Icelandair to cut jobs and capacity

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Icelandair Group is to cut capacity and 190 jobs, as well as implement organisational changes and various fuel saving measures in a bid to counter spiralling fuel prices.

The Reykjavik-based firm is planning to reduce its winter capacity by 14% and cut its number of full-time equivalent workers to 1,040 from 1,230 because of soaring fuel prices and global economic uncertainty.

Icelandair CEO Birkir Holm Gudnason says: “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.”

Under its new operating strategy, Icelandair has dropped its plans to serve Toronto and Berlin year-round, although Toronto services will be resumed in spring 2009.

Its Minneapolis flights will have a longer winter suspension, lasting from the end of October until March, and frequencies on other services such as Paris will be cut. Flights to New York, however, will be stepped up. Icelandair says: “These changes correspond to a cutback of 14% between winter schedules.”

Under the restructuring, taking account of part-time employees, the group is cutting 240 workers from its headcount including 64 pilots and 138 flight attendants. Flight control and sales personnel will also be affected.

Icelandair says some of the cuts will be made by leaving vacancies unfilled, but it adds that redundancies are “inevitable”. It says just over 200 employees will receive notifications by the end of June and adds that the headcount reduction is in addition to the group’s normal seasonal cutbacks.

Gudnason says: “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.”

Organisationally, Icelandair has discontinued or merged some of its departments, improved its working processes and trimmed its middle management, cutting its directors from 15 to seven through non-replacement and redundancies.

Focusing on operating costs, the Icelandic firm is also pursuing various fuel efficiency measures, such as lightening aircraft through precision loading, reducing airspeed and using different landing procedures.

Gudnason says: “On the whole, we are convinced that these measures will strengthen Icelandair for the future. We have shown before that by reacting swiftly to external setbacks we strengthen our operations for the longer term.”

Icelandair Group comprises 12 subsidiaries, including domestic airline Flugfelag Islands, Bluebird Cargo, Latcharter in Latvia and Travel Service in the Czech Republic, but the firm says these have not been as sensitive to fuel price trends as Icelandair.

But other group companies will also suffer cuts, such as Keflavik Airport ground handler IGS where Icelandair says the headcount will be reduced by around 75 positions in excess of normal seasonal variations.