UPDATE 2-NZ's Auckland Airport says possible bid talks over

(Adds analyst, CPPIB comments, updates share price)

By Adrian Bathgate

WELLINGTON, Feb 5 (Reuters) - Auckland International Airport Ltd (AIA.NZ: Quote, Profile, Research, Stock Buzz) said talks with a potential bidder had failed, boosting the chances for an existing a NZ$1.8 billion ($1.4 billion) partial offer from a Canadian pension fund.

The unnamed party became the second suitor to walk away from the airport operator, which handles more than 70 percent of New Zealand's international traffic, leaving Canada Pension Plan Investment Board's (CPPIB) bid for a 40 percent stake as the only offer on the table.

The airport's sale is politically sensitive, with opponents arguing it would lead to foreign control of a strategic asset.

The board has rejected the Canadian bid saying it does not recognise the full value of the airport and because it would triple its debt to NZ$2.6 billion. However, analysts said shareholders might now find the offer tempting.

"This third party going away and no prospect of any other party being in the running anytime soon, combined with markets where they are, (CPPIB's) offer is looking increasingly attractive," said Stephen Walker of Walker Capital Management.

The board has previously said it would seek a new minority shareholder, but Walker said with tight credit markets, the chances of a bidder who is both and willing and able to finance a bid before the CPPIB offer expires on March 13 are slim.

CPPIB said vice president Graeme Bevans said the offer still had plenty of time to run, and CPPIB would continue to talk to major shareholders in a bid to secure support.