Iberia reaches landmark agreement with pilots union

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This topic contains 17 replies, has 9 voices, and was last updated by  WillieWelsh 12 Jul 2014
at 09:25

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  • Anonymous


    This is terrific news and proof, not that it was ever required, that IAG has true turnaround expertise. Indeed, IAG is the only airline group that has proven turnaround expertise, without relying on bankruptcy.

    As I have been saying for some time, over the coming years Iberia will begin to reap with rewards of IAG’s restructuring and commercial expertise and will enter into an unprecedented era of growth, just as British Airways has been doing.



    Interesting news, would have thought the combination of Spain coming out of recession, Iberia sorting out its cost structure and loads of spare capacity at Madrid-Barajas will result in some pretty exciting growth opportunities for IAG.


    I wonder what the SEPLA take on it all is.

    An agreement in itself is proof of nothing except the ability to draft an agreement. It didn’t seem to have both parties signatures on it.

    The proof of the pudding…


    IAG’s release is a function of Stock Exchange rules on disclosure, and I doubt they would publish the release unless they were confident it will be ratified.

    This is hugely significant and proof that IAG now has real momentum. In just three years it has:

    1. Bought bmi from Lufthansa saving thousands of jobs in the UK and providing British Airways with an unprecedented platform for expansion whilst conducting an impressively swift integration.

    2. Unlocked the value of Iberia’s 46% holding in Vueling through buying out the remaining shares meaning that IAG is the only of the three European airline groups to have a true pan-European low cost carrier. Vueling can now accelerate its growth thanks to the backing of IAG.

    3. Transformed the performance of Iberia’s operation at Madrid airport delivering radical improvements in punctuality and reduced connection times. This, together with Iberia’s investments in its on board product and Iberia’s pending expansion will make Madrid one of the world’s preeminent hubs.

    Neither Air France KLM nor Lufthansa can point to such achievements in such a short space of time.

    IAG has defied its critics and sceptics and thanks to the strong performance of its share price we will no doubt see more airlines joining IAG in the coming years.


    It’s an impressive achievement, and credit must go to SEPLA and its pilots for seeing the opportunities that co-operating with management will deliver both to its membership, and to other employees within Iberia and the wider IAG Group.

    IAG, 2013’s strongest performing share in the FTSE100, is trading at 448p this morning, 10% up since the start of the year:



    The IAG share price is up 5% since the press release, they were a good buy yesterday!


    This is (part of) what the Spanish financial press says today about the agreement between Iberia and the pilots union, SEPLA. (any errors are in my translation).

    Friday 14th February 2014: Cinco Dias.

    “Iberia pacta con los pilotos las medidas para mejorar la productividad”.

    “Iberia agrees a pact with its pilots to better the conditions for productivity.

    “Peace in Iberia. The company announced this morning that it had reached an agreement with SEPLA, the pilots´union, through which they would achieve a substantial increase in productivity. The pilots´ salaries would remain frozen until 2015, as was stated in the mediation agreement of one year ago. After this date the increases will be subject to the economic viability of the company….

    …That means that for the collective there will still remain an adjustment of 14% in salaries, and the company renounces additional measures which would mean an 4% reduction in salary . This intitial agreement, presented here today in Madrid, will come into force when it is ratified by the assembly of the pilots union SEPLA.

    Among the details are the fact that on flights to America the number of pilots will be reduced from four to two and the crews will be available for the time which the law permits. Other measures to achieve greater productivity are the maximum of 13 free days per month with ten as a minimum and 900 flight hours per year for the pilots which is the maximum permitted by law………….

    …..Growth for Iberia Express.

    The protocol of the agreement gives independent operation to the subsidiary Iberia Express.With regard to its growth, it is limited to 15% of seat kilometres operated by Iberia. This formula means that Iberia Express could reach 25 planes en 2017 in comparison to the present 15.

    The SEPLA pilots maintain certain restrictions in favor of Iberia over the operations of Vueling from Barajas. The present restrictions for the catalan low cost operator to operate in codeshare from Barajas are maintained. Also outsourcing is limited.

    Luis Gallego, president of Iberia, reckons that the measures, when put in place fully, will mean a 62% reduction in labour costs… assure the future of Iberia… and put it on a competitive level with low cost operators Iberia Express, Ryanair and Easyjet……..

    The agreement comes days after the unions, representing the cabin crew, signed a productivity agreement with the company which means a limit of 900 flying hours per year both in short haul as well as long haul.

    Luis Gallego expects to reach an agreement with ground staff. From that moment his team will analyse routes and fleet renovation. This was one of the aims of the company to reach an agreement so that it can take up the 32 options over the A350 aircraft in part or completely signed with Airbus. The value of the purchase would exceed 6.000 millon euros”.

