IAG boss on course for another showdown as trade unions respond to announcement with intention of five-day strike action
Willie Walsh is once again on a collision course with his own employees after announcing he will push ahead with plans to axe at least 4,500 staff at British Airways’ sister airline Iberia, prompting trade unions to retaliate by declaring five consecutive days of strike action.
Walsh, chief executive of International Airlines Group – BA and Iberia’s parent, had demanded acquiescence by 31 January to a plan to cut nearly a quarter of Iberia’s workforce. IAG has said the Spanish airline is in a fight for survival, with losses running at around €1.7m (£1.5m) a day, and blames overcapacity and high staff costs. Unions representing Iberia’s ground and cabin crews responded with a pledge to hold strikes over five days later this month.
Walsh said: “We’re disappointed that no agreement has been reached. Iberia is ready and willing to negotiate with the trade unions. We are determined and united to implement the necessary changes to secure the future survival and viability of Iberia.”
He first used the phrase “fight for survival” when he was BA chief executive in 2009, setting the scene for a confrontation with cabin crew over cuts that led to 22 days of strikes the following year.
Iberia on Thursday published an offer it had made to unions to reduce redundancies in return for deeper pay cuts, with pilots losing almost a quarter of their salary. The proposal was not accepted and staff warned that total redundancies could top the 4,500 originally proposed.
IAG said it will start implementing alternative plans, aiming for breakeven by the second half of this year. It is pushing ahead with plans to cut 15% of Iberia’s route network this year, focusing on profitable long-haul flights.
The dispute at Iberia is likely to prove more wounding politically in Spain than the BA cabin crew dispute of 2010 was in Britain. The downgrading of hitherto well-paid jobs and loss of almost a quarter of the workforce at the national carrier will take place against a domestic economic backdrop of a Spanish unemployment rate of around 25%.
Walsh, who forced through a major restructuring at BA to create a new breed of lower-paid, more flexible cabin crew, will not be directly involved in the confrontation in Spain, where resentment has built up against BA since the merger in 2011. Rafael Sánchez-Lozano, Iberia’s chief executive, has also warned that the airline’s future is “bleak” without radical action.
Strikes remain likely. One analyst said: “This could get messy. If I’m a survivor at Iberia, where’s the upside? You can grind people into the ground but you’ve got to show the people the way to the sunny uplands.”
IAG insists “synergies” will prove the logic of the merger by 2015 when Iberia hopes to achieve an acceptable level of profitability, but Walsh does not want the timetable for cost-cutting at Iberia to slip.
Douglas McNeill, investment director at Charles Stanley, said: “There is a high chance that management will prevail in any dispute because they are well prepared. When unions went on strike last January the company was still able to operate the vast majority of its flights and the damage was modest. Its cash reserves are such that it’s something the company can handle. As with BA in 2010, this will be the decisive factor.”
Just over two years since the merger, IAG’s shareholders have seen BA’s new partner drag down the profits. McNeill said: “At the time of this merger, they promised significant results by 2015. In football terms, they are a goal down and it’s half time.”
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