UPDATE 1-Pilots agree to talk with Iberia about job cuts

Wed Jan 2, 2013 2:59pm EST

* Iberia insists cuts are needed for survival

* Unions have until Jan 31. to back restructuring plan

* Unions want growth plan to ensure Iberia survives

* Talks to start on Thursday -union source

By Tracy Rucinski

MADRID, Jan 2 (Reuters) - Spanish airline Iberia said on Wednesday it has reached a preliminary agreement with pilots over plans to restructure the loss-making airline by laying off staff and cutting salaries.

However, the agreement to sit down to talks does not necessarily mean that the union will support the restructuring. The airline's unions, which have been demanding a growth plan from Iberia, have until Jan. 31 to support the airline's plans.

"We reached the same agreement with the pilots as we did with the other unions two weeks ago, which is a preliminary agreement for talks," a spokesman for the company said.

A union source said the pilots signed the agreement to kick off negotiations and that talks over the nature of job cuts would begin on Thursday.

Iberia averted strike action over the Christmas holidays through talks with its ground and cabin crews over the shape of the restructuring, but until now the pilots had been less willing to sit at the negotiating table.

Iberia, part of the International Airlines Group (IAG) along with British Airways, plans to axe about 4,500 jobs - a quarter of the Spanish carrier's workforce - and cut salaries to become more competitive.

Iberia says the cuts are needed to guarantee its survival amid low-cost competition and Spain's deep economic recession, both of which have weighed on the airline and made it a drag on its more profitable partner, British Airways.

To back the restructuring plan, unions want proof that there is a growth strategy for the airline beyond the cost cuts.

"We're not very optimistic going into the talks because there still isn't anything on the table showing how this plan saves Iberia, showing how Iberia will grow in the future," the union source, who did not wish to be named, said earlier on Wednesday.

The Spanish government, which technically holds 12.1 percent of IAG through a stake owned by nationalised lender Bankia , has also expressed concern over the job cuts as Spain battles record-high unemployment of 25 percent.

Spain's joblessness continues to grow amid thousands of job losses at nationalised banks and other struggling companies.

The planned cuts at Iberia, one of Spain's largest firms, are also in the strategic tourist sector, one of the country's few growth drivers and representing around 11 percent of an economy in its second recession since 2009.

As part of its restructuring, Iberia has shut down flights to destinations such as Athens, Cairo, Istanbul, Montevideo and Havana.

LOW-COST SURVIVAL

At the root of union discontent has been Iberia's creation last March of low-cost carrier Iberia Express, meant to compete with budget rivals like Ryanair Holdings Plc and EasyJet Plc by having a lower and more flexible cost structure.

The pilots' union, Sepla, spent most of 2012 in conflict with Iberia over the new airline, but an independent arbitrator ruled last week that new pilots for Iberia Express can be hired with 40 percent lower salaries than at parent Iberia.

The ruling also limits the amount of short- and medium-haul capacity Iberia can transfer to the new airline but links wage hikes to Iberia's performance.

Iberia posted a 262 million-euro ($345.4 million) operating loss in the nine months to September, while BA recorded a nine-month operating profit of 286 million euros. Sepla has accused IAG of downsizing Iberia to the benefit of BA.

Another source of union tension has been IAG's 113 million-euro bid to buy out the rest of low-cost airline Vueling , Spain's second-largest carrier by passenger numbers and in which IAG already holds 46 percent.

IAG announced the bid the day before it unveiled Iberia's restructuring plan.

Experts have highlighted Vueling, which has a large business clientele, as one of the few Spanish companies that is creating jobs and boosting economic growth thanks to strict cost controls.

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