Qantas, British Airways merger talks grounded

* Airlines could not agree on terms of the deal

* BA says Qantas wanted more than 50 percent of group

* BA says Iberia merger talks continue

* BA not taking stake in Alitalia

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By Mark Bendeich and John Bowker

SYDNEY/LONDON (Reuters) - Australia's Qantas Airways (QAN.AX) and British Airways (BAY.L) called off talks for a $6.4 billion merger, leaving the British carrier to consider other combinations with European peers as the sector grapples with falling demand and volatile fuel prices JET-SIN.

Qantas and BA announced the end of talks to the Australian and London stock markets on Thursday, saying they could not agree on key terms for a deal, which a BA spokeswoman told Reuters included a Qantas demand for more than 50 percent of the business.

The BA spokeswoman said the British carrier's long-running merger talks with Spain's Iberia (IBLA.MC) were continuing but that it was not planning to take an equity stake in Italy's Alitalia AZPIa.MI.