Net profits at Iberia Airlines dropped about 90 per cent last year, as high fuel costs and flagging demand offset efficiency gains, the Spanish flag carrier said on Wednesday.

The airline, which is in merger talks with British Airways, told analysts that profits for the year were a provisional €32m ($42.3m), from operating revenues down 1.3 per cent at €5.5bn. Passenger revenues fell 2.5 per cent, to €4.2bn, while cargo was ahead slightly at €346m.