The European Commission is unlikely to completely block Ryanair's surprise bid for Aer Lingus, according to legal experts. However, they said EU anti-trust regulators may lay down stringent restrictions on Ryanair and Aer Lingus as a condition for approving a deal.

Ryanair was at pains to play down the risk that its takeover attempt would fall foul of the Commission. But observers said the airlines' dominance of the traffic at Dublin Airport is likely to prompt regulatory concern in the first instance. "You'd have to think that it could be back to the bad old days when we only had one airline so there will be competition issues," said one market source in Dublin.

ABN Amro in London said a deal would raise huge competition issues. "The Ireland-US bilateral gives the US authorities the right (but not obligation) to block Lingus operations if it believes Lingus to not be majority Irish-owned. Since Ryanair is majority European owned but not, we believe, majority Irish, this could be an issue."

The EU competition directorate general, which is likely to oversee the deal, will have 25 working days to approve the transaction or call for a 90-day investigation that may lead to restrictions on the airlines.

Issues arise in the context of the airlines' significant operations at Dublin Airport, where they control almost 70 per cent of traffic between them. Of some 16 million passengers who passed through the airport since the start of 2006, Ryanair carried 5.8 million of them and Aer Lingus 5.4 million.

The standard merger test for regulators is whether a transaction will substantially reduce competition in market. However, experts say the crucial issue is to define the market in question. While a merger of the Ryanair-Aer Lingus axis in Dublin may not on its own pass the test, the airlines' operations are not confined to that airport.

Unlike Aer Lingus, for example, Ryanair's rapid expansion in Europe means it takes in only about a quarter of its revenues in Ireland.

This means the "market" under assessment would not be limited to Dublin. So while issues may emerge in relation to Dublin, experts say that "behavioural restrictions" may be imposed to ensure the competition at that airport.

John Kettle, competition partner at Dublin solicitors Mason Hayes & Curran, said a merged Ryanair-Aer Lingus might have to divest slots in the airport to allow a new competitor into the market. "Preservation of competition might be seen to be important in the context of airports," he said.

Pointing out that Ryanair's point-to-point service is different to that of its target, Mr Kettle said conditions may be imposed to protect the automatic connections to international routes that are offered by Aer Lingus.

"I would think that the European Commission might require a continuing mandate for Aer Lingus to use those, the major interconnecting hubs, to enable Irish consumers to link with long-haul flights with ease. There may be restriction on divestment of Heathrow slots and other pairs at hubs in Amsterdam, Charles de Gaulle in Paris and Manchester."