British Airways said on Tuesday it had decided to join a bid for Spanish airline Iberia led by private equity firm Texas Pacific Group.
"British Airways has joined with TPG Capital, Vista Capital, Inversiones Ibersuizas and Quercus Equity to investigate a possible consortium offer for Iberia," said BA, which owns 10% of Iberia.
TPG and its partners have already made an indicative bid worth 3.4 billion euros ($4.6 billion) for Iberia, or 3.60 euros per share.
"If a bid was successful, Iberia would remain in Spanish control, and the Spanish investors would put in more than 50% of the total capital investment," said a BA spokeswoman.
Without this, airport landing deals with Latin American states, on which Iberia's most sought-after routes are based, would have to be re-negotiated.
"Our stake in Iberia has been very beneficial to BA, and we'd anticipate that continuing," she added. "But we're exploring our options and haven't ruled out anything, including disposing of the stake."
BA said there was no guarantee a formal bid would be made, but it ruled out making any further investment of its own in Iberia and said it would not make any ndependent bid for the carrier.
BA shares had fallen 2.81% to 466.50 pence at close, valuing the group at around 5.5 billion pounds ($10.8 billion).
The consortium could face a rival bid from private equity group Apax, which is thought to have the support of Torreal and Inversiones Hemisferio, investment vehicles owned by Spanish billionaires Juan Abello and Jose Manuel Lara respectively.
BA had wanted to roll TPG and Apax into one bid team to ensure it did not back the wrong consortium or allow a bidding war to drive up the price, sources close to the deal have said.
But an industry source said on Tuesday the door was now closed to Apax.
"BA and Apax had detailed discussions, but the two sides couldn't reach agreement on a number of key commercial issues," said the source. "The consortium BA announced today is final."
In addition to its 10% holding in the Spanish airline, British Airways has the right of first refusal over another 27% making it a pivotal player in any battle for control.