A spokesman for BA said Chief Executive Robert Ayling met officials of Iberia in Madrid for talks which had been "very positive".

A "tentative agreement" was reached to take a minority stake, he said.

The proposed agreement will be submitted to British Airways' next scheduled board meeting on November 13."

No details

The spokesman declined to confirm Spanish reports that the deal that was for BA to pay 42-52bn pesetas (up to $370m) for a stake of between 8.2% and 9.1% in Iberia.

He said it would be "inappropriate to discuss any figures or percentages prior to the proposals going to our board meeting next month."

Spanish state holding company SEPI said the deal agreed would see BA take a stake of between 8.2% and 9.1%, while American Airlines would take a balancing stake to give the British and US airlines 10% between them.

According to SEPI the deals value the Spanish carrier at 520-580bn pesetas.

BA chief executive Bob Ayling has sometning to smile about

The three companies first revealed plans to link up in July 1997 as a prelude to Iberia's planned privatisation.

The privatisation is now not expected to get underway until May next year.

Spain plans to sell 30% of the company to institutional investors and more than 50% through a public flotation.

Airline workers will also get a stake.

Iberia plans to join the new "oneworld" alliance of international airlines launched last month by British Airways, American, Cathay Pacific, Canadian Airlines and Qantas.