Iberia has delayed its planned merger with British Airways after reporting a €92.6 million (£83 million) first-quarter net loss and warning that it was unlikely to make a profit this year.

Fernando Conte, chairman of the Spanish flag carrier, said yesterday that he was focusing on rebuilding the airline, although he remained confident that a deal with BA could be arranged eventually.

His statement was at odds with comments from BA, in March, which suggested that a deal was imminent. Willie Walsh, BA's chief executive, told shareholders then that the only issue to be resolved was how the parent company would be controlled. Mr Conte said yesterday: “We are currently mainly focused on our own contingency plan, which we believe is the most important and immediate challenge.

“Due to the volatility of the financial markets and the impact on BA's pension deficit, and also the difficult state of the sector, this project is taking more time than initially foreseen.”

Talks between BA and Iberia were revealed last August and have dragged on since. The two are seeking a merger to improve their financial strength amid the downturn in the aviation sector. The tie-up would create Europe's third-largest carrier. A spokesman for BA said yesterday: “Talks are ongoing.”

Iberia said that the recession had combined with a catalogue of other problems, including poor weather, pilots' strikes and competition from high-speed rail connections, to trigger the first-quarter loss, up from €400,000 a year ago. Operating revenues fell 15.6 per cent year-on- year to €1.1 billion.

Iberia reported a net profit last year of €32 million, its thirteenth consecutive year of profit.

The group announced a crisis cost-cutting plan, including redundancies and a hiring freeze, aimed at saving between €110 million and €125 million. It will also put on hold a planned investment programme of up to €90 million. Implementing these moves was “the most important and immediate challenge of our company”, Iberia said.

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