Spain's nightmare start to the peak tourist season took an unprecedented turn for the worse last night when Iberia suddenly suspended all its 750 daily flights.

The indefinite stoppage will ground up to 80,000 passengers daily until the airline and its pilots, who have been striking every Tuesday for the past three weeks for a 20% pay rise, come to an agreement.

The airline acted after 99 pilots in charge of flight operations resigned, and its chairman, Xabier de Irala, said he could no longer guarantee the safety of passengers.

Angry crowds of passengers formed at the Madrid and Barcelona airports last night after being told that their flights had been cancelled. The interior ministry said it was sending extra police to prevent trouble.

A fortnight ago coach drivers in the Balearic islands went on strike, stranding thousands of holiday-makers.

Spain gets 48m foreign visitors a year, many of them travelling with Iberia.

Mr Irala said he did not know when flights would resume or whether he would follow Cathay Pacific's example in sacking 52 pilots and using outside crews.

Iberia said the pilots, who have a long tradition of industrial action, were trying to blackmail the company and force the government to intervene in their pay dispute.

The 1,875 pilots accuse the airline of reneging on a 1995 wage deal, and have demanded a 20% rise and better pensions.

Last night they said they had issued a writ accusing Mr Irala of shutting the airline down illegally

The final spark for the pilots was Mr Irala's decision this week to put a non-pilot in charge of flight operations, for the first time.

With many Spaniards due to leave on holiday this weekend, the pilots' already waning popularity may suffer further.

Iberia accounts for two-thirds of Spain's internal flights and 30% of its scheduled international flights.

British Airways owns a 9% stake in the company, which was privatised three months ago.