[Editorial Note: Updated 2/14/2014 to include details from IAG’s spokesperson on terms of the productivity deal signed with the pilots union.]
Iberia Airlines has reached a deal in principle with its pilots’ union, SEPLA, to “introduce permanent structural change and improve the airline’s viability,” effectively ending a years-long labor dispute, according to parent company International Airlines Group.
The deal will keep pilots’ salaries frozen until 2015, after which increases to salaries will be subject to the Spanish-flag air carrier’s profitability.
An earlier mediation agreement, finalized in March 2013, included a 14 percent pay cut for pilots, as well as an additional 4 percent cut “due to lack of agreement on productivity measures,” an IAG spokesperson told the JOC. Now that there is agreement on productivity, the 4 percent will be returned, the spokesperson said.
The terms of the productivity deal, signed Feb. 13, include the pay freeze, as well as increased flying hours for short-haul and long-haul routes and new entry level salaries for pilots of around €35,500, the spokesperson added.
The productivity agreement also means that the union has accepted the creation of Iberia Express, an independent subsidiary which it had opposed in 2012 for violating the pilots’ collective bargaining agreement with Iberia Airlines. More specifically, the productivity agreement allows Iberia Express to expand its fleet by up to 25 aircraft by 2015 and remain as an independent subsidiary with its own pay scale, according to the IAG spokesperson. In addition, it will allow Iberia first officers to be promoted into Iberia Express captain roles on Iberia Express pay scales.
“This groundbreaking deal reduces the cost structure and provides the foundation for the airline to grow profitably,” said Luis Gallego, Iberia’s executive chairman, in a written statement. “Iberia Express will help make Iberia profitable and stronger, by providing short haul feed, and will provide Spanish competition to low cost carriers.”
IAG explained that these changes will allow Iberia to sustain profitable growth, become more competitive and reduce its cost base. Gallego also noted that the deal will help Iberia’s competitiveness on Latin American routes.
“Permanent structural change was the only way to save Iberia from slow decline,” added Willie Walsh, IAG’s chief executive. “This agreement marks the beginning of its future.”
The deal, which is still subject to approval by SEPLA’s general assembly, ends years of conflict between the airline and the union, which held strikes in response to job cuts, restructuring and pay freezes, Europe Online Magazine reports.
Shares in IAG have rallied following the labor deal, according to iNVEZZ.com, up 2.9 percent today.
IAG, Europe’s third largest airline, was formed in 2011, when British Airways and Iberia merged. However, Iberia has been a drag on the IAG’s earnings since then, as it was hit by competition from low-cost carriers and high-speed trains during Spain’s economic downturn, according to Reuters, as well legacy issues that meant its staff costs were comparatively high, according to London South East.
In 2013, Iberia’s cargo traffic plummeted 15.3 percent to 1.007 billion metric-ton kilometers, from 1.189 billion metric-ton kilometers in 2012, and its passenger traffic dropped 16.5 percent. Comparatively, British Airways’ cargo volume dropped 5.0 percent year-over-year, from 4.891 billion metric-ton kilometers in 2012 to 4.646 billion metric-ton kilometers in 2013, while its passenger volume rose 3.9 percent.
Last year, Iberia started a cost-cutting initiative and subsequently reduced its number of routes by 14 percent. In November 2013, the Spanish carrier put forward restructuring proposals, which were rejected by unions, and then submitted less-stringent proposals in January 2014, which unions also rejected. IAG now has to reach deals with unions for the cabin crew and baggage handlers. It aims to cut 3,800 to 15,000 employees, which sparked strikes in 2013.