The International Airlines Group (IAG), which was formed after the merger of British Airways and Iberia in 2011, has warned that its Spanish unit is in a "fight for survival".

IAG has said that it might have to cut 4,500 jobs at Iberia as it is likely to report an operating loss during the year. The group has recorded a 25 per cent fall in operating profit during the third quarter mainly due to high costs of fuel and poor performance from its Spanish unit. The group's operating profit in the third quarter was 270 million euros, compared to 363 million euros recorded in the same quarter of the previous year.

The group said that Iberia is losing _1.7m each day and is not earning profits in any of its markets.

Iberia has been struggling to perform in the recession-hit Spanish economy and its low-cost carrier Iberia Express has been affected by labor disputes in the country.

"For too long the narrow self-interest of the few has damaged the long-term future for the many. Time is not on our side. The Spanish and European economic crisis has impacted on Iberia, but its problems are systemic and pre-date the country's current difficulties," said chief executive Willie Walsh's.

The warnings comes as the group is likely to report a operating loss of about 120 million euros in 2012 following looses relating to its bmi subsidiary and exceptional items.