DUBLIN (Reuters) - Ryanair's bid to take over smaller Irish rival Aer Lingus is to be blocked by Europe's anti-monopoly watchdog, the low-cost giant said on Tuesday, a "political" decision it said it would challenge in court.
The rejection of what Ryanair has described as its third and final bid for its rival, likely marks the end of a long-held ambition of Ryanair Chief Executive Michael O'Leary to seize control of the country's 75-year-old former flag carrier.
The European Commission, which acts as the European Union's competition authority, told Ryanair executives at a meeting on Tuesday morning that it intends to block the bid, Ryanair said in a statement.
A Commission spokesman said a final decision had not yet been taken.
"It appears clear from this morning's meeting that no matter what remedies Ryanair offered we were not going to get a fair hearing and were going to be prohibited regardless of competition rules," Ryanair spokesman Robin Kiely said in a statement following a meeting with Commission representatives.
"This decision is clearly a political one to meet the narrow, vested interests of the Irish government and is not based on competition law," he said.
Aer Lingus said it had not been informed of any decision, but said it had always expected a rejection.
"It was and remains Aer Lingus's position that the offer should never have been made," it said in a statement.
Ryanair, Europe's biggest budget airline, was told last month that it had one last chance to submit measures to ensure the proposed 694 million-euro (594 million pounds) merger did not reduce competition.
Ryanair's latest offer to the Commission included ceding 43 routes to a newly created Irish subsidiary of British airline Flybe (FLYB.L) and hand to British Airways ICAG.L. the routes Aer Lingus operates from London's Gatwick Airport.
The commission's principle objection was over the viability of the envisaged new carrier Flybe Ireland and whether British Airways would continue the routes after an initial three-year period, a source close to the talks said.
Flybe said in a statement it was disappointed by the news and was awaiting the result of Ryanair's appeal.
"The Commission will take a decision in this case at the end of February or the beginning of March," said a spokesman for EU competition chief Joaquin Almunia, who declined to comment further on the Ryanair statement.
Ryanair said the Commission was influenced by the Irish government, which has publicly criticised the merger, saying it could damage access between Ireland and major European airports and undermine competition.
The acquisition of Aer Lingus has long been seen as a personal ambition of O'Leary's, capping his transformation of an airline that started with one plane in 1985 into one of Europe's largest with over 300.
Aer Lingus operates 45 aircraft.
The Commission blocked Ryanair's first attempt to take over Aer Lingus in 2007 and Ryanair dropped its second in 2009.
Ryanair's offer of concessions went further in its latest bid than it had before, but failed to win over Irish political or public opinion.
"People are happy with the status quo, they have a soft spot for Aer Lingus," said Cathay Daly, a financial services professional walking in central Dublin.
"People were happy Ryanair brought some competition to Ireland but they don't want them to take it out."
Aer Lingus's shares were 4 percent lower at 1.28 euros by 2.55 p.m. British Time, when Ryanair's shares were unchanged at 5.67 euros.
(This story refiles to add the dropped words 'to comment' in the 13th paragraph)
(Editing by Greg Mahlich)