    It seems to be that if the 62% reduction labour costs is true when affected, then we are at a landmark agreement which will put AF/KLM and the Lufthansa group on the back foot. It sounds that it can only be extremely good for the airline and therefore for the shareholders.


    Iberia has announced today it has also reached agreement with the Cabin crew union.

    Main points of the deal:
    – ‘A substantial improvement in productivity’ including an increase in the number of duty days and flying hours.
    – Maintaining a 14% pay cut
    – Starting salaries set at market levels.


    So much for agreement being….

    Hippocampus – 13/02/2014 12:58 GMT
    .. proof, not that it was ever required, that IAG has true turnaround expertise.


    SergeantMajor – 14/02/2014 09:31 GMT

    ….It’s an impressive achievement

    When the reality was Walsh’s team had to accept a mediator and incur an additional (on top of the near €1 billion in losses and restructuring costs already incurred) quarter of a € billion cost…

    .. In March 2013, Iberia accepted the appointed mediator’s labour agreement proposal. As a result management recorded an additional €265 million related to employee restructuring costs

    As noted under exceptional items within IAG’s own report..


    For over 2 years, IAG leadership was incapable of negotiating a settlement… ” a prevailing lack of agreement ” (going back to 2011?), cue a mediator led agreement costing IAG additional €265 million. What is impressive about a failure by all parties barring the appointed mediator?


    In the interests of that much discussed and sought after “consistency”, perhaps it would not be unreasonable to point out that at “Europe’s premier airline” the dispute with its pilots (currently grounding the entire airline plus LH Cargo and Germanwings) for three days and inconveniencing over 400,000 passengers, has been going on for over two years as well. Despite considerable concessions from LH management [that would appear to be going in the opposite direction to the cost reduction strategy that high-cost LH needs] the dispute currently shows no signs of ending. No doubt, we will all be pouring over LH’s next annual set of accounts detailing the exceptional items arising from the management and pilots slugging this one out.

    As pointed out in this week’s CAPA posting:


    there are variously pay, pension and transfer of undertaking issues between the managements and labour forces at Lufthansa, Austrian, Air France/KLM, Finnair, Scandinavian, Aer Lingus and even at Norwegian Air Shuttle…! Further afield, there have been repeat issues at US carriers forcing almost all through Chapter 11 restructuring and Qantas management and unions currently have hell of a bun fight on their hands.

    It really would help every now and again if people were to take a look at the wider world once in a while rather than taking an excessively inward focus.


    And when the ink is barely dry on the new agreements, Iberia is delivering on its promise with a rapacious expansion, backed by the unparalleled expertise of IAG.

    Already long-haul routes to Santo Domingo and and Montevideo have been reinstated. As have short & medium haul routes to Amsterdam, Athens, Istanbul and Stockholm.


    Unparalleled expertise….mmm…keep on repeating it Hippo and you may start to believe it is actually beneficial expertise.

    Guess IAG could learn a great deal from Etihad


    – Potentially buying-in toward the bottom of the market
    – Working to get restructuring commitment/agreement in advance.

    I agree Hippo, the inept IAG leadership has unparalleled expertise in :

    1) Overpaying for an asset and buying at the top.
    2) Spending €1 billion after the purchase in an attempt to sort it.
    3) Taking 3 years to realise that they were incapable of sorting it so left it to the mediator to settle and spend another quarter billion.
    4) Creating lasting division, poor morale and motivation etc etc.

    The smart play would have been just to buy the already highly successful Vueling and build the Spanish short haul and long haul network within an already low cost structure having a motivated team not one likely to bear distrust and long term grudges.

    One day WW may realise getting co-operation up front as opposed to bullying, threatening and being unreasonable is a far far better way to achieve the goal, it is cheaper, faster and is more likely to result in a supportive, trusting workforce post re-structuring. But to do that one needs intelligence.

    As it is, any future takeover/turnaround candidate will know up front that IAG takes on a bullying belligerent position so best take a defensive stance, get government support and be belligerent back from the outset.

    Walsh’s mantra that “A reasonable man gets nowhere in negotiations,” is costing IAG dear – monetarily, time and emotion.


    The naysayers have been proven wrong time and again, and yet they still keep digging.



    @Hippocampus – 24/04/2014 20:09 GMT
    And when the ink is barely dry on the new agreements, Iberia is delivering on its promise with a rapacious expansion, backed by the unparalleled expertise of IAG….


    and yet IAG/IB now announce a further 1,581 jobs in addition to 3,100 already announced


    …The new redundancies affecting up to 1,581 people will take place over the 2014-2017 period, a spokesman at the carrier said….

    Having invested/lost billions in Willie’s folly one would think even with incompetent leadership IB could make some millions back. However is this death by a thousand cuts?

    The smart move would have been to avoid IB, let it fail and build a long haul version of Vueling. based in the thriving northern Spain region – saving billions and allowing an independent BA to thrive unencumbered by a corpse.

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