Spanish flag-carrier Iberia is heading for its first annual years in 13 years as a fall in business class traffic and a price war in economy erode margins.

Chief executive Fernando Conte warned shareholders that passengers travelling business had fallen 20 percent year-on-year due to a sharp fall in business travel on its routes from Madrid to London and Latin America.He said: “We are going through the worst global economic crisis we have ever seen, and our revenues and profits are being seriously affected.”

He also reiterated a €200m cost-cutting plan that would include plans to cut staff by up to 10 percent this year, reduce investments by about 50 percent and freeze executive pay.

Conte’s bleak outlook follows shortly after British Airways also disclosed its unprecedented conditions that had left it in “a fight for survival” with a record annual loss of £401m.

Executives at both airlines have said that tough trading was hampering their planned merger, whilst analysts are beginning to question whether the merger will ever be completed.

Mr Conte told shareholders Wednesday that the “merger process, in which we have identified an important volume of synergies . . . is having a normal level of complexity”.

“At the moment, work continues on the both sides to find agreement on those elements of greatest importance,” he added.

But Iberia finance chief Enrique Dupuy dealt BA a blow by saying: “A merger with BA is a good fit for Iberia, but a merger with Lufthansa or Air France would be quite a good fit as well.”

Last month, Iberia posted first quarter losses of €92.6m, compared to a €400k profit year-on-year. Revenues were down nearly 16 percent, to €1.01bn. At the time, Iberia citied a “collapse in business travel and intense pressure on fares”.
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