British Airways owner to axe 4,500 jobs at Spanish airline

International Airlines Group (IAG), which was formed when BA merged with the Madrid-based carrier in 2011, will cut Iberia’s capacity by 15 per cent and reduce its fleet by 25 aircraft as it attempts to turn around an operation which made losses of E262m (£210m) in the first nine months of this year.

Iberia’s troubles and the impact of Superstorm Sandy, which grounded flights into and out of the US east coast last month, mean IAG expects an operating loss of about E120m (£96m) this year.

BA, which made profits of E286m (£228m) over the first nine months of this year, saw revenue growth for the last quarter held back as the London Olympics reduced demand for business travel.

However, there are signs of a recovery, although the airline group continues to face rising fuel costs, with the bill showing a 21 per cent year-on-year increase in the three months to September 30.

Group chief executive Willie Walsh said the full integration of its rival bmi, which was bought by IAG for £172m in April, had been achieved smoothly and efficiently.

IAG, which made an operating profit of E270m (£216m) in its busy third quarter trading period, became Europe’s third biggest airline group in January 2011 after the merger of BA and Iberia.

Chief executive Rafael Sanchez-Lozano said the problems were “systemic and pre-date the country’s difficulties”.

He said Iberia was “burning” E1.7m (£1.4m) every day and had to modernise and adapt to the new competitive environmen.

Iberia’s 15,500 staff have been warned of “deeper cuts and more radical reduction” if an agreement is not reached by January 31.