Spanish flag-carrier Iberia has reported its first full-year loss in over a decade, as demand in both the premium international and domestic markets fell sharply.

The airline recorded a net loss of €273m (£242 million) for the financial year 2009, compared with profits of €32m (£28 million) in 2008. Revenues at the airline fell 19 per cent to €4.4bn (£3.9 billion), with a sharp drop in business travel exacerbated by a global slowdown in cargo traffic.

Iberia confirmed the total amount of cargo hauled declined nearly 12 per cent from a year ago.

Following “one of the most difficult periods of its history”, Iberia is apprehensive with regard to trading conditions over the coming year. High oil prices and doubts over whether demand will recover for lucrative business class seats are both key concerns.

The International Air Transport Association (IATA) has speculated recently that the fall in demand for premium travel may be “structural” rather than “cyclical”, arguing the market may have irreparably changed.

British Airways

Iberia is presently finalising the details of a merger with British Airways. In the pipeline for over 18 months, Iberia confirmed firm details will be published in the next few weeks.

Iberia chairman Antonio Vázquez explained: “This market has changed for good.

“Traditional airlines as we know them will disappear, but we’re not about to cry about it.”

The proposed merger between the two oneworld Alliance partners reflects a broader wave of consolidation in the airline industry, which has been hard hit by the spread of budget airlines, high fuel costs, the global recession and travel shocks such as last year’s outbreak of swine flu.

Any merger would create the world’s third largest airline by revenue, with British Airways shareholders taking a 55 per cent stake in the new company, with a smaller 45 per cent share for Iberia stockholders.