Ryanair, Europe's biggest budget airline, will lose its attempt to take over its rival Aer Lingus when the European Commission vetoes the bid on Wednesday, sources familiar with the matter say.
The Commission, executive arm of the European Union, will take the unusual step of blocking the unsolicited bid in order to prevent the two carriers from becoming a single, dominant operator at Dublin Airport and stifling competition there.
Competition Commissioner Neelie Kroes, on whose recommendation the Commission will act, has blocked only one other deal during her tenure. The offer, originally valued at €1.48 billion, will mark the 20th prohibition among more than 3,000 cases reviewed by the EU executive since 1990, and the first since 2004.
Ryanair chief executive Michael O'Leary has said publicly that he expects the deal to be blocked and that he plans to appeal to the EU Court of First Instance in Luxembourg. He also wants to hold on to the 25 per cent stake in Aer Lingus that his company owns.
The Commission, however, has laid the groundwork to force him to cut back or sell all of that holding and will decide later whether to do so. Both airlines are based at Dublin Airport and serve a market where few others have shown an interest in establishing a base.
The EU regulator in March issued a confidential charge sheet, known as a statement of objections, that laid out a tough case against the merger.
In some ways, Aer Lingus owes its own success to Ryanair. Ryanair's cut-rate prices and expanding choice of destinations have forced Aer Lingus to transform from a staid, high-priced flag carrier into a tough no-frills competitor ready to match O'Leary ticket for ticket and route for route.
The charge sheet said that in the past six years the number of routes on which the carriers competed had jumped to 37 from eight, driving prices down by 5 to 8 per cent.
Ryanair offered proposals it said could ensure competition, but they were never enough to satisfy the Commission. For example, it offered to 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