Spain's Iberia airline announced Tuesday it will slash its pilots' overall wage bill by 20 percent, delivering the news in the midst of a series of one-day pilot strikes.
Iberia, which merged with British Airways last year to form International Airlines Group, said the decision would cut pilots' wage costs by 62 million euros ($81 million) and boost productivity by 25 percent.
The airline was taking steps to stay competitive at a time of weak demand, high oil prices and tough competition, Iberia finance director Jose Maria Fariza said in a statement.
"This delicate situation has been seriously aggravated by the strikes by the pilots union SEPLA, which have been causing daily losses for Iberia of three million euros," he said.
SEPLA has vowed to strike every Monday and Friday until July 20 -- a total of 30 days -- in its battle against the launch of budget airline Iberia Express, which began flying on March 25.
Pilots say Iberia Express will offer worse working conditions and lower wages to pilots, arguing that it breaches a work agreement and could lead to the loss of 8,000 jobs in the core airline.
An earlier string of 12 one-day pilot strikes in December, January and February forced about one-third of flights to be cancelled. Iberia estimated it cost the firm a total 36 million euros.
Iberia's finance chief said the company was targetting the pilots because they were the only group not to have reached a new work agreement with management after more than two-and-a-half years' negotiations.
It said the airline pilots' wage bill would be lowered by cutting the salary scale by 12 percent and by other measures such as eliminating inflation-linked pay increases.
An Iberia spokesman said the average pilot's gross salary was about 200,000 euros a year.
Pilots would also be required to work more, the airline said, as it raised the maximum number of pilot flying hours to 900 a year.
The airline, which also eliminated extra holidays earned for length of time served in the company, said the maximum flying time allowed in the existing agreement was 820-850 hours but in reality the average was 650 hours.
Iberia called on the pilots' union to abandon its strike and return to the negotiating table.
The firm criticised SEPLA for not attending a meeting Tuesday called to discuss the latest measures.
But Sepla called the company's announcement a "provocation" and a union spokesman said it was asking the government for arbitration.
Iberia has come under pressure from its British partner to make savings after the Spanish line logged a loss of 98 million euros compared with some 620 million euros of profits for BA.
It faces tough competition on its home ground, particularly from Irish budget line Ryanair, which overtook Iberia in passenger numbers last year.