Posted at 4:41 p.m. PDT Thursday, July 12, 2001

Travel chaos in Spain as Iberia grounds all flights BY ELISABETH O'LEARY

MADRID, July 13 (Reuters) - Spain faced airport chaos on Friday after its biggest airline Iberia halted all flights at midnight and tour operators warned of irreparable damage to the nation's image as a happy holiday destination.

The move came amid an increasingly bitter dispute with pilots, who have staged a series of summer season strikes in attempt to win pay increases.

Iberia said resignations by 99 pilots meant it could no longer guarantee its operations were safe.

As long queues formed at Iberia counters at airports up and down the country, political opposition parties, tourism and consumer associations called on the government to take immediate action to limit the damage to Spain's holiday industry, which accounts for one tenth of the nation's economy.

Around 1,000 flights per day will be affected. Airport switchboards and rival airlines were immediately jammed with callers seeking alternative transport.

``The government...should intervene automatically to stop this chaos because it is simply not fair that consumers should be held to ransom in this way,'' Javier Hinojoso, head of Spain's Union of Consumers, told state radio.

Iberia, which has a long history of disputes with its pilots, said half its top level pilots had walked out, making the suspension of flights necessary.

Iberia's total 1,900 pilots have called one-day work stoppages once a week during July and August to back demands for a pay rise.

Talks between the two sides broke down completely earlier this week, and pilots' union SEPLA had been expected to announce new strikes on Friday.

``This situation of extreme necessity obliges me, in the interests of everyone...to temporarily and immediately suspend flight operations,'' Iberia Chairman Xabier de Irala told reporters at a hastily convened news conference.

Iberia guaranteed it would give customers their money back and hoped the situation would be resolved ``as soon as possible.''

One grounded passenger from Dusseldorf told Reuters no information had been made available in Madrid airport.

``I've been travelling since 7.30 this morning and I'm very angry. We're just waiting here and no one is telling us anything,'' she said.

A spokeswoman for pilot union SEPLA confirmed 99 senior pilots had handed in their notice, but were waiting for the posts to be filled before leaving the company.

She accused Iberia's management of trying to create a situation where the Spanish government would be forced to get involved in the labour dispute.

State radio said extra police were being drafted into airports to increase security.

British Airways was aiming to boost seats to Spain.

``We are looking to put on extra capacity to Madrid and Barcelona, but that depends on what aircraft we have operationally available. It is not extra flights, it would be larger aircraft,'' a British Airways spokeswoman told Reuters.

So far, strikes this summer have led to the cancellation of about a quarter of scheduled flights on each of the three strike days in June and July.

The stoppages had only a limited impact on air travel to and from Spain -- one of the world's top three tourist destinations -- which last year received 48 million foreign visitors. Germany and Britain provide the bulk of the tourists.

An Iberia spokeswoman said about 750 flights would be affected on Friday, 430 internal Spanish flights, 250 to destinations in Europe and 70 long-haul flights. Iberia is one of the biggest European airlines serving Latin America.

Shares in Iberia, whose biggest shareholders include British Airways Plc and Spanish savings bank Caja Madrid, closed on Thursday at 1.14 euros, below the 1.19 euros per share offer price when the company was privatised in April.

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-- Martin Thompson (mthom1927@aol.com), July 12, 2001