Last week Cologne-Bonn airport said it was among the final bidders for the facility.

Other bidders include the UK's largest construction company, Balfour Beatty, which has partnered with Merrill Lynch.

It is understood that infrastructure funds owned by Credit Suisse and ABN Amro may also be making separate bids for the airport.

Among the parties that dropped out of the race were Fraport, operator of Frankfurt airport, and Spain's fifth largest construction company, Sacry Vallehermoso. Fraport deputy chief executive Manfred Schoelch said recently that the price being sought is too high. The airport complex stands on 120 acres, with an option to develop five acres of dockland. The airport reported £45m in consolidated revenues in 2005, and EBITDA of £19m.

Desmond acquired the airport in 1995 from construction company John Mowlem for just £14.5m. London City airport forecast this year that passenger numbers will quadruple in the next 25 years to eight million.

However, there has been concern amongst commercial interests that London's mayor, Ken Livingstone, could block any further expansion of London City airport. Any largerscale growth at the facility would necessitate leasing land from the London Development Agency, which is controlled by the mayor's office. Livingstone has previously said that the business case for the airport will be weaker in the future when the long-awaited Crossrail network is completed in 2015. It is intended that commuters will be able to travel between Canary Wharf and Heathrow in just 25 minutes using the system.

Livingstone said that it will be necessary to weigh the economic benefits of the airport's growth to London's economy against "amenity loss, environmental harm" and "loss of development capacity".