Iberia seeks union agreement for new low-cost carrier

2nd June 2010, Comments 0 comments

Loss-making Spanish airline Iberia is seeking an agreement with unions to create a new low-cost carrier to handle its short- and medium-haul routes, Iberia chairman Antonio Vazquez said Wednesday.

Unions reacted coolly to plans unveiled by the airline in October for a budget airline on these routes, where it faces fierce competition, to allow it to focus more on more profitable services between Europe and Latin America where it is the market leader.

Vazquez said talks were underway with unions to reach a "mutual agreement" for the creation of the new airline but he added the decision to set it up "is irreversible.

"Iberia will operate its short- and medium-haul flights with a model that is substantially different than the existing one," he told a news conference before a company general assembly.

"We cannot mortgage the future of the company by operating them the way we do."

Iberia faces growing competition from low-cost airlines like Ryanair and easyJet which keep adding new routes within Spain as well as to other European countries.

In the domestic market, the carrier faces added competition from the expansion of Spain's high-speed rail network which is attracting passengers away from airplanes.

"The national network of high-speed trains is increasing, airports favour ... low-cost airlines and the fact that price is a key factor for our clients when it comes time for them to choose an airline all force us to react firmly," said Vazquez.

Iberia, which signed a merger deal with British Airways in April, saw its share of the market in Spain fall two percentage points in 2009 to 33.8 percent.

The company swung to a record loss of 273 million euros (333.8 million dollars) last year after posting a net profit of 32 million euros in 2008.

© 2010 AFP

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