After a short period to negotiate, Iberia and its unions have once again fallen out over job cuts, with 5 days of continuous strike action to take place.

No date has currently been set, although it is expected to take place in the 2nd half of February.

The Unions rejected a plan that would cut the initial 4500 job cuts to 3,147, 30 percent,  lower wage reductions and capacity cuts of 10 percent for this year rather than an initial plan for 15 percent.

Iberia’s problems stem from its short haul unit – which has to contend with low cost carriers including Ryanair, EasyJet, as well as High Speed trains. In addition, the demand for services is dropping due to the financial issues hitting Spain that have resulted having one in four workers is unemployed.

In response, Iberia have created a lower cost unit called Iberia Express – which has gone down like a lead brick with the unions as it has a much lower cost base than Iberia.

Add all this together, and you’ve got a recipe for trouble.

As no dates have yet to be confirmed for the action, automatic rebooking won’t be a possibility for now. Personally, I’d have contingency plans if I was travelling on Iberia towards the end of this month….

As we all remember, Virgin Atlantic moaned its way through the sale of BMI to IAG. Part of the deal was that IAG had to disperse 14 pairs of slots of Heathrow to buy BMI.

These slots are assigned for shot haul and domestic use.

Well, it seems Virgin Atlantic has full authority on these slots from the UK Civil Aviation Authority (CAA) and the European Commission, confirming routes to the following:

• Manchester (pre-announced and confirmed to operate)
• Edinburgh (pre-announced)
• Aberdeen  (pre-announced)
• Nice (new)

It seems Virgin Atlantic’s focus on its flying between Scotland and Heathrow, running multiple daily flights from Edinburgh and Aberdeen to London Heathrow.

The slots which were assigned for Moscow are to be re-assigned as Virgin Atlantic lost the offer of route authority (with EasyJet winning the 2nd Carrier status between London and Moscow)

Steve Ridgway CEO of Virgin Atlantic says:

“We have fought hard for the right to fly short-haul and take a strong challenge to British Airways within these shores. For 28 years both airlines have battled for customers all over the world and it has meant that British consumers have ultimately had some of the world’s best flying and lowest fares.

“This is the beginning of an exciting new era in Virgin Atlantic history and we now feel a responsibility to everyone that has supported us in this challenge. Passengers can look forward to a great short-haul service with us but most importantly reap the benefits from the re-injection of vital competition we can provide on these routes.“

Timetables are being firmed up for all services, as well as equipment leases (mainly as Virgin Atlantic currently operate a wide-body only fleet at the moment, and for shorter haul legs they won’t fill those seats for all the will in the world). It’s looking Virgin will lease some A320′s for this purpose.

The only other known operator to bid for the slots was Aer Lingus – who have a rather large slot portfolio at Heathrow already.

The big question that needs to be asked however is will Virgin Atlantic manage to turn a profit on these routes? Whilst Virgin Atlantic will provide welcome competition on these short-haul legs, turning a profit is a different matter. Considering BMI were substituting larger A320′s and A319′s for a ERJ-145′s on these routes at a lot of points – and still managing to loose £36 per passenger, I can’t help feeling this could be a costly exercise for Virgin.

However, if they can combine this short haul feed with an alliance membership – who knows.

It’ll be down to the old chestnut – Yield Per Passenger.

I hate the post some days. Be it bills or letters about the lack of stability in my real world job (oh yes, than you Andrew Lansley MP for South Cambridgeshire, Ex Secretary of State for Health and  for adding a layer of uncertainty to my post so I might not make it past 1st April 2013 in my current job).

Sometimes it brings joy in the form of membership kits, but otherwise, the post doesn’t bring a lot of joy these days.

Today, was another letter came through that’s in the in the letters you don’t want to receive pile – this one is from IAG/BA and the remains of Diamond Club, and written confirmation of what’s going on:

The letter confirms what we all know:

• All earning except via the credit card is suspended
• From 31st December, any remaining access will be online only
• Tier match until 31st December 2012

Still, it’s not a nice letter to get – another sign of the final parts of BMI coming to a close.

(Apologies for the mini-rant at the beginning of this post. I’ve needed to get that out of my system today).

It seems IAG’s patience with Iberia is running out quickly, as it announced today a sharpening of the job axe.

