Strikes Affect Travel in Europe; Iberia Responds to Union Complaints

Recent protests against government austerity programs affected travel in Spain, Portugal and Greece this week, but the Wall Street Journal says that in the face of "protest fatigue," declining levels of unionization and factionalism within the labor movement have weakened strikes as tools for changing government policy.

Wednesday's coordinated strikes, denouncing budget cuts encouraged by the European Union, were touted by organizers as the widest union-led challenge to austerity since the start of the global recession in 2008. In Spain and Portugal, subway and bus services were closed or running at limited levels. More than 330 flights were canceled in the two countries: According to the AFP, British Airways and Easyjet were among the airlines that canceled or rescheduled services to Madrid, Barcelona, Lisbon and Thessalonaki in Greece owing to a general strike organized by the European Trade Union Confederation.

Clashes erupted in Spain after tens of thousands of strike supporters held a peaceful evening rally in Madrid's central Plaza de Colón. Television images showed people hurling rocks and bottles at police officers, who clubbed demonstrators to the ground and hauled away others in police vans. Garbage bins along a central Madrid boulevard and a police vehicle in Barcelona were set afire. Authorities reported 142 arrests and more than 70 injuries across Spain.

Airline Responds to Union

On its website, Iberia countered what it called "the lies and misleading statements issued by the SEPLA airline pilots unions," claiming that the union's goal is "to obscure the company’s real problem, which is its lack of competitiveness, due chiefly to the high costs of cockpit and cabin crews, which can reach levels twice as high as those of competing airlines." The statement claims that Iberia pilots take home an average of 200,000 euros per year, vs. the about 100,000 earned annually by pilots of other airlines, who also work more hours than their counterparts at Iberia. 

The site also lists several reported complaints from SEPLA and offers counter-arguments to each. For example:

Iberia has handed routes to British Airways, which is taking over its T4 hub at Madrid airport 

Iberia has not transferred any route to British Airways. In T4 BA operates 10 daily Madrid-London flights, as compared with 700 daily flights operated by Iberia group airlines. Cancellation of routes has been due solely and exclusively to the chronic losses they generate. One of the main reasons for these losses is that in some instances Iberia pilots earn nearly twice as much as those working for the competition, work 23 percent fewer hours, and demand that extra pilots be carried on flights where they are neither necessary nor legally required. An example is the Johannesburg flight which Iberia operated for 12 years and which never earned money, but racked up a total loss of 46 million euros. British Airways has been flying from London to Johannesburg since 1920, and this year it reduced seat supply on the route by 11 percent with respect to 2010. 

British Airways is raising its seat supply at the expense of Iberia, which is cutting supply. 

British Airways has raised its supply of seats from its London-Heathrow hub owing to the good performance of demand to/from London, while Iberia has been obliged to adapt its capacity to the decline in demand for flights to/from its Madrid hub, owing to Spain’s economic crisis –other airlines operating from Madrid have had to do the same thing. Iberia and British Airways have different markets, so growth in one cannot be said to be to the detriment of the other. In addition, Iberia must eliminate frequencies or entire routes that are not profitable, and will resume growth when profitability has been restored. 

The merger hurt Iberia. 

In a little less that 18 months the merger brought 101 million euros worth of synergies to Iberia, which is to say that its losses would have been much larger had it not belonged to IAG. Moreover, thanks to the merger, Iberia has access to sources of financing that otherwise it would be denied on the grounds of its operating losses and of country-risk. If it were not a part of IAG, Iberia would be doomed to disappear in the short term.

Iberia has lost money since the merger while BA has earned profits. 

Iberia has posted operating losses since 2008. In 2009, two years prior to the merger, it had the worst results of its recent history. Before the merger, Iberia was suffering from serious structural and competitiveness problems, which were aggravated by the economic crisis. The current health of its natural markets is poor, and the demand for flights originating in Spain is now very weak, widening the gap between Iberia and its competitors. Iberia’s revenues do not cover its high operating costs, and this is why it urgently needs to implement a radical transformation plan. British Airways posted losses in the two-year period between March, 2008 and March, 2010, then returned to profitability thanks to a restructuring plan that involved downsizing, staff cuts, a pay freeze, and productivity gains. Between 2001 and 2010 the number of BA employees dropped from 60,000 to 36,000. In the same period Iberia’s staff declined in size from 26,000 to 21,500 people.

British Airways will take control of Iberia in 2015 when the safeguard clauses expire.

There are no such clauses, and the merger terms are on public record. IAG is controlled by its shareholders and decisions are made by its board of 14 directors, half of them proposed by Iberia and the other half by British Airways. This makes it a merger of equals. Board members now consist of six people with Spanish nationality, three Britons, two from the United States, one from Ireland, one from France and one from New Zealand.

British Airways is replacing its fleet while Iberia is not. 

The sole important aircraft acquisition decision taken by IAG since the merger was to order 16 Airbus A330s, eight of them firm and to be delivered to Iberia staring in January, 2013, with options to buy eight more. These aircraft will be fitted with Iberia’s new long-haul business and tourist class sections. British Airways approved its latest fleet replacement program five years ago.


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