Ryanair's takeover bid for Aer Lingus will be allowed to lapse following a decision by the European Commission to conduct an "in-depth investigation" into the acquisition, with a final decision not due until 14 January 2013.

The Commission's preliminary investigation identified grounds for competition concerns that must now be fully assessed in a Phase II investigation, it says.

Ryanair's €694 million ($882 million) bid for the Irish flag carrier - its third in six years - was widely expected to encounter regulatory opposition due to the virtual monopoly any merged entity would command on key routes between the United Kingdom and Ireland.

"Ryanair and Aer Lingus are the main operators out of Dublin airport," the Commission notes in a statement.

"On a large number of European routes, mainly out of Ireland, the two airlines are each other's closest competitors and barriers to entry appear to be high. Many of these routes are currently only served by the two airlines. The takeover could therefore lead to the elimination of actual and potential competition."

Ryanair issued a terse statement in response to the decision, saying that it plans to renew its takeover bid if regulatory approval is eventually granted.

"Following today's (29 August) decision of the European Commission to refer the acquisition of Aer Lingus to Phase II, Ryanair's offer lapses ... with immediate effect, and all acceptances of the offer to date are void," it says.

"Ryanair intends to re-bid for Aer Lingus if the European Commission clears its offer following its Phase II review."

The Irish low-cost carrier was dealt another blow earlier this month when the UK's Competition Commission determined that its own investigation into Ryanair's existing 29.8% shareholding in Aer Lingus should continue unimpeded, despite the parallel launch of the EU probe.

Source: Air Transport Intelligence news