A dozen capybaras died at Heathrow Airport after being kept on plane for 56 hours in cramped conditions without water, a court heard.
The mammals were among 20 which had started their journey in Lima, Peru, before being flown from Madrid to Beijing via London Heathrow.
Capybaras are a large South American rodent whose friendly and gentle nature make them very popular with exotic animal collectors.
Iberia admitted causing unnecessary suffering to 20 capybaras by failing to supply enough water during transportation at Uxbridge Magistrates' Court today.
The court was told that the Spanish airline is "mortified" and "incredibly sorry".
Staff at Heathrow Animal Reception Centre immediately became concerned when the Iberia plane landed on October 28 last year.
Prosecutor Jaysen Sharp said: "The crates did not have dispenser bars and insufficient ventilation.
"The animals were inspected and two were found to be deceased on arrival. The remaining 18 animals appeared to be in bad shape."
Another 10 animals died in the reception centre and the survivors were eventually put on a flight to Beijing.
Iberia now faces sentence at Ealing Magistrates' Court onFriday.
Edward Smith, defending the airline, said: "It is absolutely mortified by this incident. It has no previous convictions of anything like this.
"It is incredibly sorry and takes this matter most seriously."
Following the incident, the airline sent a bulletin to staff members in order to avoid a possible repetition of the tragic events.
"The sales and operation team in Lima shall be informed of the correct way of transporting live animals," said Mr Smith.