Redundancy procedure negotiated at Iberia

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In November 2001, the Spanish airline Iberia announced a redundancy procedure affecting some 10% of its workforce, as part of a series of measures to respond to the downturn in the air transport industry. Over the following month, management and trade unions negotiated the terms of the workforce reduction, which will mainly involve non-renewal of temporary contracts, pre-retirement, voluntary redundancies and temporary suspensions, along with greater flexibility.

On 14 November 2001, the management of Iberia, the Spanish airline, presented to the Directorate-General of Employment (Dirección General de Trabajo) a redundancy procedure (Expediente de Regulación de Empleo, ERE) affecting 2,800 jobs — nearly 10% of the workforce. The procedure is part of a series of 'measures against the crisis' following the terrorist attacks in the USA on 11 September.

Management's plan

According to the plan presented on 14 November, the redundancy procedure will affect 2,516 workers in Spain — 8% of the 29,124-strong workforce as of 31 December 2,000. Of these, 1,857 are ground workers, 465 are cabin crew, 181 are pilots and 13 are co-pilots. Iberia management proposed a series of measures to reduce the workforce including: pre-retirement (prejubilación - ES0011221F); voluntary redundancy; termination of contracts with commitments to redeploy workers within a given period; reductions of working time and wages with a guarantee of returning to full-time employment; a substantial modification of working conditions; and geographic and functional mobility. Iberia convened a bargaining commission for each of the four groups of workers, in order to negotiate the redundancy procedure with the trade unions over a period of one month.

The redundancies will be accompanied by a package of further 'measures against the crisis'. The company foresees losses of ESP 46.7 billion in 2,002, and though the causes go back to before 11 September, the company attributes them to the effects of the crisis on the sector. The package includes measures to reduce flights by 11%, the cancelling of contracts to rent planes with crew for certain routes, the negotiation of a delay in the delivery of new planes and the establishment of a plan to save ESP 9 billion in costs in 2002 and ESP 18 billion in 2003.

Repercussions for other Spanish airlines

On 30 October 2001, Air Europa presented a redundancy procedure that involves: the closure of its regional flight subsidiary, Air Europa Express; the dismissal of 337 permanent employees, of whom 197 are pilots; the termination of 450 temporary contracts; and a wage freeze. Some 80% of the reduction of the workforce corresponds to the staff of Air Europa Express. The management of Air Europa stated that the introduction of the redundancy procedure was justified by the termination by Iberia of a rental contract for six planes and their crew, and by losses of ESP 6.4 billion in the first 10 months of 2001. The Directorate-General of Civil Aviation (Dirección General de Aviación Civil) issued a formal warning to Air Europa for giving notice of the closure of all the operations of Air Europa Express only 12 hours before it became effective. The trade unions have also stated their opposition, so the Directorate-General of Employment has decided not to authorise the redundancy procedure as yet.

Another air company that could be affected by Iberia's decisions is its franchisee Air Nostrum, which specialises in regional flights. The Spanish Airline Pilots' Union (Sindicato Español de Pilotos de Líneas Aéreas, SEPLA) has asked Iberia to take over the operations of Air Nostrum with its own planes and crew, and an agreement to this effect was reached.

Provisional agreement

The trade union situation at Iberia is complex and fragmented. The trade unions represented at the company are:

• the General Workers' Confederation (Unión General de Trabajadores, UGT), which is the majority union in Iberia, Spanair and Air Nostrum;
• the Trade Union Confederation of Workers' Commissions (Comisiones Obreras, CC.OO), which is the majority union in Air Europa;
• the Commission of Assembly Workers (Comisión de Trabajadores Asambleario s, CTA);
• the Independent Union of Passenger Cabin Crew Members (Sindicato Independiente de Tripulantes de Cabina de Pasajeros, SITCPLA);
• SEPLA, which is the majority union among pilots;
• the ESTABLA cabin crew union, which is the majority union among this group; and
• the Spanish Union of Aeronautical Maintenance Technicians (Asociación Sindical Española de Técnicos de Mantenimiento Aeronáutico, ASETMA).

When the bargaining period over the Iberia redundancy procedure ended on 13 December, there was a basic agreement between the company and most of the trade unions represented in the company, but it was not supported by SEPLA or ESTABLA, while CTA did not agree with some points of the deal and asked for an extension of the bargaining period. The provisional agreement will be valid for one year (until 31 December 2002), and some of the measures laid down in it will be voluntary. These measures are:

• non-renewal of 700 temporary contracts of flight staff, who may be taken on again according to the development of business. Some of the workers affected will be offered the possibility of a permanent part-time contract;
• pre-retirement, from the age of 58, on 90% of pay until the age of 60 and thereafter 80%;
• voluntary redundancies, with compensation of 35 days' pay per year of service;
• temporary suspension of contracts for one to two years, with payment of 40% of the voluntary redundancy pay and an agreement to redeploy the workers voluntarily at the end of this period, when they will return the compensation or accept the same conditions as a new recruit;
• modification of working conditions to create greater mobility of workers between fleets, with the necessary training to allow them to adapt; and
• reduction of the agreed working time.

Commentary

Despite Iberia's forecast of losses in 2002, many experts and advisory institutions, as well as the trade unions, believe that the situation of Iberia in the Spanish and South American airline markets is well consolidated, and that there has been no substantial reduction in passengers after 11 September, as has affected other European companies (down as much as 14%, above all among business passengers), such as British Airways (UK0110114F) and Lufthansa (DE0111207F). Iberia has a 15% market share of flights from Europe to South America; passenger numbers on these flights increased by 0.5% in September, whereas flights across the North Atlantic fell by 17.1%. The share of Iberia's business represented by the routes most liable to lose custom, those to the USA and the Middle East, is 9% and 1% respectively.

The experts state that after the initial negative impact of 11 September, Iberia's air traffic and bookings have begun to pick up. Furthermore, after an 11% fall in Iberia's profits in September, they recovered to 20.9% in November. In contrast, the British Airways' profits were down 77.5% in September. Furthermore, according to figures from the Spanish Airports and Air Traffic Authority (Aeropuertos Españoles y Navegación Aérea, AENA), the number of passengers at Spanish airports fell by 4.7% in October, whereas the number of flights rose by 0.5%. The fall in passengers mainly affected international flights (6.5%), whereas domestic flights showed a far lower fall (2%). Iberia expects to recover the loss in passengers from May 2002 onwards.

Thus, one cannot generalise the crisis affecting carriers such as Braathen Safe (NO0111125N), Swissair and Sabena (BE0109362N) to all air companies. Iberia is a well-consolidated company due to its position in the Spanish market (Europe's second-largest tourist market after France) and the South American market (in which the large companies are interested in order to compensate for losses on other routes such as the North Atlantic and the Middle East). In the last few months, the Scandinavian SAS has bought 75% of the shares of the second-largest Spanish company, Spanair (it already has a shareholding of 25%), and there are negotiations for Lufthansa to buy 25% of Spanair shares.

Therefore, the 'crisis' at Iberia is just another stage in the restructuring process that the company has been carrying out since privatisation (ES9802246N). The labour measures that accompany this process are aimed at achieving greater flexibility in recruitment, working time, working conditions and wage costs. What differentiates Iberia from Spanair and Air Europa is that the use of temporary employment is more limited (20%-25% of the total workforce, compared with 50% in the other two companies, though it is higher in areas of tourist traffic), and the working conditions and pay are significantly better. There is therefore more fragmented and weaker trade union representation at Spanair and Air Europa. (Manuel Sánchez, Fundació CIREM)