Iberia is to shed 4,500 jobs to save the biggest airline in Spain from collapse.

Its parent group International Airlines Group (IAG) also owns British Airways and has warned that more cuts may follow.

The Iberia chief executive Rafael Sánchez-Lozano says the airline is unprofitable in all its markets and is now in a fight for survival.

Dubbed a ‘transformation plan’ it will introduce permanent structural change across all areas of the business with the aim of stemming losses and returning the airline to profitability.

Transformation Plan Highlights:

• Stem Iberia’s cash losses by mid-2013.
• Turnaround in profitability of at least €600 million from 2012 levels to align Iberia with IAG’s target return on capital of 12% by 2015.
• Network capacity cut by 15% in 2013 to focus on profitable routes.
• Downsizing its fleet by 25 aircraft – 5 long-haul and 20 short-haul.
• Reduction of 4,500 jobs to safeguard around 15,500 posts across the airline. It says this is in line with capacity cuts and improved productivity across the airline.
• New commercial initiatives to boost unit revenues including increased ancillary sales and website redesign.
• Discontinue non-profitable 3rd-party maintenance and retain profitable ground handling services outside Madrid.
• In the short-term the airline says it will focus on stemming the losses and creating a profitable route network.
• This will include suspending loss-making routes and frequencies and ensuring an effective feed for profitable long-haul flights.

Warning for unions

A deadline of January 31st next year has been set to reach an agreement with unions at the carrier.

Iberia says that if agreement is not reached than deeper cuts and a more radical reduction in the size and scale of operations will take place.

CEO Sánchez-Lozano says “The Spanish and European economic crisis has impacted on Iberia, but its problems are systemic and pre-date the country’s current difficulties”.

“The company is burning €1.7 million every day. Iberia has to modernise and adapt to the new competitive environment as its cost base is significantly higher than its main competitors in Spain and Latin America” he added.

Iberia Express currently flies from Dublin Airport.