UPDATE 2-Citi Infrastructure out of race for Gatwick airport

* Spokesman confirms Citi Infrastructure-led group out

* Says John Hancock left Lysander group months ago

* BAA says bid was uncompetitive, queries "deliverability"

* Two bidders remain in battle for UK No.2 airport

(Adds detail, background, BAA statement)

By John Bowker and Quentin Webb

LONDON, May 13 (Reuters) - A consortium led by Citigroup's infrastructure fund was dropped on Wednesday from the battle to buy London's Gatwick airport, leaving just two groups vying to take over Britain's second-busiest airport.

The decision is a fresh blow for the Citi Infrastructure Investors fund and its ally, Vancouver Airport Services, which only weeks ago saw their winning bid for Chicago's Midway airport collapse because they could not secure financing.

Gatwick owner BAA, majority owned by Spain's Ferrovial (FER.MC: Quote, Profile, Research), said the bid from the consortium, known as Lysander Gatwick Investment Group, was "uncompetitive on price and there were no assurances on deliverability".