Spanish airline Iberia said yesterday that it fell into the red last year as the recession dented demand for air travel, especially for more profitable premium seats.

Iberia, which has plans to merge with British Airways, said in a results statement that 2009 marked "one of the most difficult periods of its history".

The carrier posted a worse-than-expected net loss of €273 million last year despite a cost cutting programme and cuts in routes and frequencies.

Iberia had posted a net profit of €32 million in 2008.

Revenues fell 19 per cent to €4.23 billion. A poll of four analysts by Dow Jones Newswires had predicted that Iberia would post a 2009 net loss of €256.3 million and revenues of €4.41 billion.

Iberia forecast more tough times due to the global economic downturn, uncertainty over a recovery in demand for both tourist and business class seats and volatile oil prices.

BA and Iberia plan to seal a definitive agreement in the first quarter for a merger to create the world's third largest airline by revenue.

Earlier this month BA forecast a record loss in its current financial year owing to weak demand for air travel and despite sharp cost cutting, underscoring the challenges faced by the sector and the need for a merger.