Madrid’s wary welcome for carrier deal

Workers and analysts in Spain gave a cautious welcome to the merger between Iberia and BA, seeing it broadly as a guarantee of the future viability of the Spanish carrier.

Coming less than 12 hours before the Madrid-based airline unveiled widening third-quarter losses, the deal is seen by many as the only possible response to an increasingly difficult trading environment.

Although much leaner than it was during its time as a state-owned monopoly, it remains weighed down by high personnel costs and old-style work practices. Rafael Sánchez-Lozano, chief operating officer, said recently that its business model was unsustainable.

“This is an indispensable merger,” said Josep Francesc Valls, tourism sector specialist at the Esade business school in Barcelona, “made necessary by the explosion in low-cost carriers and the liberalisation of the air transport market”.

Employees, too, view the tie-up favourably, despite a history of confrontation with Iberia’s management.

The flight assistants’ union, which has been striking over pay, welcomed the “culmination of the [negotiation] process”, which dragged on for nearly 16 months. It said it felt confident that the merger would “help focus all possible efforts on reaching an agreement that [resolves] the current conflict involving our members”.

Ignacio Fernández Toxo, secretary general of one of the country’s largest labour confederations, described the merger as “good news”. However, he called for guarantees from the airline on job security.

The airline’s pilots, meanwhile, were less qualified in their support, describing the merger agreement as “very positive” and the weight of Iberia in the planned holding company – 45 per cent – as “more than acceptable”.

Justo Peral, head of the pilots union at Iberia, also called for calm from the carrier’s 20,000-strong workforce. “What they are proposing does not threaten jobs,” he told Spanish news agency Europa Press.

“The merger plan consolidates a company in a sector which has been badly hit by the crisis and that is good for workers.”

Investors, however, were less upbeat, selling Iberia shares to take profits after a rally on Thursday in which they rose 12 per cent. A worse-than-expected third quarter loss at the airline, coupled with doubts about whether the merger will proceed, on Friday drove them back down about 4 per cent, to close at €2.10.

“This is a long way from being a done deal,” said one Madrid-based equity analyst. “There is still a chance it will fall apart.” There were other sceptical voices in Spain but these reflected concerns about national interest rather than the deal’s future.

El Mundo, the right-leaning newspaper, said in an editorial that Iberia would “stop being a Spanish airline” under the tie-up agreed with BA. This, it said, was “lamentable, but there is probably no better option in an increasingly globalised world”.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from and redistribute by email or post to the web.