Iberia, the Spanish carrier which signed a deal with British Airways to form one of the largest airline groups in the world in April, has declared a return to profit. Iberia announced a €31 million gain for the second quarter of 2010 compared to a €73 million loss for the same period a year earlier.

For the first half of this year Iberia also said it had been able to cut operating costs by almost 6 per cent. It did this by reducing capacity on some routes, establishing ways of stripping out unnecessary expenditure and reducing its fuel bill. South American destinations have also been an area of growth for the carrier.

The airline said that it had managed to increase revenues in the international market where business travel was showing signs of improvement. However, negative results were being seen in the domestic market which is still struggling.

As with many other European carriers, Iberia felt the effects of the ash cloud which settled over Europe earlier in the year grounding planes for nearly a week. Although Iberia remained active on some routes, including Madrid-New York, it claims the volcanic cloud cost it in the region of €20 million.

The proposed merger between Iberia and BA is expected to be completed by the end of the year. Although both airlines will still operate under their own liveries, the new company is to be called International Airlines Group. It will be based in London and BA shareholders are to retain 55 per cent.