Up to 4500 positions are up for the cut, along with five long haul aircraft and 20 shorthaual aircraft to be removed for the Iberia mainline fleet (156 planes down to 131 planes).

This will also reduce Iberia’s routes by 15%, to focus on the profitable routes.

IAG revealed a 30% drop in pre-tax profits due to Iberia’s poor performance, as well as the purchase of British Midland Airways (better known as BMI), and that olde bugbearer of airlines – fuel.

Willie Walsh, CEO of IAG says:

“The group performance is coming back to the levels seen in 2011 and this is particularly true if you strip out the BMI losses of 31m euros in the quarter,”

“However, there remains a strong difference between the performances of British Airways and Iberia.”

IAG flagged that Iberia’s future wasn’t rosey in the last quarter report – and that jobs would be on the line. That promise has now been delivered sadly.

Rafael Sanchez-Lozano, Iberia’s CEO puts it bluntly.

“Iberia is in a fight for survival,”

“It is unprofitable in all its markets.

“Unless we take radical action to introduce permanent structural change, the future for the airline is bleak.”

Ouch.

As well as the 4500 jobs to go, there will also be what IAG describes as “permanent salary adjustments to achieve a competitive and flexible cost base”.

Or pay-cuts and cuts in conditions to you and me.

Iberia has gone out to the Unions (who were expecting 7000 jobs to go to the axe), but has set itself a deadline of 31st January 2013 to have all deals agreed.

With Iberia burning through €1.7 Million a day, there is motivation to sort something out, with the ominous threat of if no agreement is reached, deeper cuts will have to be made.

This comes at a time where IAG itself is going to make a 100% control bid of Vueling, purchasing the remaining stake of Vueling for €113 million.

IAG believes with Vuelings lower cost base, it can create more jobs and operate more lower cost services.

How it will convince the regulators is another matter completely.

Sadly, this is an indication of the weakeess of the Euro-area. Everyone is trying to drive down costs – at all costs it seems.

For International Airlines Group, it’s been a rather good year getting control of British Midland Airways in the United Kingdom. However, in Spain things have been a bit more fraught.

The setting up of Iberia Express has caused a lot of friction between the management and the pilots and cabin crew.

Well it looks like the management are looking for a way out – and its name appears to be Vueling.

Vueling is a Low Cost Carrier based in Spain (with multiple bases around Europe), operating 56 Airbus A320′s and 3 Airbus A319′s, and seems to do the low cost carrier thing like most low cost carriers do. It’s history is an interesting one as it was an independent airline to start off with, before merging with ClickAir (which was a low cost carrier started up by Iberia). To save money, both airlines merged, with Iberia retaining a 48.85% holding in the company.

In a statement, IAG says the following:

“No decision to make an offer has yet been reached nor, accordingly, on any of its potential terms, including in particular the price. Further announcements will be made in due course when a decision is made,”

“IAG’s subsidiary Iberia L.A.E. Operadora, S.A. has a 45.85% shareholding in Vueling.”

If it does, this could be an interesting play. Whilst there is no room for another LCC in the United Kingdom (as far as IAG are concerned – they closed down bmibaby), Spain offers a real interest as it has both shorthaul domestic, Europe and possibly Africa if agreements are reached.

However, for a 100% takeover, this would probably have to head to the regulators – which is where this deal could stumble…

Something I don’t want to stumble is my Comments for Hurricane Sandy Dollars Drive. Sandy was a hell of a storm, and with each of your comments in a blog post, I’m aiming to get lots of commments so I can donate a lot of cash with other Boarding Area Bloggers.

Time is running out for this (I’m closing this 19:00GMT/12:00EDT), so PLEASE comment in http://boardingarea.com/blogs/ghettoife/2012/11/05/after-sandy-ways-to-help-and-get-points-and-a-way-to-get-me-to-help/ and help me donate cash!

It’s getting close to closing time for the Low Cost Carrier offshoot of BMI – BMI Baby.

With the final flights set for the 9th September (Sunday this week), they’ve put a little ditty out on their website:

BMI Baby was create out of the spare Boeing 737′s BMI mainline had leftover after mainline switched to Airbus operations. Based out of different airport during its time (Birmingham, East Midlands, Durham Tees Valley, Manchester and Belfast), it tried to play the LCC game – and came out rather bruised each time compared to the giants of Ryanair and EasyJet.

