Iberia Express expansion threatened by labour arbitration

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Despite early encouraging performance, newly-created Spanish budget carrier Iberia Express is facing a potential legal obstacle which could restrict its expansion plans.

Since its launch in April, as a strategic weapon to cut Iberia's short- and medium-haul cost base, the carrier has achieved crew productivity and overall crew costs which are "better" than other low-cost carriers, claims Iberia parent International Airlines Group.

Operating costs, says IAG, are better than expected by at least 10% and 30% better than Iberia's. Iberia Express was profitable in June, it adds, despite "macro headwinds" affecting the flag-carrier.

Iberia Express has 10 aircraft and crews have been secured for four more in preparation for expansion in 2013.

But uncertainty over labour arbitration threatens to "put a cap" on cost-competitiveness beyond the initial 14 aircraft, IAG admits.

The original plans for Iberia Express laid out an expansion strategy which would take the airline to a fleet of 40 by the end of 2015.

IAG chief Willie Walsh says the arbitration is "unclear and difficult to implement" and the company is "waiting to see the outcome" of a legal process which will determine whether the expansion can stay on its original track.

This legal hearing is scheduled to take place on 11 October.

Iberia Express is intended to deliver over €100 million of benefits to the Iberia restructuring effort, but IAG says that, while the savings are on track, the carrier's plans are "potentially compromised" by the situation.