International Airlines Group, the owner of British Airways and Spain's Iberia, swung to a full-year operating loss, hit by its underperforming Spanish unit and higher fuel costs.
IAG, Europe's fourth-biggest airline group by market value, on Thursday reported a 2012 operating loss of 68 million euros (58 million pounds) compared to the 485 million euro profit it posted a year earlier. The result beat average analyst forecasts for an 82 million euros loss, according to Thomson Reuters data.
IAG said including restructuring costs at Iberia the loss was 613 million euros.
The results were hit by a 6.1 billion euros fuel bill, 20.4 percent higher than in 2011, and a 351 million euros operating loss at Iberia. British Airways, however, delivered an operating profit of 347 million euros.
Iberia, Europe's biggest carrier to Latin America, has been battling competition from low-cost airlines and high-speed trains, labour disputes and Spain's deep economic crisis and bleeding cash as revenue fails to cover high operating costs.
IAG said it would press ahead with plans to cut some 3,800 jobs at Iberia as part of a restructuring plan to return the loss-making airline to growth after Spanish unions rejected IAG's offer to reduce job cuts by 30 percent.
"The divergent financial performance of our airlines continued," said IAG chief executive Willie Walsh.
"We have embarked on a significant transformation programme in Iberia and these results emphasise further that the airline must adapt to survive."
IAG also plans to cut capacity by 15 percent this year, mainly at Iberia, by focusing on profitable routes and reducing its fleet by 25 aircraft.
Walsh said the outlook for 2013 hinged on the outcome of Iberia transformation plan negotiations, and associated costs and losses. Subject to these, IAG said it expects to report a better operating result close to the 485 million euros profit it delivered in 2011.
IAG's full year revenues rose 10.9 percent to 18.1 billion euros, but non-fuel costs rose 11.6 percent to just over 12 billion euros.
(Reporting by Rhys Jones; editing by Lorraine Turner)