Whilst the BMI Baby brand at some points had better recognition than BMI itself, this wasn’t enough as Lufthansa tried to dispose of the airline during the sale of BMI to IAG.

IAG decided not to retain BMI Baby, and the airline has been in wind-down mode since the IAG purchase with routes from Belfast City Airport cut to nothing and most duplicate routes cut in the first phase of the shutdown.

The final shutdown will be after 9th September after the last planes land at Birmingham Airport and East Midlands Airport.

International Airlines Group (BA/Iberia/BMI) is having a bad time of it – loosing €390m  ($476m; £306m) loss for the six months to the end of June.

This is especially bad as the group turned in a €39 million pre-tax profit in the same period in 2011. Revenue increased in the period by10% to €8.5bn vs €7.8bn in the same timeframe.

Whilst revenue has been up, costs has also risen, with fuel costs going up by 25% as well as the costs of business restructuring (especially since it’s taken on BMI too)

Most of the trouble seemingly has come from the Spanish arm of Iberia which sustained a loss €263 million during the first half of 2012.

IAG’s CEO – Willie Walsh has thrown out a warning

“Iberia’s problems are deep and structural and the economic environment reinforces the need for permanent structural change. We are currently working on a restructuring plan for Iberia which we anticipate will be finalised by the end of September.”

“Inevitably, we will not be able to avoid job losses as part of this process.”

As well as redundancy costs, migration costs to Iberia Express, the economic conditions that the Iberia business unit operates in are worsening in Spain.

Very few carriers are making it through unscathed this year as the European downturn is having a major hit. Combined with high fuel costs, carriers are trying to reorganise themselves to make profit.

But when there are staff losses, it always makes those profits a bit more bitter.

As the first day of Farnborough 2012 draws to a close, lets take a look at what has been creating headlines today:

• Top of the bill goes to Steven Udvar-Hazy’s Air Lease who have placed an a firm order for 60 Boeing 737 Max 8 and 15 Boeing 737 Max 9s with  “reconfirmation rights” for 25 more. Expect those to be leased to airlines quickly when they arrive…
• Airbus have signed with Israel after the second-largest operator, Arkia to sell them Airbus A321neo’s – a grand total of four , became the first in the country to sign for the re-engined A320 family. For Airbus, this is another step into Israil after Israir’s purchase A320 aircraft.  TheArkia A321neos will be configured in an all-economy layout for 220 passengers, and will be operate on domestic and European routes.
• Meanwhile, more important news from Airbus – with news of an upgrade to the A330 family to increase the payload range of the A330-300 with a 240 metric tonne (from 235t) maximum take-off weight (MTOW)  with a maximum range extension of 400 nautical miles to 5,950 n.miles.  The A330-200/A330-200F will also also be upgraded with an extra 2 tonnes to match the payload of the A330-300, whilst boosting the range to 7,050 nautical miles.
• COMAC, C919′s and… IAG?   It seems that BA’s and Iberia’s parent is going to cooperate with COMAC over the development of the C919 narrowbody  aircraft.  It also means that COMAC will be in the bidding war with Airbus and Boeing for fleet type consideration in the future fleets if required.  Whilst IAG may not order the aircraft, it will examine the C919.  Certainly, it’s another feather to COMAC’s hat who are trying to develop the C919 as a rival to the Airbus A320 series and Boeing 737 series.
• Qatar are to operate their first 787′s first international route to London Heathrow after the initial deployment of the aircraft on Middle Eastern Routes.
• Bombardier are in high spirits with someone buying 15 of its planned C series aircraft, split for five CS100 and 10 CS300 aircraft. Who has brought them though? Bombardier are keeping quiet at the customer’s request…
• US Airways are to retrofit it’s fleet of 57 A321′s with HEPA (high-efficiency particulate air) filters. The aim being to remove dust particulates, allergens, bacteria, viruses and odours from cabin air. Which will be nice.

