IAG’s Walsh Pledges to ‘Do It Again’ in Taking on Iberia Unions

IAG (IAG) Chief Executive Officer Willie Walsh pledged to push through job cuts at Spanish unit Iberia in the face of union opposition, pointing to his past record in slashing costs at British Airways and Aer Lingus Group Plc.

“We will reform Iberia and we will secure its viability,” Walsh said in London, adding that a move on Feb. 1 to go ahead with cuts without union agreement was the first of a number of “difficult” steps to be taken. “People can be confident we will resolve this issue. I’ve done it before and I’ll do it again.”

IAG is pressing on with a plan to shrink Iberia operations by 15 percent after the rejection of proposals that would have limited job losses to 3,147. While the capacity cut implies an initial workforce reduction of 3,500, analysts have said Walsh may need to eliminate more posts and cut pay if he’s to deliver a 600 million-euro ($814 million) earnings turnaround by 2015.

While Walsh previously faced down strikes to cut positions and wages at British Airways and as CEO of Ireland’s Aer Lingus (AERL), he said Iberia’s talks are being left to local executives.

“It’s the responsibility of the management at Iberia to do it and they’re the people that are managing the negotiations with the trade unions,” he said in an interview at the annual Business Travel Show in London. “They’re the people responsible for implementing the change, so they will continue to do it.”

Euro Shock

Walsh said he doesn’t regret going ahead with the 2011 merger of British Airways and Iberia to form London-based IAG, as International Consolidated Airlines Group SA is known, and that Spanish costs were always known to present a major hurdle.

“There are issues we were well aware of and knew we would have to tackle,” the CEO said. “The issue that we didn’t appreciate -- I don’t think anyone did -- was just how bad the euro-zone crisis would become.”

Walsh said in the interview that British Airways regards the London-Ireland market as an important one, while declining to comment on whether his company would agree to boost flights in conjunction with Ryanair Holdings Plc (RYA)’s plan to win antitrust approval for a takeover of Dublin-based Aer Lingus.

British Airways resumed flights between London’s Heathrow airport and Dublin last year -- returning to a route exited in 1991 -- when it opted to retain services flown by BMI following its purchase of the U.K.-based Deutsche Lufthansa AG (LHA) unit.

BA quit flights from London Gatwick to the Irish capital in 2009. It also code-shares on Aer Lingus operations where passengers transfer to services of its own, though terminated collaboration on point-to-point traffic in 2004.

To contact the reporters on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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