabin Crew who have been there since the start and are borken into short and long-haul--- directly employed by Qantas

Casuals who operate short-haul ---- Employed by Maurice Alexander Management and are then contracted out to Qantas who are currently slowly being phased out I believe

QCD who operate short-haul --- Employed by Qantas Cabin Crew Domestic a whole owned Qantas subsidurry specialisting in recruitment and employment.
QCCA who operat Long-haul and feature mainly on the A380 --- Employed by Qantas Cabin Crew Australia a whole owned Qantas subsidurry specialisting in recruitment and employment.
So whilst the above two groups are 'Qantas permant crew' they are not employeed by Qantas and thus do not recieve the same pay as their Qantas employeed colligues, but at the same time as Qantas ownes 'Qantas Cabin Crew Australia' and 'Qantas Cabin Crew Domestic' it has complete control over them and their conditions, and who is hired, almost a mock pupet company.

What is interesting though it that the same has been done at JQ with now Team JetStar employees who are paid less than their JetStart direct hire counter parts, interesting even the LCC employees are not cheep enough these days? Does make you wonder though where the bottom is?


User currently offlineRojo From Spain, joined Sep 2000, 2452 posts, RR: 9
Reply 16, posted (4 years 11 months 2 days 3 hours ago) and read 7631 times:



Quoting Ghost77 (Reply 8):
More over my dear friend, MX has been very smart by not axing jobs in MX and by keeping a similar identity in order to make everyone feel like Mexicana. MX exactly has avoided to create new airlines and new identities like our friends north of the border with different names and c/s.

I'm sure this is exactly what IB has in mind, but it won't work. Mexico and Spain are different playgrounds and IB Unions will never allow this. In MX, it was done gradually and IB needs to do it right away. I want to see if IB will be able to make it work... can't wait!

Quoting AirNz (Reply 9):
Like many (particularly on here), you are failing to recognise the changing trend in air travel. Passengers are primarily concerned with getting from A to B, (quite correctly indeed as it should be) and no matter how many here hanker otherwise, air travel was never anything more than a mere form of transportation. With the pace of 'modern' living, and the ability to travel between virtually any two points with ease, how much do you seemingly 'need' to "enjoy the experience"? Furthermore, you speak of improving yields as if it were the Holy Grail......without reflecting on the cost necessary to provide those improved yields

I will summarize it with one word: Air travel for most people is now a COMMODITY!!!
Airlines need to understand it... customers are price sensitive and they want cheap tickets, because they know all airlines will give them a seat from point A to point B. There is a small customer base that thinks differently and business class is available for them.

Quoting Kelual (Reply 14):
The fact is that charging for drinks doesn't make you a LCC.

Charging for drinks and making you pay tons of money for your ticket makes people fly away from the legacy airlines. This is why IB is suffering from deffecting customers. If you are charging me twice or three times the price U2 or FR and also charge me for checking-in bags, selecting my seat, meals, etc. of course I will go with the LCC's. Apparently, this is what is happening to the loyal IB customers...


User currently offlineC010T3 From Brazil, joined Jul 2006, 3704 posts, RR: 19
Reply 17, posted (4 years 11 months 2 days 3 hours ago) and read 7618 times:

I hope that the BA-IB merger happens in time to stop this nonsense.

User currently offlineUALWN From Andorra, joined Jun 2009, 2790 posts, RR: 2
Reply 18, posted (4 years 11 months 2 days 3 hours ago) and read 7567 times:



Quoting PlymSpotter (Reply 13):
Why on Earth don't they just expand Vueling at MAD???

Vueling will keep on operating like a European LCC (purely point-to-point, with no connections, for instance), while this new subsidiary will provide feed for IB's big MAD hub.



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlineRojo From Spain, joined Sep 2000, 2452 posts, RR: 9
Reply 19, posted (4 years 11 months 2 days 3 hours ago) and read 7567 times:

And today we have IB dealing with a Cabin Crew strike schedule for Monday and Tuesday. 400 flights will be cancelled (domestic and europe mainly). Doesn't look good for IB!!!

http://www.abc.es/20091023/economia-...cela-unos-vuelos-200910231419.html (Spanish)


User currently offlineAircatalonia From Spain, joined Nov 2007, 558 posts, RR: 0
Reply 20, posted (4 years 11 months 1 day 21 hours ago) and read 6134 times:

The good news about this is that IB can't get more miserable at BCN. At most it will stay the same.  Wink

User currently offlinePlanemaker From Tuvalu, joined Aug 2003, 6188 posts, RR: 34
Reply 21, posted (4 years 11 months 1 day 21 hours ago) and read 6040 times:



Quoting Myt332 (Reply 11):
In your opinion. Some people value how they fly, it's about the journey, much like life, and who are you to say otherwise? If they want to pay a premium then let them.

