UPDATE 1-IAG says Spanish flag carrier Iberia in critical state

Thu Jun 20, 2013 8:00am EDT

By Robert Hetz

MADRID, June 20 (Reuters) - Spanish flag carrier Iberia has become unprofitable in all markets, including long haul, and its problems are critical, International Airlines Group said on Thursday.

Last year's overhaul of Iberia, resulting in over 3,000 job cuts, was just the beginning, Chief Executive Officer Willie Walsh told the group's annual shareholder meeting.

"It's only a first step and Iberia needs to do more," Walsh said.

"It's vital that everyone within the company understands that they have to make sacrifices to help save Iberia," the executive said in a clear call to unions bucking against salary and job cuts enforced last year.

IAG groups together British Airways and Iberia. It trimmed salaries at the Spanish airline last year in an attempt to counter cut-price competition from rivals like EasyJet and Ryanair in a severe economic downturn.

Workers staged two five-day walkouts in February and March leading to millions of euros in losses and the cancellation of thousands of flights.

Further strike plans were scrapped after IAG accepted a government-appointed mediator's proposal to fire fewer people and soften pay cuts. However, Spanish pilots' union Sepla did not agree to the new terms and has filed a lawsuit against Iberia for applying the measures to them.

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