It is, on the face of it, an attractive prize. Iberia Airline, the Spanish flag carrier, dominates travel between Europe and Latin America, with nearly a fifth of the market.

It operates an average 1,000 flights a day to 101 destinations in 39 countries, has a fleet of 224 aircraft and carried 33 million passengers in 2006. The group is profitable: its net earnings were €116.1 million in 2006.

But the horizon is not exactly cloudless and could explain why Fernando Conte, the chief executive, has made known he is open to a merger.

That profit figure, for example, had fallen from €395.8 million in 2005. Moreover, competition is getting hotter. Low-cost carriers have started to offer domestic flights in Spain, including easyJet, which has established a hub at Barajas airport, Madrid. Others have been challenging on its international routes.

Worse, Iberia has been dogged by a reputation for poor customer service that Mr Conte been unable to shake. The company has been out of state hands since it was privatised in 2001, but it still feels, looks and acts very much like a state enterprise of the Seventies. Frequent flyers complain that delays, lost luggage and unappetising meals are all part of the standard service. In recent years, the company has maintained profitability by instituting a cost-cutting programme that has slashed on-board food rations still further.

Iberia has tried to improve things. It has introduced new aircraft on its international routes and revamped its business class. It has set up a no-frills brand of its own — Clickair.

Yet its efforts have been undermined by labour problems, which have often brought the airline to a standstill. Yesterday, the General Workers’ Union was flexing its muscles, expressing its “deep concern” over the possible sale of Iberia to the Texas Pacific Group.

The good news for possible foreign buyers is that there is huge scope to improve Iberia, an airline with good routes and brand recognition that has remained profitable during tough times for the industry. The bad news is that the ill-tempered staff and intransigent unions will soon become their problem.

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