Iberia’s Layoffs & IAG’s Attempt to Buy Vueling

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It has been a busy week with IAG, the parent of British Airways and Iberia, that made an offer to buy the rest of the Vueling, a Barcelona based discount carrier, that it doesn’t already own and an announcement of layoffs of around 4500 at its Iberia unit.

bbc-iag-iberia

IAG made a bid to buy rest of the Vueling that it doesn’t already own on November 8. Currently IAG owns about 46 of the airline. Unlike IAG’s Iberia, Vueling is a profitable airline and has considerable amount of cash on its balance sheet (407 million euros).

iag-vueling

Then on Friday, the IAG announced that it would need to fire 4500 employees of the Iberia unit that is currently not profitable. The airline has tried to move more of Iberia’s flying to its low cost Iberia Express unit. That has resulted the mainline to have too many employees working for it. The overall economic problems of Spain has resulted in fewer flights than previously required.

iag-iberia

Many of the European airlines are trying to outsource their unprofitable European flying that is required to support the network. Lufthansa recently announced to move all of the flying that doesn’t touch its Munich and Frankfurt hubs to Germanwings.

Finnair has already moved all of its Embraer fleet to be flown by UK based Flybe under their Flybe Finland subsidiary, although under Finnair flight numbers and service concept.

Conclusion

It is interesting to see if IAG’s bid for Vueling is successful and whether they would incorporate the airline under the Iberia Express brand.

The problems with Iberia that requires fewer headcount has been widely known due to fewer flights having been flown under the mainline Iberia-brand. Reducing headcount is not easy in Spain and especially now that the country is going through rather tough times.

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