OREANDA-NEWS. International Airlines Group (IAG) announces that Iberia has reached agreement in principle with its pilots' union, SEPLA, to introduce permanent structural change and improve the airline's viability. It also heralds a new positive working relationship between Iberia and SEPLA after years of conflict.

This landmark agreement provides a strong foundation to put Iberia on the path towards sustainable profitable growth - the more positive of the two scenarios outlined at IAG's Capital Markets Day in November 2013. It will also enable Iberia to become more competitive and reduce its cost base.

The main impacts of the agreement are:

Fundamental productivity improvements within Iberia.

Salaries to remain frozen until 2015 as outlined in the Mediation Agreement. After that date, increases will be subject to the airline's profitability.

The Mediation Agreement provided a 14 per cent salary reduction for pilots and an additional 4 per cent cut linked to the productivity agreement. With these productivity improvements, the 4 per cent will be returned.

Facilitates the growth of Iberia and Iberia Express.

Luis Gallego, Iberia's executive chairman, said: “I would like to thank the efforts made by SEPLA, the pilots and Iberia's management team who worked together to reach this agreement. This groundbreaking deal reduces the cost structure and provides the foundation for the airline to grow profitably. A strong and profitable Iberia can protect jobs in the long term and boost tourism which is a key driver in Barajas and Spain's economic recovery.

“Iberia is the natural airline choice for Latin America and this agreement will enable it to be a formidable competitor and build on its new brand, providing customers with great service and an extensive network.

“This agreement also enables the growth of Iberia Express with a competitive cost base and provides promotion opportunities for current Iberia and Iberia Express first officers. Iberia Express will help make Iberia profitable and stronger, by providing short haul feed, and will provide Spanish competition to low cost carriers”.

Willie Walsh, IAG's chief executive said: “'Luis Gallego, his team and SEPLA deserve congratulations for striking a bold deal that will mark the turning point in Iberia's future. Luis has deservedly won the respect of the industry, his colleagues and the trade unions. Permanent structural change was the only way to save Iberia from slow decline. This agreement marks the beginning of its future”.

This agreement in principle is subject to the approval of SEPLA's general assembly.