You are in the minority.

Quoting Rojo (Reply 16):
Air travel for most people is now a COMMODITY!!!




Nationalism is an infantile disease. It is the measles of mankind. - A. Einstein
User currently offlineGatoVolador From Spain, joined Apr 2007, 435 posts, RR: 1
Reply 22, posted (4 years 11 months 1 day 17 hours ago) and read 5189 times:

The new subsidiary will not be a LCC but a "high margins" or an "internal" low-cost, meaning that it will very likely copy both Iberia's image/brand and product (business class, Iberia Plus, Oneworld, cargo, hub-and-spoke system, etc.) but with a new staff subject to the current market conditions (no/minimum labor agreements, no seniority, no strikes, as much hours worked as the law permits, etc.).

I wouldn't imagine Iberia 2.0 as Ryanair, but it could be as the wet-leased flights: pure Iberia with "outsourced" and cheap crews.


User currently offlineOP3000 From United States of America, joined Jun 2009, 1767 posts, RR: 2
Reply 23, posted (4 years 11 months 1 day 15 hours ago) and read 5095 times:

This article in Aviation Week goes into some of the other ideas included the recently approved Iberia plan. The cost measures mentioned here may have a lot to do with the cabin crew strike.

http://www.aviationweek.com/aw/gener...20Feeder%20Subsidiary&channel=comm

The new strategic plan also includes quite draconian cost measures. The airline plans to lay off all flight attendants above the age of 55. Wages are frozen for two years for all employees who remain on board, and no new staff will be hired until the end of 2011. Two hundred more ground staff will also be laid off. These measures come on top of the existing cost-cutting and staff reduction plans.

Spain’s biggest airline — which still is in merger negotiations with British Airways — will cut capacity in the short- and medium-haul network, where most of its losses accumulate. In contrast, the airline will grow capacity in the long-haul sector and mainly on routes between Spain and Latin America, where the airline is already the market leader. Iberia’s refocusing includes new efforts to improve customer service, and the airline will invest in an upgraded business class to attract more high-yield passengers.


User currently offlineGemuser From Australia, joined Nov 2003, 5664 posts, RR: 6
Reply 24, posted (4 years 11 months 1 day 5 hours ago) and read 4937 times:



Quoting OP3000 (Reply 23):
The airline plans to lay off all flight attendants above the age of 55.

Is this legal under EU law?

Gemuser



DC23468910;B72172273373G73873H74374475275376377L77W;A319 320321332333343;BAe146;C402;DHC6;F27;L188;MD80MD85
25 LJ : Unless Iberia can prove that people above the age of 55 are not capable of being a flight attendant the answer is no. However, if Iberia provides for
26 Vinniewinnie : I totally agree with what has been said above: air travel is a commodity. As such people chase low prices especially for short hops. Long-haul people
27 PHKLM : I think you need to re-open your school books. A commodity is a service or good for which there is demand, but there is no differentiation possible i
28 Vinniewinnie : Little comparison between Iberia & Lufthansa A320 in economy Short haul - Seat pitch: Same or one inch difference - Seats: Hardly any different in te
29 PHKLM : Vinniewinnie, along this line of reason there should be no pax left for IB/LH/AF and any other carriers like DL, AA, UA in the USA and they should al
30 R2rho : You gotta be carfeul with the wording here, the article does not talk about a LCC but about a lower cost structure. Those are the magic words here. I'
31 OP3000 : Agree, it all comes down to labor. Everything else (planes, revenue/fare structure, route network) can be changed within the same company, so they on
32 Vinniewinnie : First of all I was talking about a typical destination where 2 carriers compete on exactly the same route (Little reminder below) on short haul desti
33 Rojo : You say MILK is a commodity and your definition of a commodity doesn't even apply to it. Yes, here in the United States we have MILK being sold at di
34 OP3000 : AFAIK all the legacies lost money in Q3 (save for AS), whereas LCCs WN, F9 and B6 posted a profit.
35 LJ : 100% correct. The game is to be able to figure out how much extra someone is willing to pay for your product. However, here IB falls short. There Eur
36 Rojo : WN posted a net loss of $16 million, or two cents a share for Q309.
37 R2rho : Well, there you go, IB just suffered 2 days of cabin crew strike. I guess it is no coincidence that it happened just after these announcements? As for
38 OP3000 : Those are my same thoughts.Particularly when this talk about starting the a low cost airline for short-haul came as part of a five-year plan for IB,
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