Following an initial inquiry, the European Commission has said Ryanair's proposed €1.4 billion take-over of Aer lingus would raise serious competition concerns and could reduce choice for consumers and increase fares.
The EC has now opened a Phase 2 inquiry, which will give the Commission 90 days to decide if the take-over would significantly impede competition within the European Economic Area.
'My main priority on this case is to make sure that consumers would continue to enjoy a competitive choice of airline services,' said Competition Commissioner Neelie Kroes.
The Commission said the proposed merger could lead to the elimination of competition between the carriers on a large number of routes out of Ireland as well as eliminate competition at Dublin airport.
Ryanair said following the decision of the European Commission to refer the acquisition to Phase II, Ryanair's offer lapses, in accordance with the requirements of the take-over rules, and it intends to make a further offer for Aer Lingus .
Ryanair had just two days to secure acceptances from Aer Lingus shareholders before the bid was due to lapse on Friday.
The EC has been considering the competition aspects of Ryanair's bid since October 30 and was due to give its decision at the end of last month.
The deadline was extended until today because Ryanair proposed a number of remedies to resolve potential competition issues - including giving up some or all of Aer Lingus' Heathrow slots to allow other airlines compete on the Dublin/London route.
Aer Lingus said that the European Commission's opinion that the take-over would raise serious competition concerns and reduce choice for consumers is in line with their stated view.
Ryanair's CEO, Michael O'Leary, said larger airline consolidations (most recently the Air France-KLM merger) have been approved under the Phase I process, and the Commission was not following its stated strategy of airline consolidation.
He said the Commission's decision in this case is inconsistent given that the Air France-KLM merger was approved while offering up 120 slots , while Ryanair was offering to surrender over four times more slots.
The Transport Minister Martin Cullen said: "The decision of the European Commission is consistent with my view that the proposed merger raises significant competition issues'.
* Ryanair has been told that planned strike action by security staff at Charleroi airport in Belgium, planned for Thursday, has been called off. As a result, all cancelled flights and planned diversions to and from Lille airport will be reinstated to operate to and from Charleroi airport on Thursday.
