In 1940 the government gave the monopoly of national air transport to Iberia (this fact changed 6 years later when the government liberalized the national air traffic for the private airlines) The airline was nationalised on 30 September 1944, that year it signed the purchase of seven DC-3, and three DC-4 with the purpose of expand the network in Europe. In 1946, Iberia was the first airline to fly between Europe and South America after World War II, using a Douglas DC-4 to operate flights between Madrid and Buenos Aires. This flight was the first of an expansion of flights between Latin America and Europe, including destinations like San Juan de Puerto Rico, Caracas, Ciudad de México and La Habana.

The airline phased in the first of three Super Constellations in June 1954, they were deployed on the inauguration flight of the new Madrid–New York service. In 1959 the Spanish airline Aviaco became a part of Iberia by controlling two thirds of its capital. Aviaco had been created in 1948 after the national air traffic had been liberalized. In 1961 Iberia had 9 Super Constellation in the fleet but also it marked the introduction of the first jet engine jets, in the form of the first DC-8-50 in 1961, Sud Aviation Caravelle in 1962 and Douglas DC-9 in 1967.

Iberia’s introduction of the Douglas DC-9 marked a significant step in the modernization of its short- and medium-haul fleet during the 1960s. The Spanish flag carrier first took delivery of the DC-9-32 in 1967, at a time when European air travel was rapidly expanding and airlines were seeking efficient jet aircraft to replace older piston turboprop planes.

The DC-9 quickly became a cornerstone of Iberia’s domestic and regional operations.

In the early 1970s the jumbo jets Boeing 747s and Douglas DC-10s came to the company during an expansion of the intercontinental routes, specially to Central America. Iberia also bought the short-middle range trijet Boeing 727-200 in 1971, which were used until 2001.

During the 1970's, Iberia continued to expand and refine its long-haul network, particularly to Latin America. Destinations such as Buenos Aires, Mexico City, Caracas, and São Paulo were either expanded in frequency or served with upgraded equipment like the DC-10, improving both capacity and passenger comfort.

The mid-1970s were marked by both opportunity and challenge. The global oil crisis of 1973–1974 significantly increased fuel costs, forcing airlines worldwide, including Iberia, to reassess their operations, improve efficiency, and optimize route structures. Despite these pressures, the airline continued its modernization efforts and did not halt its expansion entirely, recognizing the importance of maintaining international connectivity for Spain’s growing tourism industry.

Spain itself underwent profound political change following the death of General Francisco Franco in 1975 and the subsequent transition to democracy. This transformation had indirect but important effects on Iberia. As Spain opened up further to the international community and integrated more deeply with Western Europe, air travel demand increased, both for tourism and business. Iberia benefited from this growth, particularly on European routes, where it connected Spanish cities with major destinations such as Paris, London, Rome, and Frankfurt.

Fleet development remained a central theme throughout the late 1970s and early 1980s. Iberia continued to rely on the DC-10 as its flagship long-haul aircraft, while also operating Boeing 727s on short-and medium-haul routes.

By the late 1970s and early 1980s, Iberia began to consider further fleet modernization, this led to the eventual introduction of the Boeing 747 into its fleet. Iberia received its first Boeing 747-100 aircraft in 1970, but it was during the 1970s and into the early 1980s that the aircraft became more prominent in its operations. The 747-200 was introduced in 1972 and allowed Iberia to significantly increase capacity on high-demand routes, particularly between Spain and Latin America, as well as on certain North American services. The introduction of the 747 also enhanced Iberia’s image as a modern, long-haul carrier capable of competing with other major international airlines. When Iberia received its first Boeing 747-200 in 1972, the livery was changed to reflect the times. The red lightning bolt along the window line was replaced with a yellow stripe with two red stripes above stretching over the plane's upper deck. A red-coloured letter I and a yellow letter B replaced the yellow globe on the tail. Iberia did, however, not rebrand all of its aircraft and left many flying in the old livery with the yellow globe until 1977.

During the early 1980s Iberia maintained its strong focus on Latin America, often referred to as its “natural market,” while also exploring opportunities in Africa and the Middle East. Destinations in North and West Africa, such as Casablanca, Dakar, and other regional capitals, were served.

