This July, Alonso Fernández Ortiz, a 30-year-old engineer from Colombia, made a brief stopover in Madrid, en route to Poland, where he is studying. It turned out he was the billionth passenger to land at Barajas airport, and was duly given a small model of an Airbus 340 in recognition of this happy event, a certificate that read "I am the billionth traveler," and the right to use the VIP lounge in any Spanish airport for the next year.
Elena Mayoral, Barajas' director, then read out a speech on the tarmac in front of the plane that Fernández had arrived aboard in which she pointed out that 2013 was the airport's 80th year in operation, and that she hoped it would not take another 80 years before the next billionth passenger touched down.
What Mayoral presumably preferred not to point out was that this July saw Barcelona's El Prat airport almost match Barajas in terms of the number of passenger arrivals: 3,837,605 versus 3,879,548. August will likely see El Prat overtake Barajas, reflecting the 3.2-percent annual increase in tourist numbers to Barcelona, compared to a 10-percent fall in visitors to Madrid.
Aside from fueling nationalist pride in Catalonia, the figures speak volumes about the changing nature of the aviation industry, and the rise of low-cost airlines — Ryanair, Easyjet and Vueling are all now based at El Prat — to the detriment of Spain's former flag carrier Iberia.
The figures are also a warning to Barajas' six-billion-euro Terminal 4, opened in 2006, and which has mired the Spanish airports authority AENA in debt after going two billion euros over budget.
Barcelona has handled demand better than Madrid"
That said, thanks to T4 — used exclusively by Iberia and its IAG partner British Airways — Barajas is now Europe's fourth-biggest airport in terms of passenger numbers: some 51 million people now pass through it each year compared to the 30 million who land and take off from El Prat. AENA admits nevertheless that the economic crisis in Spain has hit the aviation industry hard, noting in a recent report that its lower profits are "closely linked to the economic situation of certain airline companies." Those "certain airline companies" is AENA-speak for Iberia; the former national carrier's annual turnover has fallen by 17 percent compared to July 2012.
Iberia's decision to make T4 a European hub for the Americas has benefitted El Prat, which thanks to the determination of the regional government, is now a major European low-cost hub. The story dates back to 2009, when a group of Catalan business leaders bought Spanair for one euro after the SAS affiliate went bankrupt. Of the total 107 million euros required to get the company back in the air, 37 million came from the government, backed by a loan of 50 million.
The regional government had already spent 1.2 billion euros on expanding and renovating El Prat. But the Spanair dream was over by 2012, when it went bust, leaving debts of 474 million euros, and 4,000 people without jobs.
But El Prat wasn't finished yet. Aware that the future of the industry was increasingly in the hands of the low-cost companies, the airport has gone out of its way to attract visitors from northern Europe looking to enjoy Spain's beaches and city breaks. Easyjet decided to move its operations to Barcelona in November, and by the end of this year will have more flights out of El Prat than Madrid.
"Barcelona has handled demand better than Madrid," says Javier Gándara, Easyjet's head of operations in Spain, adding: "We had eight planes and 300 people in Madrid, but the city has now lost that money because its taxes were too high. Our income was falling at the same time as our costs were rising."
The evolution of the country's two main airports is matched by the two main airlines operating out of them: at the same time as Iberia continues to lose altitude, Vueling, which it now owns, and which is based out of El Prat, has grown by more than 17 percent over the last year.
Iberia's own low-cost company is going nowhere due to a pilots' dispute
It's hard to avoid aviation similes when discussing Iberia: the company seems to be locked in a nosedive. It has cut its least-profitable routes and sacked around 1,700 of the 3,140 staff required after it merged with British Airways (BA). The plan to pull the company back to profitability by creating its own low-cost company, Iberia Express, is going nowhere due to a pay dispute with its pilots.
BA has been painted as the villain of the piece by the Spanish media, which blames it for cutting routes and sacking staff. Juan José Hidalgo, the president of Air Europa — which is now demanding access to T4 — is shedding few tears: the company has opened routes to destinations Iberia has closed, and he describes the merger with BA as "selling a horse in return for 10 cats: I don't see where the synergies are."
The decision to buy Vueling would seem to have been BA's. IAG's CEO, Willie Walsh, announced earlier in the month that the low-cost operator was now to be given 120 new aircraft to expand its operations, in direct competition with Iberia Express.
This puts further pressure on Iberia, which has lost 351 million euros over the last year; meanwhile, Vueling just keeps growing: its flights now take up 35 percent of El Prat's capacity, despite being only a quarter of Iberia's size and with a workforce 20 times smaller than that of its bigger rival.
The airlines may avoid using the term low-cost, but there is no doubting that this is the philosophy driving their strategies. The formula is simple: keep costs down, and instead of pricing on the basis of the amount of kilometers a plane has to fly, do so instead on supply and demand.
Initially, the thinking was that this model would be just one of many within the travel industry, but it has ended up muscling its way to the apex, and forcing competitors to follow its approach. Airports are now increasingly designing strategies to make themselves attract low-cost companies with large numbers of passengers, while travel agencies are struggling to compete with their policy of avoiding intermediaries — as online agency Rumbo, constantly hassled by Ryanair's legal eagles, can attest. At the same time, the hiring policies of the low-cost companies have also forced the flag carriers to rethink their previously generous labor agreements.
A report by Ryanair's Pilots' Group, which is not recognized by the company, shows that 94 percent of the 1,000 employees it surveyed believed that the authorities should investigate the impact of safety on the company's hiring policy. As though to illustrate Ryanair's disregard for its staff, John Goss, who had been a pilot with the company for 27 years, was fired earlier this month after he had questioned the company's safety policy on British television.
