The European Commission is to carry out an "in depth investigation" into Ryanair's bid for control of Aer Lingus. The commission has long- fingered a decision on the application until January 14, 2013.
As a result, Ryanair's takeover bid for Aer Lingus will be allowed to "lapse" but could be renewed if regulatory approval comes at the end of the investigation.
A preliminary investigation by the commission identified grounds for competition concerns that must now be fully assessed, the website FlightGlobal reported.
Ryanair's €694 million ($882 million) bid for the former 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, the report stated.
"Ryanair and Aer Lingus are the main operators out of Dublin airport. 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," the commission said in a statement.
Ryanair reacted to the decision with something less than joy.
"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. Ryanair intends to re-bid for Aer Lingus if the European Commission clears its offer following its Phase II review."
Ryanair already owns 29.8 percent of Aer Lingus. The former does not fly the Atlantic while the latter does.
An Irish Times editorial noted that the commission's decision to examine in detail Ryanair's bid for Aer Lingus will have surprised few.
"The result of its in-depth investigation, which must be announced by mid-January, seems close to a foregone conclusion. The commission in its preliminary review has already signaled major potential competition concerns.
Will it be third time lucky? The odds, it would seem, are stacked against Ryanair.
Previously, it was reported that Abu Dhabi-based Etihad Airways was interested in possibly purchasing Ryanair's Aer Lingus stake though the Middle Eastern carrier, which operates services out of Dublin, has stated that is not actually engaged in any talks with Ryanair.
Etihad already has a small stake in Aer Lingus, amounting to just three percent.