Greek carrier Olympic Air's proposed merger with Aegean Airlines has run into problems with the European Commission, which has expressed doubts that the tie-up meets competition regulations.
Initial investigations into the proposal point to "serious competition concerns", says the Commission, particularly on the domestic market but also on several international routes.
It has chosen to open a 90-day in-depth inquiry into the agreement in order to assess the effects of the partnership.
"The Commission must make sure that consumers and businesses will continue to have a competitive choice of airline services in Greece," says European competition vice-president Joaquin Almunia, "in particular at a time of difficult economic circumstances."
Olympic Air and Aegean Airlines notified the Commission formally of their merger plan on 24 June.
While the competition situation on Greek routes is under scrutiny, the Commission says it also has "serious doubts" that the tie-up meets requirements regarding provision of public service obligation routes and ground-handling at Greek airports.
With regard to the PSO routes the merger would "bring together the two strongest and most credible bidders", it states. The inquiry is set to conclude by 7 December by which time the Commission will decide whether the merger poses a threat to competition.