Iberia restructuring on track as deal on further cuts nears

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Iberia's restructuring is on track with this year's headcount-reduction target expected to be beaten, generating higher savings for 2014. Talks about further cuts are also progressing, with union agreements expected soon.

The Spanish airline, which is owned by IAG, is aiming to reduce headcount by at least 3,140 staff in a restructuring mediation agreement that also includes productivity improvements, salary cuts and a pay freeze through to 2015. These changes are designed to generate €360 million ($476 million) in gross savings from 2012 levels by 2015.

Speaking during an IAG analysts' briefing today, Iberia chief executive Luis Gallego said he expects to be significantly ahead of the 2013 staff-cut target by year-end. The 2013 target of a 2,127 staff reduction should be exceeded by around 250 people.

"We have a small delay [in the headcount reduction] between May and September but at the end of year we are going to have a higher number of people leaving the company [than targeted], so we will have higher savings for 2014," he said.

Iberia is negotiating further productivity enhancements with unions and says that if it can reach agreement on "real sustainable productivity gains", then a proposed 4% salary reduction would no longer apply.

"But this is not enough, and we are working on long-term agreements with the unions right now and are optimistic we can reach agreement very soon," says Gallego.

"We have started negotiating with unions not only about productivity measures, we are talking about 'Iberia of the future' and when we finish these two phases we'll have a stable and healthy cost base and be in a position to grow," he adds.

IAG's aim is that Iberia will be back in profit from 2015 with a solid positive EBIT from 2017, having adopted a new business culture and positioned for growth.