IAG scales down job cuts at Iberia after union clashes

International Airlines Group, the owner of British Airways and Iberia, yesterday looked to have won a major battle with unions and ended the threat of strikes at its Spanish airline with a deal that will still see it save €250m (£218m) a year.

IAG's chief executive, Willie Walsh, made his name facing down unions at BA, and City analysts were suggesting he has done the same at Iberia after completing negotiations with a Spanish government mediator. A strategy to help IAG turn around a €1bn loss last year saw Mr Walsh set out plans for Iberia, Europe's third-biggest airline, to axe thousands of jobs and cut pay.

The airlines group was thwarted by staff staging eight days of strikes in the past two months and waving red and yellow Spanish flags outside IAG offices in Madrid with signs such as "Get your dirty hands off Iberia" and "British go home". But IAG accepted a Spanish government mediator's proposal to trim its targets to sacking 3,141 Iberia staff and cutting salaries for the airline's remaining 16,000 workers by 15 per cent, and unions are close to accepting the group's offer.

"The majority of unions are in favour of signing," Manuel Atienza, a spokesman for aeronautical workers at the General Workers Union, said.

The proposals don't match IAG's original ambitions of sacking 3,800 staff, and will see it out hand out pay-offs worth 35 days per year worked, rather than 20 as initially planned.

Yet City analysts pointed out that the airports group looked to have won the negotiations, with a package that will shave €250m a year from Iberia's wage bill. Currently about 24 per cent of IAG's total costs come from staff wages, but at Iberia 30 per cent of group costs come from employee pay.

"There were some doubts that Walsh could pull this off," said Douglas McNeill, aviation analyst at Charles Stanley. "Some thought he might get bogged down in Spanish politics, but that hasn't happened. IAG has got most of what they were looking for. The changes being pushed through are pretty profound, with considerable job losses. It's certainly the biggest change Iberia has ever undergone. The sacrifices [IAG had to make on job and salary cuts] look like a price worth paying to achieve a settlement of the industrial dispute."

Another analyst added: "The deal sees IAG get a 15 per cent reduction in Iberia's workforce, plus save an additional 5 per cent through salary reduction schemes and productivity gains. It looks quite encouraging for IAG."

Strikes have forced Iberia to cancel hundreds of flights, costing the airline €3m a day.

Mr Walsh last month said it was "unfortunate that some people are still blind to the problems that exist at Iberia", adding its €351m operating loss of 2012 "should convince anybody that the problem needs to be tackled".

But Spanish politicians have been critical of IAG's moves, with José Manuel Soria, the industry minister, last week saying: "We want to call attention to what is going on. From the moment there was a merger between British Airways and Iberia the number of routes for BA has increased and the number for Iberia has fallen. Earnings for BA have risen, and fallen for Iberia. It gives the impression that there has not really been a merger at all."