The head of the Spanish carrier Iberia's main shareholder, Caja Madrid, said on Tuesday though the company is suffering from the higher prices of oil but should still earn a profit this year.

The Spanish airline, 23 per cent owned by a savings bank Caja Madrid, racked up an operating loss (EBIT) of 28.3 million euros and net losses of 441,000 in the first quarter, affected by higher costs of fuel and higher competition in the market.

Speaking at a financial conference in Santander, northern Spain, Mr. Miguel Blesa, Caja Madrid Chairman said, "The situation at Iberia is complicated. It is being very affected by the price of oil, but it's not going to fall into loss".

Mr. Blesa further said, "The increase in the price of fuel is going to be passed on (to customers), but everything has its limit".

However, Fernando Conte, Iberia chairman, has refused at recent public events to give a figure on the possible hike in ticket prices in response to the rising price of oil.

The carrier has hedged forty-eight per cent of its fuel costs for the current year, at a price of $83 per barrel.

Mr. Blesa also said that Iberia and the UK's flag carrier British Airways, which also owns 13.5 per cent of the Spanish carrier, were in talks in relation to a commercial partnership, but not a merger.

In the month of April, the local government-managed bank ruled out offering to sell BA its stake.