UPDATE 1-Striking Iberia workers to stage protest at Madrid airport

MADRID, March 4 (Reuters) - Workers at Iberia were set to protest at Madrid's Barajas airport at midday on Monday as part of a strike over job and pay cuts at the loss-making airline that will ground nearly 1,300 flights this week.

Iberia is part of International Airlines Group, which also includes British Airways and which last week pledged to press ahead with plans to slash 3,800 jobs at the struggling Spanish airline, or 19 percent of the total, despite union opposition.

Iberia, Europe's biggest carrier to Latin America, is battling competition from low-cost airlines and high-speed trains as well as an economic crisis in Spain. Its declining revenue and high costs drove the IAG group to a 631 million euro operating loss for 2012.

Most passengers affected by the strike - the second of three five-day stoppages planned for February and March - had been re-scheduled and there were few signs of stranded travellers on Monday morning at Barajas airport.

Of the 40,000 passengers whose flights this week were affected, Iberia said 38,000 had been booked onto other flights. Fifteen percent of Iberia's trans-Atlantic flights, 38 percent of flights to Europe and Africa and 53 percent of domestic flights will be cancelled during the Monday-Friday strike.

The February and March strikes are the biggest in the airline's history and are estimated to be costing Iberia 3 million euros ($3.9 million) a day, while also causing disruption to other airlines as ground staff are part of the stoppages.

Iberia's pilots have also joined this strike, after not participating in the previous action between Feb. 18 and 22.

The strikes are a blow to Spain's tourist-dependent economy as it gears up for the spring and summer travel season. Tourism contributes about 11 percent to gross domestic product.

Iberia has cancelled 431 flights between Monday and Friday. A further 850 operated by Vueling, Air Nostrum and Iberia Express will also be grounded.

Union members clashed with police at Barajas when the first round of strikes began on Feb. 18. The final round is planned for March 18 to 22.

An independent mediator brought in by the Spanish government to resolve the conflict has so far failed to produce an agreement.