Iberia has still got some way to go before it gets its hands on the full state capital injection approved by Brussels in January. And the intended use of the funds will come under further European Commission scrutiny before the Spanish flag is allowed to implement its financial restructuring programme.
Approval of the Pts87 billion ($719 million) handout meant an immediate release of Pts37 billion to Iberia to cover redundancy costs - the carrier plans to shrink its workforce by some 28 per cent by 1999. But before it receives the balance of Pts50 billion Iberia must satisfy the Commission on two main counts. First, the successful transfer of most of the 83 per cent stake in Aerolineas Argentinas to a consortium led by the Spanish carrier's state-owned holding company. This should be completed by May, says a senior source in the Commission's transport directorate.
Second, Brussels will also vet a report from the Spanish carrier detailing how the Pts50 billion will be used. It is intended solely to pay down part of the $2.5 billion debt, with Pts11 billion set aside to cover defaulted loan payments.
The Commission will also want to ensure that funds 'released' by the subsequent drop in interest payments are not used by management to ease up on labour concession demands or alter the carrier's pricing policy.
The Commission source is doubtful Iberia will apply for the additional Pts20 billion in 1997 because 'it will be tough enough to meet the present criteria.' And the official warns: 'If Iberia fails to meet the current criteria the Commission will re-open the case.'
Mark Odell
Source: Airline Business