The airline group posted operating profit over the three months to September of €270m, down from €363m over the same period last year.
Over the nine months to September, Iberia made an operating loss of €262m. To secure a turnaround in profitability of at least €600m, IAG is slashing 4,500 Iberia jobs and downsizing the carrier’s fleet by 25 aircraft to help stem losses.
For IAG overall, fuel costs rose 15.4 per cent over the quarter, while passenger revenues were up 9.1 per cent over the three months.
The group said that it expected to make an operating loss of €120m this year.
Chief executive Willie Walsh said: "Iberia continues to cause concern and we are announcing today a restructuring plan to introduce permanent structural change across the airline.
"Iberia is in a fight for survival and we will transform it to reduce its cost base so it can grow profitably in the future."