A consortium comprising private equity group 3i's infrastructure arm and two Canadian pension schemes has pulled out of the bidding for London's Gatwick airport, a source briefed on the matter said today.

The source told Reuters the consortium was not prepared to match the asking price put up by Gatwick's Spanish owner Ferrovial, believed by analysts to be in the region of £2 billion ($2.89 billion).

"Having considered its position very carefully the consortium has decided to freeze all activities related to the transaction," the source said.

Ferrovial shares fell following the comments and traded at an intraday low of 21.55 euros, down 3.45 percent, this morning.

The source said the trio "have put a lot of work into it, but are not prepared to meet the price currently being demanded." The consortium had not disbanded but would need a material change in the asking price to return to the table.

The consortium declined to comment. It is made up of 3i Infrastructure Fund, Ontario Teachers' Pension Plan and Canada Pension Plan.

Ferrovial, the majority owner of the British seven-airport monopoly BAA, put Gatwick up for sale last year and hopes to use the proceeds to pay down some of its huge debt pile, which stood at 28.6 billion euros ($36.50 billion) at end-September.

Earlier this month Ferrovial Chief Executive Joaquin Ayuso told Reuters the group hoped to close the sale by the end of March or start of April.

However, Collins Stewart analyst Andrew Fitchie said it would be very difficult for the firm to get anything like £2 billion in the current climate.

"The primary valuation-driver for UK regulated airports would be its Regulated Asset Base (RAB), which for Gatwick is 1.65 billion pounds.

"You would expect any bidder to pay close to RAB, but given air traffic volumes are in serious decline and funds are not readily available, it's hard to see a bidder paying a premium," he told Reuters.

The withdrawal leaves three confirmed bidders for Britain's second busiest airport, which carried just over 34 million passengers last year. These are:

- Global Infrastructure Partners (GIP), a joint venture between General Electric and Credit Suisse, which owns London City Airport;

- Deutsche Bank's RREEF Infrastructure in partnership with Babcock & Brown;

- Citigroup unit Citi Infrastructure Investors, with Vancouver Airport Services and John Hancock Life Insurance Company, bidding jointly as Lysander Gatwick Investment Group.

In January, a person familiar with the process said Manchester Airports Group and Canada's Borealis were also jointly involved.

German construction company Hochtief was dropped from the shortlist shortly after the first-round bidding deadline last month.

The British competition regulator has ordered BAA to be broken up to boost competition among Britain's packed airports. As well as Gatwick, London's Stansted and a Scottish airport could go on the block.

A spokesman for BAA declined to comment.