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British Airways (BA) has confirmed it no longer intends to make a takeover bid for Spanish airline Iberia.

Alongside US private equity firm TPG, BA had been part of a consortium considering an approach for Iberia.

But in a statement yesterday BA revealed it did not intend to exercise its pre-emption rights to acquire an additional stake in the takeover target – a move which led to speculation the consortium had effectively put its acquisition plans on hold.

Confirming its decision to formally renounce its interest in Iberia today, BA confirmed the consortium had written to the board of the Spanish airline to inform the carrier a takeover bid would no longer be forthcoming.

The development comes after BA, which already owns a stake of almost ten per cent in Iberia, said it did not intend to block two other core investors from selling their shares in the airline to a Spanish bank - believed to be against a takeover by the BA consortium.

Spanish bank BBVA and Spanish logistics company Logista had indicated their intention to sell their shares to Caja Madrid, one of the country's savings banks -which currently owns a 9.9 per cent stake in Iberia.

Although a pre-emption agreement signed in 1999 gives any of Iberia's core shareholders the right to buy stock put up for sale by fellow investors, BA rejected the opportunity to block a sale of the shares on offer to Caja Madrid.

Commenting on the subsequent decision by the BA consortium to withdraw its interest in Iberia, the letter from the former suitors to the airline's bosses said: "As a consequence of the recent decision taken by Iberia's core shareholders, the consortium formed by British Airways, Ibersuizas, Quercus, TPG and Vista Capital, has come to the conclusion that it is not possible to pursue a potential takeover bid since the consensus and friendly terms that we considered essential for this project are no longer in place.

"We have thus decided unanimously to withdraw our indication of interest for the company."