Iberia urges union accord for low-cost carrier

Spain's Iberia wants an agreement with unions on a new short-medium range airline before summer, its chairman said, as the loss-making carrier seeks new strategies to ensure its viability in the damaged air industry.

Iberia announced plans to create a Madrid-based, low-cost network to feed its growing long-haul business last October as part of its 2012 strategic plan, but unions have met the move with skepticism.

"We want consensus with the unions, but it must be clear that our short-medium range model has to change, without a doubt," Iberia's chairman Antonio Vazquez told reporters.

"It's not just about cost-cutting" he added.

Airlines posted record losses in 2009, but industry association IATA has said demand for business and first class seats had picked up in the first quarter, while economy travel recovered to pre-crisis levels.

"We're on the right track now, but there's still a long road ahead" Vazquez said ahead of a shareholders meeting.

Iberia's merger with British Airways (BAY.L), also conceived to cut costs and improve competitiveness, is still on track for completion before year-end.

"If everything goes as planned the merger will take place in November" Vazquez said.

He said he also expected a commercial alliance with BA and American Airlines to be approved by the U.S. Department of Transportation and the EU by this summer.