A tie-up between British Airways and Spanish carrier Iberia is set to be completed before the year is out. The deal, which was agreed in November last year and signed in April this year, will create one of the world’s largest airlines. It is to be called International Airlines Group and its headquarters will be in London. British Airways shareholders will retain a 55 per cent stake in the new company and both airlines will continue to fly under their current names.

Ahead of the finalisation of the deal, Iberia has announced it is once again making a profit. For the second quarter of 2009 Iberia published losses of €73 million. For the same period this year the company has gained €31 million.

Improved performance has been partly due to Iberia’s ability to cut costs. It claims to have made savings of 5.9 per cent through reducing seat capacity, reducing its fuel bill and introducing other cost-containment practices.

The airline is also seeing a rise in the number of premium seats it is selling on international routes, although it admitted that the domestic market was still pretty stagnant. Analyst at Davy Stockbrokers, Stephen Furlong, said the airline was continuing to grow steadily in terms of capacity. He added that South America was currently a growing market for Iberia providing a good revenue stream.

Iberia said it estimated its loss due to the disruption caused by the volcanic ash cloud which drifted across Europe earlier in the year at around €20 million. As Spain was only partially affected, Iberia was still able to run flights on international routes such as Madrid to New York.