Skift Take

If Iberia doesn't boost profits, its parent company will kill it. A simple truth like this is likely the only way IAG was able to convince workers to take a double-digit-percentage pay cut.

British Airways parent IAG SA said cabin crew at unprofitable Spanish arm Iberia have joined pilots in agreeing to raise productivity as part of a turnaround program eliminating more than 3,000 jobs.

The pact, which still has to be ratified, retains a 14 percent cut in flight-attendant pay while eliminating a further 4 percent reduction imposed after the failure of earlier productivity talks, London-based IAG said in a statement today.

Europe’s third-largest airline has sought long-term structural changes at Iberia beyond an agreement to cut jobs and close unprofitable short-haul routes. The Sepla pilot union agreed terms on Feb. 13, while negotiations with ground staff continue, Iberia Chairman and Chief Executive Officer Luis Gallego told reporters in Madrid.

The cabin crew accord “is a key step in building the new Iberia since it lightens its cost structure and lays the foundation for profitable growth,” he said. “All employees are accepting changes to help give the airline a better future.”

The agreement in principle, which runs through 2017, increases duty days and provides the airline with greater flexibility to handle peak summer demand, Iberia said. Working practices will also be amended for medium and short-haul operations, while pay scales will be adjusted to “market levels” for new staff and recalculated for senior employees.

IAG, as International Consolidated Airlines Group SA is known, has said investments to modernize Iberia’s fleet, including purchasing more Airbus Group NV A330 long-haul jets and adding the A350 model, are contingent on the unit achieving sustainable profitability. Group CEO Willie Walsh has also set up Iberia Express with less-generous employee contracts and acquired control of Barcelona-based discount carrier Vueling SA.

A turnaround at Iberia is a key part of Walsh’s plan to lift IAG’s operating profit to 1.8 billion euros in 2015. Walsh said in October that the unit should turn profitable in 2014.

Editor: Christopher Jasper.

To contact the reporters on this story: Robert Wall in London at [email protected]; Nick Leiber in Madrid at [email protected] To contact the editor responsible for this story: Benedikt Kammel at [email protected]

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Tags: british airways, iberia, labor

Photo credit: Iberia planes at Barajas airport, Madrid in December 20009.

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