Air Transport World

The strain in Spain.

Iberia's strong recovery is disrupted by pilot troubles and right delays

Iberia's ongoing dispute with its pilot union and Congestion at its Madrid hub are taking center stage as the state-owned airline prepares for its initial public offering this fall. The carrier's hold gambit to sue the union arm of the Spanish Airline Pilots Assn. (SEPIA) for pta4 billion ($28 million) in dam ages it claims the pilots caused by disrupting operations for eight days during the busy Easter holiday period is likely to inflame labor relations further, at least in the short term. Meanwhile, horrendous delays at Madrid's Barajas Airport, where only about 50% of flights were on time in March. have caused Iberia to scale back intended capacity increases from 30% to 15% and trim an average of 77 flights daily between June and December, a total of 16,368 flights in all.

Having overcome years of mismanagement, government meddling and near-bankruptcy, the latest problems are a bitter pill for the Spanish airline. But they should not overshadow Iberia's remarkable recent history as it has transformed itself into one of Europe's most profitable carriers, with net margins that are the envy of many of its competitors. For 1998. Iberia Group's provisional net profit skyrocketed 117.5% to Pta37.2 billion with a 32% gain in operating profits to Pta52.7 billion. Revenues rose nearly 10% to Pta667 billion and return on equity reached 26%, with 20.8% forecast for 1999.

Much of the credit for the turnaround should go to Chairman and CEO Xabier de Irala, a dynamic, hard-nosed businessman and Iberia's first CEO from the private sector. With Europe's air transport market fully liberalized since 1997, "the rules of the game have changed," says the burly chairman. "Now we're also here to make money. If we don't we will disappear." To achieve this successfully, he says, "we have to be obsessed also with cost reduction. That means eliminating anything that doesn't add value. If we don't, we'll be cut out of the game."

Born in New York in 1946 and educated in Paris and the Philippines, de Irala spent 19 years with General Electric in various European posts before heading the Spanish unit of ABB Asea Brown Boveri AG. …

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