Iberia is looking to slash pilots’ pay by a fifth as it takes a hard line in its battle with their union over cost cuts and the launch of a budget carrier to compete with the likes of Ryanair and EasyJet.

Alongside the pay cut, which includes an across-the-board reduction in pay scales and changes to perks for pilots with 15 years’ seniority, the airline is proposing to increase the number of hours pilots are expected to fly every year and eliminate extra holidays for senior staff.

Under recent reforms to Spanish labour law, companies are allowed to propose changes to contracts with employees if the groups have experienced two consecutive quarters of either losses or falling revenue – both of which apply to Iberia.

The proposals are an opening gambit that triggers 15 days of negotiation with the Sepla, the pilots union. That will be followed by another week of talks if an agreement cannot be reached, after which an arbitration committee will step in. Iberia expects a resolution in 50 days time.

Antagonism between management and Sepla is already intense, with the union starting a series of strikes last week to protest against the launch of Iberia Express, which offers worse pay and conditions than the mainline carrier.

Pilots are planning to strike every Monday and Friday for three and a half months, an action that could cost the airline up to €90m. International Airlines Group, the holding company of both Iberia and British Airways, says it will not back down given the damage high costs has done to profitability on Iberia’s short- and medium-haul network.

Analysts on Tuesday agreed that the airline needed to take action. “Being an airline you have to continuously cut costs,” said Gert Zonneveld at Panmure Gordon. “It’s non-stop.”

Iberia said the payroll cuts would reduce costs by €62m at an airline that produced an operating loss of €61m last year. It also expects the changed working arrangements to increase productivity by a quarter. José María Fariza, finance director, said the changes were “the sole means of ensuring success in the difficult situation faced by the airline”.

He added that the moves would only affect pilots, since the unions representing cabin and ground crew have already reached deals with the airline for a new contract.

Douglas McNeill, an analyst at Charles Stanley, estimates Iberia’s short-haul division lost €100m last year. “Saving this kind of money would still leave work to be done, but it would constitute very significant progress,” he said on Tuesday.

He added that while these proposals might simply be an aggressive first move by the airline in a longer game, “Iberia pilots are already striking with such regularity that management doesn’t have much to lose by upping the ante”.

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