March 13 (Bloomberg) -- British Airways parent IAG has yet to win backing from pilots at Iberia for a turnaround plan that includes 3,140 job cuts at the Spanish subsidiary, after union representatives joined management in signing off on the accord.
Unions representing the majority of Iberia’s employees have agreed to accept the proposal, IAG said in a statement today. With 93 percent of the workforce supporting the deal, IAG remains at odds only with the Sepla pilot union, a brewing conflict that Madrid-based Iberia called “irresponsible.”
“We have not signed the document because there are details we want to negotiate,” Ana Serrano, a spokeswoman for the Sepla union, said by telephone. “We want the same labor conditions imposed on other workers.”
The Spanish mediator said the accord is binding with a majority of employees accepting the terms, Iberia Chief Executive Officer Rafael Sanchez-Lozano said on a call today.
Under the terms of the deal, pilots and cabin crew face higher pay cuts than ground staff. Gaining union approval would let IAG Chief Executive Officer Willie Walsh implement a 600 million-euro ($780 million) earnings turnaround at Iberia by 2015, after losses at the Spanish business wiped out gains at British Airways and dragged IAG to an operating loss last year.
The plan proposed by the mediator would cut pay at Iberia by as much as 14 percent, with no raise before 2016. IAG’s board voted over the weekend to approve the settlement that pares job losses from the 3,807 it had pledged to drive through in the absence of a negotiated settlement. The deal calls off a strike planned for next week, Iberia said.
Shares of IAG, as International Consolidated Airlines Group SA is known, closed 0.7 percent higher at 259.00 pence in London. The stock has gained 40 percent this year, valuing the company at 4.8 billion pounds ($6.8 billion).
“This accord is a step in the right direction” and would help the airline become profitable, Sanchez-Lozano said on the call. He wouldn’t predict the impact on this year’s operating result.
Union and Iberia representatives met the mediator today to discuss the proposal after unions on March 10 indicated they favored the terms of the deal. Sepla’s Serrano said she’s “hopeful” an agreement with the pilots can be reached soon.
“We all had to concede something,” Sanchez-Lozano said earlier in a statement. The deal “enables us to advance towards a leaner, more viable Iberia, able to compete on more reasonable terms in the difficult commercial aviation business.”
The job cuts match the number of posts Walsh had initially stipulated must go as part of a negotiated deal including lower pay, before saying the equivalent of more than 3,800 would need to be cut when talks on staffing levels and contracts failed.
IAG agreed to fund redundancies by dropping a planned link to productivity gains, while salaries will be reduced by 14 percent for pilots and cabin crew and 7 percent for ground staff. That’s down from as much as 35 percent under previous offers, which also sought to freeze pay until 2017, Manuel Atienza, a spokesman for the UGT union, said on March 11.
“Iberia will immediately ask unions to negotiate the measures needed to raise productivity,” the airline said. If an agreement is not reached within a month on productivity measures such as reducing the number of crew on a flight, then salary cuts will increase by 4 percentage points, Iberia said, according to a copy of the mediator’s proposal obtained by Bloomberg.
To improve IAG’s financial performance in Spain, Walsh last year established a new unit, Iberia Express, with less-generous contracts, and that business has been profitable.
The CEO also initiated a takeover bid for Barcelona-based discount carrier Vueling Airlines SA. The Vueling board last week rejected a 7 euros-a-share proposal that IAG made for the 54.14 percent of stock it does not already own.