It was. Hitler and Mussolini tried very hard to get them to join the Axis, but Franco was just a bit too smart for that.
I realise the Axis did in fact court Spain for entry into the war, but their contribution would have been limited. Besides capturing Gibraltar (which is a significant strategic asset), I do not think there is much more Spain could have done other then providing another front that will distract the allies.
The idea of this AH is for Spain to have the capacity to alter the outcome of the war (on either side) before perhaps the entry of Soviet Union or USA (Spain does not have the capacity for Superpower status). Perhaps a spain allied with France from the start, with a highly militarized border - I could imagine Hitler suffering Napoleans mistake of a 'running sore'. If Hitler failed to decisevly defeat Spain, it may make Mussolinni hesitate for entry pending its outcome.
Even a strong neutral Spain has interesting consequences for post-ww2, of course it depends on its government of the day. If a fascist government exists it may create a 'third way' between the cold war sides of Capitalism/Communism. In such a scenario if Italy didnt enter the war, she would be a member of such an alliance.
Thanks for your responses, my knowledge of history is confined to general outcomes and not statistics. I will write up a small timeline in the near future perhaps regarding this.