Competition is fierce. Not even Ryanair can afford to lower its guard for a moment, and has decided to move its operations base to Barcelona, cancelling flights to nearby Reus and Girona, where for years it was given subsidies by the local and regional governments in a desperate bid to attract visitors.
In Asia, there are signs of recovery and they are hiring new companies
The Irish company reported profits of 503 million euros in 2012, up 25 percent on 2011, and that despite a hike in the cost of aviation fuel. And yet it continues to look for ways to cut costs.
"This August we will be cutting flights out of Madrid by 30 percent, and by 25 percent into and out of Barcelona. The reason: taxes," says Luis Fernández, head of Ryanair's Spanish operations. He says that the government's tax increases amounted to a 100-percent hike in costs at the two airports in 2012, and a nine-percent increase in 2013. "Spanish airports are losing their competitive edge," he warns.
Ryanair's specialty is looking for legal loopholes and then exploiting them to the maximum. For example, its Spanish pilots tend to be subcontracted through an Irish intermediary that requires them to form their own three-man companies, say unions, a policy of divide and rule that weakens pilots' ability to negotiate, particularly over the highly contentious issue of safety measures that will cost Ryanair more money.
SEPLA, the body that represents Iberia's pilots, says that the low-cost companies like Ryanair are killing the airline industry. It points out that some 18 airlines have closed since 2000; and that more than 3,000 pilots have lost their jobs, with many moving abroad to find work. Unable to lower wages due to collective bargaining agreements, growing numbers of airline operators, such as Iberia, are outsourcing hiring, which allows them to significantly reduce their wage bill.
SEPLA's president, Javier Martínez de Velasco, says that he has nothing against low-cost carriers, preferring to call them "point-to-point" companies. He explains that the aircraft always flies fixed routes and returns to the same airport each night to reduce costs, unlike "network" companies like Iberia, whose scaled costs and expenses for its flight personnel have to be paid for out of the ticket price on long-haul flights.
"It's not a bad system per se. It's just that Ryanair imposes degrading working conditions on its staff; at other low-cost companies, like Easyjet, the staff are happy; Vueling's conditions are also acceptable, give or take a few problems." Martínez de Velasco says that all the airlines now seem focused solely reducing their labor costs. "It's as though they see their staff as a necessary evil, not as the foundation upon which their business is built," he argues, estimating that Iberia's pilots have lost around 50 percent of their purchasing power in the last decade. As a result, growing numbers of professionals are looking abroad to continue their careers.
"In Asia, there are signs of recovery, and they are hiring. BA and Lufthansa are increasing pilots' wages to try to hold on to them; meanwhile, in Spain, wages are being cut, which is why more pilots are leaving the country."
Spain has never had a coordinated transport infrastructure strategy"
More and more pilots and mechanics are being signed up by Asian and Middle Eastern companies such as Hainan, Emirates, Kuwait Airways, Etihad Airways, Korean Air, Vietnam Airlines, and Qatar Airways, all of which are able to offer salaries of up to 250,000 euros a year, along with medical insurance, accommodation, and schools. "It's possible to earn the equivalent of six years' salary in a single year abroad," says Martínez de Velasco: "Iberia says that it will not pay more than 100,000 euros a year for a captain, and that this is the market price, which is a lie."
It's not easy finding Spanish pilots that have joined Asian and Middle Eastern companies, largely because their contracts include confidentiality clauses. One pilot, speaking under condition of anonymity, who works in Qatar insists that he didn't move abroad just for the money.
"I feel that I am better appreciated there. Your professional abilities are recognized, and you have been career prospects. I couldn't stand the constant labor disputes in Spain. People here treat you as though you are somehow privileged, as though we didn't do anything, and in the end, we get the blame for the mistakes made by the company's management."
He says that at his new airline, the majority of non-native pilots are Spanish: more than 300. "In Europe they are looking to get experienced professionals on low-pay contracts, but here they understand that if you want the best you have to pay for it." Up until July, 105.9 million passengers landed and took off from Spanish airports, a significant drop on 2008, a record year, when the figure for the same period was 120 million. Barajas has its problems, but they are nothing compared to the challenges facing regional airports, whose subsidies are fast drying up.
"The real problem facing Spain is that there has never been a coordinated transport infrastructure strategy," says a former consultant to AENA. "Everything has always been in isolation: experts discussing train routes, airport panels coming up with their solutions... And in the end, the decisions are always made on the basis of politics rather than real needs," he says, putting forward the country's AVE high-speed rail network as a case in point: "There was never any attempt to combine investment, to seek economies of scale; the same city had a high-speed railway station and a new airport. And what do we now have? Empty train stations and empty airports."
It is hard to make sense of Spain's infrastructure strategy. AENA, mired in a four-billion-euro debt, has recently decided to buy Luton airport in the United Kingdom for 500 million euros, as well as that of the Colombian city of Cali. The airlines operating in Spain say that the purchases are part of a plan to make AENA more attractive in the run-up to its eventual privatization, but that it would make more sense to focus on reducing taxes.
Meanwhile, to celebrate Barajas' 80th birthday, AENA sent out a press kit that included a photograph of the airport in 1933: a single runway amid what looks like a desert with around a dozen tiny aircraft lined up. Bearing in mind El Prat's recent upsurge, more than one journalist commented something along the lines of "Back to the Future."
At Iberia, there is a mood of grim determination to press ahead with restructuring. "The fewer obstacles that are put in the way of the change, and the sooner it is concluded, the sooner the company will be in a position to start growing again, with all that this supposes in terms of benefits for Barajas," says the company's spokeswoman, adding that Iberia and Barajas still have a long way to go together: "Barajas would obviously continue to operate without Iberia, but it would cease to be a hub, because no major player would come in to take on Iberia's role."