Spanish airline Iberia - which is discussing a tie-up with British Airways - said on Friday that its 2008 net profit plunged 90 percent to 32 million euros (41 million dollars) as the global economic crisis undercut demand.
Since the end of 2007, the air transport industry has seen a slowdown in the growth of traffic, which intensified in the second half of 2008 due to the deterioration of the international economic situation, a company statement said Friday.
An executive from the company said the sector tried to adapt but in an insufficient proportion to compensate for the drop in demand.
In the fourth quarter alone, the company posted a net loss of 19 million euros after a profit of 105 million euros in the same period in 2007.
Sales were down 1.3 percent over the year at 5.45 billion euros.
The airline had warned of a sharp drop in earnings last month after the economic crisis began to bite in the second half of 2008.
It said soaring fuel prices through most of the year and the launch of high-speed train services between Madrid and Barcelona had also hurt earnings.
The airline plans to reduce the frequency of some flights, in particular on the short and long haul routes, and take measures to control salaries.
It will also delay by one year an order for three Airbus A340 airliners, he said.
Iberia is discussing a tie-up with British Airways and said recently that a preliminary decision would probably be made in March.
The two companies have been holding talks since they announced their plan to merge in July to create the world`s third-biggest airline by revenue. 
The Executive confirmed that all the data are on the table and the merger talks could conclude next month.
Iberia shares dipped 0.53 percent on the Madrid stock market to 1.86 euros in a market that was down 1.91 percent.