BA says not increasing Iberia stake

LONDON (Reuters) - British Airways (BAY.L: Quote, Profile, Research, Stock Buzz) will not exercise its option to increase its stake in Spain's Iberia (IBLA.MC: Quote, Profile, Research, Stock Buzz) it said on Monday, possibly ending its 3.4 billion euro (2.4 billion pound) pursuit for the airline with private equity group TPG TPG.UL.

BA's move clears the way for bank Caja Madrid to buy a 7 percent stake belonging to fellow Spanish lender BBVA (BBVA.MC: Quote, Profile, Research, Stock Buzz) and build a powerful position from which analysts say it would block the TPG-BA bid.

BA said in a statement it would not buy any of the Iberia shares being sold by BBVA and another core shareholder Logista.

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

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

(Reporting by Pete Harrison; Editing by Jason Neely)