The year 1986 marked a significant milestone for both Spain and Iberia. Spain’s accession to the European Economic Community facilitated greater economic integration, increased mobility, and a rise in business travel. Throughout this period, Iberia also worked on improving its operational infrastructure and corporate organization. Madrid-Barajas Airport solidified its role as the airline’s primary hub, with investments in facilities and capacity to handle increasing passenger numbers.

In 1987 Iberia, together with Lufthansa, Air France and SAS Group, founded Amadeus, an IT company (also known as a Global Distribution System) that would enable travel agencies to sell the founders' and other airlines' products from a single system.

Iberia marked a significant moment in its fleet development on June 27, 1988, when the airline took delivery of its first Boeing 737-300. This delivery formed part of Iberia’s broader modernization strategy during the late 1980s, as the carrier sought to replace older short- and medium-haul aircraft such as the Douglas DC-9 and early Boeing 727 variants with more efficient, quieter, and higher-capacity jets.

The type quickly became a backbone of Iberia’s European and domestic network, serving key routes such as Madrid–Barcelona, Madrid–Paris, and other high-frequency intra-European connections.

By the late 1980's, Iberia planned a fleet renewal with the McDonnell Douglas MD-87/88, which started to arrive in 1990. As well as the first Airbus A320 and Airbus A340-300 replacing the Douglas DC-9, Boeing 727 and 747 respectively. In June 1990, the carrier also bought 16 Boeing 757, first to arrive by 1993.

During the beginning of the 1990's it was a period of expansion and investments in many airlines. In June 1990 Iberia bought a 30% stake in Aerolineas Argentinas. Then In 1991 Iberia bought a 45% stake in Viasa and a 35% stake in Chilean Ladeco. As well, in 1992, another partnership between Iberia and Lufthansa had dissolved, they were operating a point to point airline named Viva Air, afterwards Iberia took over the operations of Viva Air. That airline entered the Spanish domestic scheduled market using Douglas DC-9 aircraft but these were quickly replaced by Boeing 737-300.

In 1995, before the process of privatization of Iberia, Aerolineas Argentinas was transferred to the Spanish government through the Industrial Ministry which would later become SEPI ( National Society for Industrial Participations). In 2001 the Argentine flag carrier was sold to the Spanish company Grupo Marsans. (Later in 2008 the president of Argentina Cristina Fernández de Kirchner expropriated the company to Grupo Marsans with the symbolic pay of 1 Argentine peso ($0.57 at the time) and re-nationalized the airline in Argentina.

The plans to make the Iberia group the dominant airline in the Latin American market also failed in Venezuela. In 1997 the board of directors of Viasa, in which Iberia was the majority, decided to suspend the flights of the company. Regarding Ladeco, in 1997 Iberia sold its shares in Ladeco after had made a $22 million investment.

In 1996, the airline launched its website. The company ordered 76 aircraft from Airbus in February 1998 for more A319, A320, A321 and long range A340-600 which at the time was the largest single Airbus order. In February 1996, Iberia took delivery of the new Airbus A340-300, which would go on to replace older DC-10 and Boeing jumbo B747-200. The following year it bought out Aviaco and inherited that airline's fleet. In 1998 the wholly owned subsidiary of Iberia, Viva Air, began to lose money and, by 1999, operations ceased and the airline was liquidated. Iberia took over all staff, aircraft and route licenses as Viva Air ceased its operations.

(Read more on Viva Air).

In 1998, Iberia was still majority-owned by the Spanish state holding company SEPI, but preparations for privatization were well underway. A key milestone came in 1999 when Iberia joined the oneworld alliance, alongside carriers such as British Airways and American Airlines. This move significantly enhanced Iberia’s global connectivity, allowing it to offer coordinated schedules, code-sharing agreements, and integrated frequent flyer benefits.

Privatization was completed in April 2001, when Iberia was fully floated on the stock exchange, marking the end of direct state control. Major shareholders included British Airways and American Airlines, reinforcing Iberia’s strategic alignment within oneworld. The airline also invested heavily in its fleet during this period. It continued to operate Boeing aircraft for long-haul routes, including the Boeing 747-200 and 747-300, but began phasing these out in favour of more modern Airbus aircraft. Deliveries of Airbus A340-300 and later A340-600 aircraft allowed Iberia to modernize its long-haul fleet with more fuel-efficient and higher-capacity planes. The A340-600, introduced in 2003, became a flagship aircraft for Iberia, enabling expansion on high-demand routes such as Madrid to Buenos Aires, Santiago de Chile, and New York.