• And to end with, Rolls Royce are showing off Trent 1000 engines. Made out of Lego. Whilst I’m sure they won’t generate the thrust needed to do anything (and the lego probably wouldn’t survive the the spin out, let alone the exhaust), it does look quite cool. The Trent 1000 is used as one of the powerplant options on the Boeing 787

Images: Rolls Royce via FaceBook – http://www.facebook.com/RRLegoEngine

Tune in tomorrow for more Farnborough news!

It seems that Virgin Atlantic appears to be dusting itself off after the failed BMI takeover bid, with an announcement today that Virgin Atlantic is intending to build a short-haul and medium hub out of it’s London Heathrow base.

To do this, Virgin Atlantic is going to need the slots that were surrendered by British Airways/IAG.

Traffic between London and Moscow is regulated, with two Russian carriers and (up till the takeover), two British carriers

The Russian carriers were Aeroflot and TransAero, whilst the British carriers were BMI and British Airways. The vacating of BMI from the market leaves a slot open for a British carrier to commence services – subject to the bureaucracy.

Traffic on the London – Moscow run is continuing to grow, with traffic on the route trebling over the past 10 years, making it attractive to any newcomer.

As to the slots that British Airways gave up, Virgin feels it should have them all, so the airline it can create competition on short and medium haul routes, as well creating a feed for Virgin’s long haul network.

Some of the slots have been allocated already – namely to Transaero who used to code-share and operate the London – Moscow service as a joint service with BMI.

For Virgin to operate London to Moscow will require a rethink on how they operate the route – do they go down the line of operating as a long haul service using the resources that exist (for example, their existing 747, A340 or A330 fleet), or do they go down the line of a “Virgin America” operation which is much more of a LLC proposition… or somewhere in between.

Currently, there’s a mix options on this route with:

• Aeroflot operating Airbus A320′s and A321′s
• BMI operating A320′s
• British Airways operating Boeing 747-400′s and Boeing 767-300ER’s in long haul configurations,
• Transaero operating various different Boeing 737 subtypes (both Classic and NextGen)

Certainly there’s a lot to be done if they decide to go down this road.

Virgin Atlantic believe if they’re given the slots (which includes UK Domestic slots), they’ll be able to make money on what routes that were given up on due to the lower cost overheads that Virgin has compared to the old BMI. If that’s the case – or if this the usual Virgin bluster remains to be seen.

Still, it’s an interesting proposition

In what can be described as some good news, BMI Regional has been sold by International Airlines Group to a company called Sector Aviation Holdings.

The price: A cool £8 million.

The sale is pending CAA approval, but IAG anticipates this will be completed within two weeks.

For that cool £8 million, Sector Aviation Holdings will get:

• All of BMI Regional’s fixed assets and long-term liabilities
• A fleet of 18 Embraer ERJ-135 and -ERJ-145 regional jets.
• And the staff of BMI Regional – around 330 jobs.

Sector Aviation is a consortium of businessmen including Ian Woodley, – the founder of Business Air which was sold to BMI, which became BMI Regional – a full circle if you will, with funding provided Stephen and Peter Bond, who are also investors in Scottish airline Loganair.

Future plans for Regional have not been announced at this time – I’d expect something soon enough.

It’s good to see that BMI Regional has survived the axe that was being sharpened for it. Its previous performance should give it a fighting chance for the future and the people who work for Regional.

In some good news, it seems that talks with Granite Aviation and IAG are in progress over the long term fate of BMI Regional.

BMI Regional is the arm of BMI that runs services from some of the UK Regional airports – as well has having a heavy Scottish presence. They operate a fleet of 4 Embraer ERJ-135′s and 15 ERJ-145′s, focusing on high value traffic, employing 330 people.

Doubt had been cast by IAG’s Willie Walsh on offloading the airline which IAG obtained with the purchase of BMI.

Granite Aviation is in advanced talks with IAG over the sale of the division for about £20m, with an announcement possible in the next two weeks.

Granite Aviation was negotiating with Lufthansa over the sale of BMI Regional before, but these discussions came to nothing due to differences. Granite Aviation still lacks the infrastructure to support these aircraft however – something that would have to be addressed if the sale is to go ahead.

If the regional deal goes ahead, Granite Aviation could take on the BMI brand when IAG stops using it on BMI’s mainstream services – letting the BMI name live on.

For the staff involved, lets hope it goes through. However, there are 470 people at BMI Baby that are hoping to be rescued yet…