* Parent company has spent 700 mln euros on Iberia revamp
* Airline now well on path to recovery-Walsh
By Rhys Jones
LONDON, Oct 22 (Reuters) - Recovering Spanish carrier Iberiawill return to profit next year for the first time since 2010,the chief executive of its parent International Airlines Group said.
The Spanish airline became unprofitable in all markets,including long-haul, following its merger with British Airwaysin 2011. It was hit by competition from low-cost rivals andhigh-speed trains, labour disputes and a recession that has lefta quarter of Spaniards out of work.
IAG has spent around 700 million euros on restructuringIberia, which reduced losses for the first time in almost threeyears in the three months to the end of June.
"Iberia was in a significant crisis but is well on the pathto recovery. Iberia will be profitable next year, like BritishAirways (BA) and Vueling already are," IAG boss Willie Walshsaid at the Airport Operators Association annual conference inLondon on Tuesday.
IAG, Europe's third-biggest airline group bymarket value, owns Iberia, Barcelona-based budget carrierVueling, which it bought earlier this year, and BA.
Earlier this year Walsh said Iberia, Europe's biggestcarrier to Latin America, would return to profit at some pointin 2015.
"Iberia is still loss making at the moment but we will bringthem back to profitability next year," said Walsh, withoutspecifying which measure of profit.
IAG has cut 1,700 jobs at the Madrid-based carrier and aimsto take that figure to 3,000 by 2014 as part of plans to focuson long-haul routes which it believes can become profitable.
Many full-service carriers such as BA have slashed jobs andshelved growth plans as they grapple with high fuel prices and aweak economy and fight to defend market share against nimblerlow-cost rivals such as Ryanair and easyJet.
Lufthansa, itself in the middle of a deep revamp,on Tuesday issued 2013 profit guidance that fell short ofexpectations, driving its shares lower.
Walsh also said that IAG would look at its legal optionsover Italy's rescue of struggling carrier Alitalia, which hesays constitutes state aid which is prohibited under EuropeanCommission rules.
Italy has patched together an emergency 500 million eurobailout of near-bankrupt Alitalia, including the state-ownedpost office and banks Intesa Sanpaolo and Unicredit.
"We're going to look at it (legal options) carefully becauseit is blatant state aid and we're opposed to it. Europe has gotto stand up and implement the rules that exist," said Walsh.
easyJet (EZJ)