* Turkey hopes airport will become world's biggest
* TAV shares slide after firm is outbid
* Build-operate-transfer model includes 25-year lease (Adds prime minister, Limak chairman, details on timeframe)
By Ozge Ozbilgin
ANKARA, May 3 A consortium of Turkish construction firms made the winning 22 billion euro ($29 billion) bid on Friday to build and operate a third airport in Istanbul, which Turkey hopes will become one of the world's largest by passenger numbers.
The consortium of Cengiz, Kolin, Limak, Mapa and Kalyon bid 22.15 billion euros for the build-operate-transfer project, which includes a 25-year lease, outbidding rivals including TAV Holding and Germany's Fraport.
The project reflects the emergence of Istanbul, Europe's largest city straddling Europe and Asia, as a major regional transport hub in tandem with the country's economic rise over the past decade.
"Such an airport ... will carry Turkey to a different level on the international stage," said Prime Minister Tayyip Erdogan, who is seeking to carve out a greater role for Turkey on the international stage.
The airport is planned to have a total of six runways and eventually be able to handle 150 million passengers per year.
"We aim to start the construction in a year," said Limak Chairman Nihat Ozdemir, adding the group would initially invest 10.25 billion euros.
"We will pay the amount in 25 equal annual instalments, and the airport will be start services towards the end of 2018."
Ozdemir said the consortium would seek financing from both within and outside Turkey but said he did not anticipate any difficulty raising the funds.
TAV SHARES PLUNGE
Transport Minister Binali Yildirim has said the airport would be the largest in the world by passengers at full capacity, though it was not clear when this would be.
Turkish Airlines, already one of the world's fastest-growing carriers, will be a major beneficiary, with much of its growth expected to come from transfer passengers through Istanbul. It shares rose as much as 4.5 percent after the tender result.
The airline carried 39 million passengers last year and expects to reach 46 million passengers this year, growing to almost double that by the end of the decade.
A consortium of Turkish firm IC Ictas and Fraport, which operates Frankfurt airport in Germany, had placed the highest initial bid of 20 billion euros but dropped out of the process after the Turkish consortium entered a higher offer.
TAV Holding, in which France's Aeroports de Paris (ADP) holds a stake, had been one of the favourites in the process. Its shares slid almost 8 percent after it also withdrew. ADP said it fully supported both TAV's offer and its decision not to exceed an "amount that appeared reasonable".
The project will involve costly engineering.
Quarries are located in the area near the Black Sea on the European side of Istanbul where the airport is to be built and filling them alone will cost some 2-2.5 billion euros, a challenge which discouraged wider foreign interest, sources familiar with the process told Reuters.
Airport operators from Singapore, Britain and the Netherlands had initially expressed interest but were not among the bidders for the project.
($1 = 0.7649 euros) (Additional reporting by Ayla Jean Yackley and Ece Toksabay in Istanbul, Dominique Vidalon in Paris; Writing by Nick Tattersall; Editing by Clelia Oziel)