A consortium led by private equity group TPG and British Airways said it has withdrawn its EUR3.4 billion euro (USD$5.1 billion) takeover bid for Spanish airline Iberia.

The consortium, also including Spanish investment firms Quercus, Vista Capital and Ibersuizas, "has arrived at the conclusion that it is not possible to make the bid under the terms of consensus and friendliness that we always thought indispensable to develop our project," the consortium said in a statement released on Monday night.

The announcement comes following "the decisions taken by core shareholders over the past few days," the consortium said.

Caja Madrid, a Spanish savings bank with 10 percent of Iberia, recently said that it planned to remain a shareholder of Iberia, showing an unwillingness to sell its stake to the possible bidders.

The Madrid-based savings bank then offered to buy two Iberia stakes on sale by BBVA and Logista. The purchase of BBVA's 7 percent and Logista's 6.4 percent in Iberia would leave Caja Madrid with 23 percent of the airline.

British Airways, which also has 10 percent of Iberia, said on Monday it would not exercise its right to share with Caja Madrid the stakes on sale.

"British Airways' position as Iberia's key industrial partner remains important and is not dependent on an increase in shareholding," British Airways Chief Financial Officer Keith Williams said in a statement.

"We will enter into discussions with Caja Madrid in order to maximize the value of our relationship with Iberia," he added.

Analysts say Caja Madrid would prefer Iberia to remain independent or in Spanish hands as it fears a foreign-led takeover might reduce the importance of Madrid as a hub airport.

Iberia shares, for which the consortium offered an indicative price of 3.60 euros in March, were suspended at 3.14 euros on Monday afternoon, when they were 1.9 percent down. Trading will resume on Tuesday, the stock market regulator said on Monday night.

Analysts said an Iberia tie-up would have given BA more muscle to compete with Air France-KLM and Germany's Lufthansa and would allow the use of Madrid as an alternative hub to overcrowded British airports such as Heathrow.

Iberia, Europe's fourth-biggest carrier in terms of passenger numbers, is also the leader on flights between Europe and Latin America, with 20 percent of the market.

The consortium led by BA and TPG wanted to strengthen Iberia's international routes, sharing the experience of BA in Africa and the Far East, sources familiar with the deal said.

However, the bidders faced fierce opposition from the airline and its shareholders. Iberia declined to open its books for months, arguing that BA was a competitor.

In August, the consortium finally gained access to Iberia's books, but then had to face a global credit market squeeze that made borrowing more expensive. The financing, though, was never "an issue," sources said.

The airline recently received a second approach, from Gala Capital, a Spanish-led consortium, which is waiting for permission to access the books.