The European Commission has prohibited Ryanair's proposed €1.5 billion takeover of Aer Lingus, arguing that it would harm consumers.

In a decision published yesterday, the commission concluded that the merger would have created competition concerns on at least 35 routes operated by both companies.

"Our decision to prohibit this merger was essential to safeguard Irish consumers, who depend heavily on air transport," said competition commissioner Neelie Kroes. "Monopolies are bad for consumers because they reduce choice, lower quality and give rise to higher prices. Low cost carriers like Ryanair are not exempt to this rule."

But Ms Kroes did not rule out a future merger between the airlines if Ryanair could offer remedies that met the commission's competition requirements. This is not "a never ever decision" and the deal could go ahead under the right conditions, she added.

Ms Kroes also said the commission had no power to force Ryanair to sell its 25.2 per cent stake it has built up in Aer Lingus. The commission is not in a position to request Ryanair to divest its shares because it did not amount to a controlling stake, she said.

Aer Lingus had hoped the commission would force Ryanair to sell its stake and it may be forced to complain to the Irish Competition Authority to seek this action now.

The decision to block the Ryanair/Aer Lingus merger is only the second prohibition of a merger that the commission has made in four years.

It also marks the first time that the commission has blocked a proposed merger between two European airlines. In recent years the commission has passed several major airline mergers such as KLM/Air France, Lufthansa/Swiss and Lufthansa/Eurowings. But Ms Kroes justified the decision to block the Ryanair/Aer Lingus merger because it was the first time the commission had judged a case involving airlines that are based in a single country.

Aer Lingus welcomed the decision, saying it was good news for its customers and the airline. "Consumer choice is at the core of every competitive market and the creation of one dominant player out of Ireland, despite the protestations of Ryanair, just cannot be in the interests of consumers," said John Sharman, chairman of Aer Lingus.

Ms Kroes rejected allegations from Ryanair chief executive Michael O'Leary that the commission had made a "nakedly political decision" by supporting the Government. She said the commission had no choice but to prohibit the merger because its investigation and a market test of the various remedies offered by Ryanair were inadequate to remove competition concerns.

Ms Kroes highlighted the limited number of slots available at Dublin airport as a key problem that could not be addressed by Ryanair and highlighted significant barriers to entry for other potential competitors.

The decision noted Ryanair's aggressive competition against new entrants, which caused even the second most successful low cost firm Easyjet to stop flying to Dublin in 2006. It also found that the merger of Aer Lingus/Ryanair would give the combined company an 80 per cent share of the passengers at Dublin airport.

It would also lead to competition concerns over 35 routes to and from Ireland (32 of these routes were to and from Dublin).