EU regulators blocked a hostile bid by low-fare carrier Ryanair for Ireland's Aer Lingus on Wednesday, saying the deal would limit consumer choice and likely boost ticket prices.
Together, the two airlines would control more than 80 percent of all European flights to and from Dublin airport, the European Commission said.
"Our decision to prohibit this merger was essential to safeguard Irish consumers who depend heavily on air transport," said EU Competition Commissioner Neelie Kroes.
New airlines would be unlikely to enter the market because of Ryanair Holdings PLC's reputation for "aggressive retaliation" and its ability to temporarily slash fares and launch new routes to protect market position, it claimed.
"Any monopoly -- even if advertised as low-cost and low-fare -- is bad for consumers. The reality is that prices are higher and quality is lower when there is no competition," she said.
It is only the second time the EU has blocked a deal since 2001.
The $1.9 billion takeover had seemed doomed after nearly half of Aer Lingus Group PLC shareholders vowed to block it.
Ryanair charged Tuesday that the EU decision was politically motivated and aimed to please the Irish government. The government and Ryanair each control about a quarter of Aer Lingus.
Ryanair vowed to take regulators to court, saying they were wrong to block the deal after approving the combinations of Air France and KLM and of Lufthansa and Swissair.
Regulators, however, say the Ryanair bid was unprecedented because both airlines have such a large share of routes at one airport, Dublin. In the previous bids, the airlines' main hubs were in different cities.
Aer Lingus and Ryanair compete directly on 35 routes to and from Ireland, it said, and the combination would give them a monopoly on 22. The country has few alternative passenger ferry links to Britain and continental Europe.
"This would have reduced choice and, most likely, led to higher prices for more than 14 million EU passengers using these routes to and from Ireland each year," the European Commission said.
Changes offered by Ryanair to soothe EU concerns were inadequate, it said.
Regulators said the limited number of airport landing slots the airline offered to give away to new rivals would not replace the competitive pressure in the market that would disappear if Ryanair swallowed Aer Lingus.
"What is certain is that Ryanair proposed to end the intense competition between Ryanair and Aer Lingus at Dublin airport that has pushed prices down and brought Irish consumers an increasing choice of direct flight connections from Dublin," it said.
"It is highly unlikely that Irish consumers would be better off with a near monopoly, even if it were sweetened by a temporary, hard-to-monitor price rebate."
Aer Lingus chairman John Sharman said the EU decision was good news for the company and travelers.
"The creation of one dominant player out of Ireland -- despite the protestations of Ryanair -- just cannot be in the interests of consumers," he said.
Growing rapidly from its Irish base into Europe's largest low-cost carrier, Ryanair has revolutionized travel in Europe, spearheading no-frills cheap flights that forced Aer Lingus -- a former state-owned airline -- to do the same.