Iberia will cut 4,500 staff, reduce its fleet by 25 aircraft - five long-haul and 20 short-haul - and downsize its network by 15%, under a large-scale restructuring plan announced today by parent company International Airlines Group.
The Spanish carrier, which made a nine-month operating loss of €262 million ($334 million), is in a "fight for survival", says IAG chief executive Willie Walsh.
Iberia chief executive Rafael Sánchez-Lozano says the carrier is "unprofitable in all its markets".
Under the transformation plan, IAG hopes to stem cash losses at its Spanish unit by mid-2013.
Other measures include the cessation of "non-profitable" third-party maintenance and the launch of new commercial initiatives.
"As well as halting Iberia's financial decline, we will establish a viable business that can grow profitably in the long term," says IAG.
It has set a deadline of 31 January 2013 to hammer out an agreement with its unions on the restructure.
"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," it says.