On short- and medium-haul routes, Iberia increasingly standardized its fleet around the Airbus A320 family. Throughout the early 2000s, the airline took delivery of A319, A320, and A321 aircraft, replacing older Boeing 727s, DC-9s, and early-generation 737s that had already been largely retired by the late 1990s.

Following the September 11, 2001 terrorist attacks in the United States, the global aviation industry experienced a sharp downturn, and Iberia was no exception. Demand for transatlantic travel declined significantly, forcing the airline to adjust capacity and implement cost-control measures. Despite these challenges, Iberia remained relatively resilient compared to some competitors, partly due to its strong position in the Europe–Latin America market, which recovered more quickly than other regions.

In 2006, Iberia inaugurated the new Terminal 4 at Madrid-Barajas Airport, a major infrastructure development that significantly enhanced its hub operations. Terminal 4, designed to handle tens of millions of passengers annually, allowed Iberia to consolidate its operations and improve connection times, particularly for passengers traveling between Europe and Latin America. The opening of this terminal reinforced Madrid’s role as one of Europe’s key intercontinental hubs.

During this period, Iberia also expanded its route network. The airline launched new destinations and increased frequencies on existing routes, particularly in Latin America, where it served cities such as Lima, Bogotá, Caracas, and Montevideo. It also maintained a strong presence in North America, with services to cities like Chicago, Los Angeles, and Boston, while continuing to serve European and North African destinations.

However, by the late 2000s, Iberia faced increasing competition from both traditional network carriers and low-cost airlines, particularly within Europe. The rise of low-cost carriers such as Ryanair and easyJet put pressure on Iberia’s short-haul operations, leading to declining margins. In response, Iberia began exploring new strategies to remain competitive, including cost-cutting initiatives and organizational restructuring.

A significant strategic development occurred in 2009 when Iberia and British Airways reached an agreement to merge, creating one of the largest airline groups in the world. After regulatory approvals and shareholder agreements, the merger was completed in January 2011 with the formation of International Airlines Group (IAG). Under this structure, Iberia and British Airways retained their individual brands and operations but were managed under a single parent company.

By 2012, Iberia was facing severe financial difficulties, recording significant operating losses as a result of high fuel costs, intense competition on both European and long-haul routes, and structural inefficiencies within the airline. In response, IAG initiated a comprehensive transformation plan aimed at restoring profitability. This restructuring involved capacity reductions, route cuts, and a controversial labor agreement that resulted in thousands of job losses across flight crew, cabin crew, and ground staff. During 2012 and 2013, Iberia reduced its network by approximately 15%, suspending unprofitable routes such as Madrid–Havana (later reinstated), Madrid–San Juan, and several European destinations, while also retiring older aircraft types, particularly its Airbus A340-300 fleet, which had become increasingly uneconomical.

In 2012 Iberia established its own low-cost airline Iberia Express, which operates short- and medium-haul routes from its parent airline's Madrid hub, providing feeder flights on to Iberia's long-haul network. The airline began operating on 25 March 2012.

Iberia rolled out its new livery and logo on the 13th October 2013 on the new Airbus A330-300 aircraft after unveiling the rebranding scheme one month earlier at a press conference.

By 2014, signs of recovery began to emerge as Iberia returned to operating profit for the first time in several years. The airline started cautiously rebuilding its network, reinstating previously suspended routes and introducing new long-haul destinations, particularly in Latin America, which has historically been Iberia’s strongest market due to cultural and economic ties between Spain and the region. In 2014, Iberia resumed services to Montevideo and Santo Domingo, while increasing frequencies to destinations such as Mexico City, Bogotá, and Lima.

In 2013-2014 The airline took delivery of more Airbus A330-300 aircraft, which replaced older A340-300s and offered significantly improved fuel efficiency and lower operating costs. The introduction of the A330 also allowed Iberia to upgrade its onboard product, including new business class seats with full flat beds and an updated in-flight entertainment system. At the same time, Iberia announced plans to acquire the Airbus A350-900.

Between 2015 and 2016, Iberia continued to strengthen its financial position and expand its network. The airline also increased its presence in Asia, maintaining its Madrid–Tokyo Narita service, which had been launched in 2016 after a previous attempt in the 1990s.

In October 2016, Iberia unveiled its new Premium Economy cabin on Airbus A330-300s and modified Airbus A340-600s.