November 7, 2012 / 8:31 PM / in 5 years

UPDATE 1-IAG studies Vueling buy and Iberia job cuts

* IAG says studying full takeover bid of Vueling

* Mass job losses already feared at Iberia - union sources

* IAG to discuss both matters at Thursday board meeting

* Vueling shares suspended

MADRID, Nov 7 (Reuters) - The International Airlines Group is considering a full takeover of Spanish low-cost airline Vueling while it prepares massive lay-offs at the country’s flag carrier Iberia.

IAG, which was formed by the merger of Spain’s Iberia and British Airways, said in a statement that its board would study on Thursday a deal with Vueling, which has a market capitalisation of 171 million euros ($218 million).

The board is also expected to approve up to 7,000 job cuts at Iberia, union sources said on Wednesday.

Unions have been expecting layoffs of 4,000 to 7,000 workers for months due to Spain’s challenging recession and the progressive shifting of Iberia’s short to medium distance flight routes to its low cost carrier Iberia Express.

Meanwhile IAG, a member of the oneworld global alliance, has been on the search for candidates to join its holding group.

IAG is due to reveal third quarter results on Friday along with its restructuring plans for Iberia, which fuelled an operating loss of 253 million euros in the first half.

Spain is at the heart of the euro zone debt crisis as it struggles with its second recession in three years and a record unemployment rate of 25 percent.

IAG said it has not yet discussed specific terms or price of a possible deal with Barcelona-based Vueling, which posted an operating profit of 68 million euros in the third quarter.

Vueling’s shares were suspended from trading after the announcement. They closed down 4.4 percent at 5.47 euros.

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