Icelandair takes action to strengthen the company's performance in the face of
fuel price hikes and economic uncertainty
• Number of flights cut by 14% next winter
• Staff cut by 190, from 1230 to 1040
• Organisational changes and management cuts
• Fuel efficiency measures
Icelandair will today present its proposed measures to respond to the changed
operating environment created by rising fuel prices and global economic
uncertainty. The measures include cutbacks in the company's winter schedule,
staff reductions, organisational changes, management streamlining and fuel
saving measures.
Icelandair CEO Birkir Holm Gudnason says that the uncertain world economy and
recent soaring fuel prices will require changes in Icelandair's operating
strategy. “These difficult external conditions are affecting Icelandair's
operations, so we are taking immediate action to strengthen the company and
place its business operations on a sound footing. We are working on the
assumption that demand will fall as the year wears on, and so we are planning
on a reduction in the number of Icelandair flights next winter. The cutback in
flights will unavoidably call for staff reductions. We will do everything
possible to minimise these cutbacks and make every effort to defend the
company's income generation in order to secure its future growth,” says
Gudnason.
Trimmed schedule
Last May, Icelandair announced changes in its schedule for next winter
involving, among other things, a longer winter break in its
Reykjavik-Minneapolis flights and plans for year-round flights from Reykjavik
to Toronto and Berlin have been put on hold. Flights from Iceland to Toronto
were launched last year and will continue through the spring of 2009 following
the winter break. The Minneapolis flights were suspended last year, and this
break will be longer in the winter of 2008 - 2009, lasting from the end of
October until March. Last winter there were no scheduled flights from Iceland
to Berlin, and plans for year-round flights to that destination have been
shelved for the time being. Further changes have been made in the company's
winter schedule, with a reduction in the number of flights on the Paris route
and an increase on the New York route. In addition, individual flights will be
dropped on several routes. These changes correspond to a cutback of 14% between
winter schedules.
Staff cuts
These changes will clearly reduce the company's staff needs, and the prognosis
is that the number of staff will be reduced by about 190, from approximately
1230 last year to 1040 next winter. Since some of the staff work part-time,
this means that the number of employees will be reduced by about 240 workers.
Just over 200 of these employees will receive their notices before the end of
June, 64 pilots and 138 flight attendants, as well as technical workers, flight
control and sales personnel; although redundancies are inevitable, the cutbacks
will be met partially by leaving vacancies unfilled. In all, the number of
staff at Icelandair will be reduced by about 240 employees this autumn, in
addition to the regular seasonal changes. The redundancies will comply with
statutory law on collective redundancies and the company will consult with the
trade unions involved. Advice and assistance will be offered to those who lose
their jobs.
“It is difficult to see good colleagues, friends and outstanding employees
leave us. Icelandair is engaged in harsh competition and has based its success
on the expertise and solidarity of its staff. The result is that we are in the
front rank of international airlines and we enjoy a strong position here in
Iceland. In times of adversity this will be tested as never before. I am
confident that the knowledge and experience of our staff and the team spirit
that has always characterised Icelandair will prove its greatest strength at
this time. I wish the good people who will now be leaving us all the best,”
says Gudnason.
Organisational changes and management cuts
Concurrently with the trimmed capacity and staff, Icelandair has made
organisational changes that are designed to streamline work processes and
reduce costs. Departments have been discontinued or merged with other
departments in the company's headquarters in Iceland and offices abroad. Middle
management has been trimmed and, to give an example, the number of directors is
down from fifteen to seven. This has been achieved both through redundancies
and by leaving vacancies unfilled. At the same time, measures are being taken
to reduce other operating costs.
Fuel efficiency measures
Various measures have been launched to cut fuel costs in order to soften the
impact of rising fuel prices. Efforts are being made to lighten aircraft to the
extent possible through precision loading, and savings are also achieved by
reducing airspeed and altering landing procedures.
“On the whole, we are convinced that these measures will strengthen Icelandair
for the future,” says Gudnason. “We have shown before that by reacting swiftly
to external setbacks we strengthen our operations for the longer term.
Flexibility is one of Icelandair's key strengths and we will continue to
develop and improve the company so that it can continue to offer high-quality
and high-value services in flights between Iceland and other countries,” says
Gudnason.
Different positions of companies within Icelandair Group
Icelandair is one of twelve subsidiaries forming Icelandair Group, and all the
companies are responding to changes in the airline and tourist industries, each
in its own way. “The Icelandair Group companies are reacting to the changes in
their environment in different ways. Other airlines within the Group, such as
the Icelandic domestic airline, Flugfélag Íslands, Bluebird Cargo, Latcharter
in Latvia and Travel Service in the Czech Republic are different, and some of
them are not as sensitive to fuel price trends as Icelandair. But other
Icelandair Group companies, such as the ground service company IGS at Keflavik
Airport, will feel the effect of these changes, and the number of staff in that
company will be reduced by about 75 positions in excess of normal seasonal
fluctuations. All the companies in Icelandair Group, with a total of 3500
employees across the world, will focus on efficiency measures and flexibility
in the current circumstances,” says Icelandair Group CEO Björgólfur Jóhannsson.
