Iberia collides with Sepi due to job adjustments after the purchase of Air Europa
After rescuing the airline, the Government does not want cuts to be made with public money, but Iberia needs to slim down the company so that the operation is not a trap
2020 ends with what was promised was going to be the largest operation in the air sector of the year without closing. The Government, Air Europa and Iberia are negotiating the last fringes for the definitive purchase of the first one, from the Globalia tourism group, by Iberia, from the IAG group. Job cuts are the last hurdle to shutting down the operation, which was announced a year ago, was paralyzed by the pandemic and Iberia finally conditioned the rescue of Air Europa by the Government.
This one was announced over a month ago. It will be done through the strategic companies rescue fund managed by Sepi (State Society for Industrial Participations) and gave the Government decision-making capacity in the management of the airline, including the sale to Iberia or any initiative to cut staff.
The problem is precisely in the small print of this rescue, since the Executive, which has injected 475 million to the airline, does not want layoffs to be financed with public money, but Iberia, on the other hand, knows that it has to make adjustments so that the operation pays off.
“The political aspect, this negotiation with the Sepi, is the one that remains pending, and in reality it is the most delicate issue, because the state injects money into a company so that it does not go bankrupt and save jobs, but whoever buys has to take value out of integration and make the company slim, “says Philip Moscoso, an expert in the airline industry at IESE.
In his opinion, it is that point of friction “that is being negotiated. The rescue of Air Europa came with conditions and the Executive wants to have a voice and vote, but Iberia does not want them to be imposed with directors who could restrict their management efficiency” , he points out.
In exchange for the ransom, the Government would appoint two Sepi advisers to Air Europa’s board of directors and would have voice and vote in the appointment of its CEO and in the aforementioned cuts. Last week the airline already appointed this new council, which has two members of the state society. Lack to elect the CEO.
“Iberia proposed the purchase because Air Europa was strong in Latin America, to move it away from the southern cone and get rid of a competitor. You are interested in your slots and their routes, but not your template, and in the current context it is clear that not all jobs are going to be maintained “, says Marco Taboas, an expert in the air sector.
Luis Gallego himself, CEO of IAG and president of Iberia when this operation was carried out, has acknowledged that Iberia will also have to make adjustments, although he has never specified how it will affect the workforce. “Probably They are waiting for the purchase of Air Europa to be closed to make these calculations”, Taboas points out.
The operation was announced in November last year. Iberia offered 1,000 million euros for the airline to the Globalia group. “For Globalia, which in its best year had a profit of 56 million euros, it was a very good opportunity while Iberia absorbed a competitor,” says Taboas.
Operation of the year
Waiting for the Competition to approve the operation, the pandemic broke out, causing the biggest crisis the airline industry has ever experienced: Several airlines have already gone bankrupt, millions of jobs will remain on the way, routes will be closed and it will cause concentration within the sector.
The airlines have spent months with a large part of the fleet on the ground and more than 70% of their workers in an ERTE situation. The sector does not believe that the situation will improve between now and 2023 and they are all cutting costsAlso personnel, even those that have received public money, such as the German Lufthansa or the Dutch KLM.
This has complicated a purchase that in its day that was sold as a strategic operation with great benefits for Spain. Luis Gallego has always defended that the company continued to have a value for Iberia but that the conditions of the agreement had to be renegotiated.
Air Europa is no longer worth the 1,000 million that Iberia initially offered for it. In addition, flights to Latin America are at a standstill and long-haul traffic is not expected to pick up anytime soon. In fact, it will be the last to do so.
“The operation is going to close, and there is also a lot of social pressure, because Without this purchase, not only Air Europa’s workforce is put at risk, but that of the entire Globalia group”, Taboas points out.
Gallego has always defended the strategic interest of this union. In the first place, because it would allow Iberia to extend its tentacles in the southern cone and push away its competitor. Second, because it would allow both companies to create a hub (traffic connection center) in Barajas and would put Madrid at the level of the four largest centers in Europe: the airports of Amsterdam, Frankfurt, London Heathrow and Paris Charles De Gaulle.
Between Iberia and Air Europa, they would control almost 60% of the traffic in Barajas and more than twenty routes from Madrid to Europe and America. Therefore, “the purchase will be effective, because it continues to have interest but that happens to slim down the company, “says the expert.
Moscoso clarifies that, even so, the companies “They have to be careful in the adjustments to be able to return to activity when demand grows. If you give up take-off and landing rights, sell planes and fire pilots, this then doesn’t happen overnight. “