Spain’s Iberia Takes on Pilots With Plan to Cut Wage Bill by 20%

Spanish airline Iberia revealed a plan to slash pilot pay by 62 million euros ($81 million) or one-fifth while improving productivity by 25 percent as it seeks to match profitability levels at sister company British Airways.

Iberia, which formed International Consolidated Airlines Group SA (IAG) with BA last year, aims to reduce pilot pay scales by 12 percent and extend the reduction to 20 percent with measures including the elimination of inflation-linked raises, the Madrid-based company said today in a statement. Maximum flying hours will be lifted to 900 a year from 820-850 previously.

“Only pilots will be affected by the measures, since all other employee groups reached agreements with the company through negotiations,” said the carrier, which is already suffering 30 days of air-crew strikes after forming low-cost unit Iberia Express to take over mainly domestic flights. The plan outlined today covers all routes, including long-haul ones.

Iberia is exploiting Spanish labor-law reforms introduced in February that allow companies reporting losses or consecutive sales declines to break collective-bargaining agreements. The carrier had a 61 million-euro operating loss in 2011, compared with a 592 million-euro profit at BA, with its lucrative routes between the financial centers of London and New York.

Loggerheads

“This battery of actions aimed at making Iberia profitable is in line with what comparable airlines are doing and is absolutely necessary to enable us to compete successfully in a globalized market,” Jose Maria Fariza, the Iberia unit’s chief financial officer, said in the statement.

Iberia and the Sepla pilot union have been at loggerheads since plans for the discount unit were unveiled in October. The labor group said when announcing the strikes last month that the plan disregards current agreements.

Sepla should scrap further industrial action and negotiate new contracts, Iberia said today, adding that it is open to meetings any working day this week or next.

Union spokeswoman Ana Serrano wasn’t immediately available for comment when contacted by Bloomberg News today.

To contact the reporters on this story: Steve Rothwell in London at srothwell@bloomberg.net; Manuel Baigorri on Madrid at mbaigorri@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net

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