The European Commission is expected to reject Ryanair's proposed purchase of Aer Lingus, sources familiar with the situation said today.
The prohibition of Ryanair's unsolicited offer, originally valued at €1.48 billion, will be only the 20th in more than 3,000 cases reviewed by the European Union's executive arm since 1990, and the first since 2004.
The competition department prepared a proposed decision to present to the full Commission before a July 4th deadline, after a market test found Ryanair's latest proposed remedies for competition problems were insufficient.
Ryanair chief executive Michael O'Leary has said he would challenge the Commission in court if the deal were turned down. The decision runs to more than 300 pages in an effort to deal with issues that may end up in court, one of the sources said.
Commission competition spokesman Jonathan Todd declined comment on the investigation until a final decision is taken. A spokesman for Ryanair said: "We have a policy of not commenting on this process."
The EU regulator said in a confidential charge sheet known as a statement of objections in March it was concerned about the deal's impact on competition, especially at the Dublin airport.
It noted Aer Lingus, the Irish flag carrier, and Ryanair, an insurgent no-frills airline, were head-to-head rivals and the number of routes on which they competed had risen to 37 from eight in the past six years, driving prices down 5 to 8 per cent.
Ryanair, whose bid lapsed automatically when the Commission launched an in-depth investigation of the deal in December, said in a confidential offer it would make space for a new rival to base as many as six planes at Dublin airport.
Ryanair also offered to sell Aer Lingus' slots at London's Heathrow and Dublin for flights between the two airports. The Commission considered that would not solve the problem.