Austrian Airlines has confirmed it will reorganise its operations to create a “joint and single” set of flight operations with subsidiary Tyrolean Airways.

The decision follows a failure to reach agreement with unions over contracts at the carrier, and will see approximately 80 aircraft and 2,000 employees transferred to Tyrolean.

Transferring contracts to Innsbruck-based Tyrolean will allow Austrian to abolish automatic salary increases and introduce a modern collective agreement.

The company said in a statement the executive board views the measure as necessary to secure the future of the airline.

The move is part of a €220 million cost-cutting plan

Under the plans, Gaudenz Ambühl will assume the position of managing director of Tyrolean Airways effective June 1st 2012.

Until May 2010, Ambühl was chief operations officer at SWISS International Airlines.

The entire flight operations will be bundled in Tyrolean Airways as of July 1st 2012.

Austrian Airlines is Austria’s largest carrier and operates a global route network of round 130 destinations.

That route network is particularly dense in Central and Eastern Europe: with 44 destinations, Austrian Airlines operates the densest route network into this region served by a single airport.