Loss-making Iberia on Friday announced plans to axe 4,500 jobs to save Spain's biggest airline from collapse and warned more cuts could follow against the backdrop of economic crisis in the eurozone country.
"Iberia is in (a) fight for survival," Iberia's chief executive Rafael Sanchez-Lozano said in a statement issued by parent group International Airlines Group (IAG), which also owns profit-making British Airways.
Iberia "is unprofitable in all its markets. We have to take tough decisions now to save the company and return it to profitability," said Sanchez-Lozano.
"Unless we take radical action to introduce permanent structural change the future for the airline is bleak. However this plan gives us a platform to turn the business around and grow," he added.
Sanchez-Lozano said "the Spanish and European economic crisis has impacted on Iberia, but its problems are systemic and pre-date the country's current difficulties."
IAG said it was announcing "a comprehensive plan to save Iberia after record losses -- and return it to profitability."
The parent group unveiled a "reduction of 4,500 jobs to safeguard around 15,500 posts across the airline" -- meaning Iberia was on course to lose almost one quarter of its staff.IAG added that a deadline of January 31, 2013, had been set to reach agreement with unions over the cuts.
"If agreement is not reached, deeper cuts and a more radical reduction in the size and scale of Iberia's operations will take place to secure the natural long haul traffic flows at Madrid and safeguard the company's future," IAG said.
In a bid to stem Iberia's cash losses by mid-2013, the Spanish airline would slash its network capacity by 15 percent and downsize its fleet by 25 aircraft, including five long-haul carriers.
"Iberia has many advantages. It has an excellent geographical position to serve Latin America, along with historical ties; a strong brand and the ability to grow long term at it hub," the airline said.
Separately on Friday, IAG announced that the parent group's net profits dropped 24 percent in the third quarter compared with the equivalent period last year, hit by losses at Iberia.
It said in an earnings statement that profit after tax fell to 202 million euros ($258 million) in the three months to September 30 compared with net profit of 267 million euros in the third quarter of 2011.
IAG added that Iberia had made an operating loss of 262 million euros in the nine months to September 30, offsetting an operating profit of 286 million euros at British Airways.
"We want Iberia to be strong and successful," IAG chief executive Willie Walsh said on Friday.
"This turnaround plan is critical for Iberia and for the future of Spain. A strong and profitable Iberia can create jobs and boost tourism, a key driver in Spain's economic recovery."
Spain's economy is wilting as its government's austerity programme chokes consumer spending amid the country's deep recession that has pushed its unemployment rate above 25 percent
And the eurozone's fourth-largest economy is hovering on the edge of a sovereign bailout, after already securing a eurozone rescue loan of up to 100 billion euros for its banks.
Walsh on Friday added that IAG would not "hesitate to take the necessary steps to protect the interests" of its shareholders.
In early trading, shares in IAG jumped 1.19 percent to 170 pence on London's benchmark FTSE 100 index, which was down 0.23 percent at 5,762.80 points.
"If IAG can achieve its restructuring goals and successfully acquire (Spanish low-cost airline) Vueling, the outlook for 2013 and beyond is quite positive," Goodbody stockbrokers said in a note to clients.
Friday's developments came a day after IAG said it had launched an offer for full control of Vueling Airlines -- which is already almost half owned by Iberia -- for 113 million euros.
It comes as Vueling looks to expand its network to a total of 100 airports, with London and Frankfurt among the new destinations.
BA and Iberia merged in January 2011 in a tie-up aimed at slashing one another's costs, as a sharp economic downturn and rise of low-cost competitors sparked steep losses for traditional carriers.
Irish no-frills airline Ryanair this week announced a 10-percent jump to its interim net profits, causing the Dublin-based carrier to lift its annual earnings forecast.