With the Spanish government’s ERTE job retention scheme set to expire in its present form on September 30, Air Europa (UX, Palma de Mallorca) parent Globalia has said it will try to forge an alternative furlough deal with its unions if the scheme is not renewed for a sixth time, sources at the tourism group told the newspaper El Confidencial.

The government has proposed a further extension of ERTE until January 31, 2022, but said it would be conditional this time on employees undergoing training as well as other caveats, which has prompted a backlash among unions.

The temporary layoffs, necessary because of a drop in bookings and demand forecasts for the autumn-winter season, would affect around 9,000 employees at Globalia companies including Air Europa, Be Live Hotels, and groundhandler GroundForce. The coronavirus crisis has had a severe impact on Air Europa’s long-haul flight operations.

The five million international air passengers arriving in Spain in August, according to data released last week, was up 172% from a year ago but less than half pre-pandemic levels. Globalia’s operations are well below levels seen in 2019. Iberia (IB, Madrid Barajas), whose attempt via parent IAG International Airlines Group to buy Air Europa still awaits European Commission approval, also said last week that it would propose a furlough to more than 5,000 employees if the government scheme is not extended.

In July, Air Europa employees including pilots, cabin crew, and ground staff rejected a 6% salary cut until the end of the year, which the airline said at the time would guarantee its survival. Unions questioned the move citing the high salaries of new board members at the company such as CEO Valentín Lago.

As previously reported, the EUR475 million euros (USD558 million) in state loans so far handed to Air Europa have not been enough to guarantee the viability of the airline, and sources told El Confidencial that it would seek further aid of up to EUR150 million (USD176 million).

The dire situation facing Spain’s main long-haul operators may call into question IAG’s acquisition of Air Europa, which the group has said would bolster Iberia’s position at Madrid Barajas Airport. At least it may compel it to seek a further discount on an already cut-price deal.

“Right now there is a price that is fixed. The price that was agreed was EUR500 million [USD587 million]. And I think we have to see after the competition process, and see the evolution of the company - if it really needs capital to be injected - to see what the final photo is before making a decision,” Javier Sánchez-Prieto, executive chairman and chief executive at Iberia, told the newspaper El Independiente on September 21.

The European Commission recently extended until December 3 its investigation of IAG’s bid to buy Air Europa, which insiders have already described as a potentially lifesaving deal for the long-haul specialist.