The merger made sense at the time.
BA had no scope for growth at LHR when bmi was in Lufthansa's hands and there were soundings that the other airline groups were looking at Iberia. If Iberia had been bought by either AFKLM or Lufthansa Oneworld would have been seriously weakened in Europe.
The two airlines have complementary networks and Iberia did bring with it a very strong balance sheet with a high cash balance and little/no debt.
Turning around Iberia is going to be tough but IAG has the cash to win the battle. It's easy to forget how many were writing off BA a few years ago as a pension fund with wings with a ground operation that made it a laughing stock at LHR and had no future other than a slow decline into irrelevance.