The European Commission has decided it cannot force Ryanair to dispose of its non-controlling stake in Aer Lingus, dealing a significant blow to the national carrier.

"In the view of the commission, it is unable under the EU merger regulation to require Ryanair to reduce its minority stake in Aer Lingus, essentially because this minority stake does not confer control," said a commission spokesman yesterday.

His comments followed a formal decision adopted by the college of commissioners at their regular weekly meeting, which rejected a complaint by Aer Lingus that the EU executive had "failed to act" to force Ryanair to divest its 29 per cent share holding.

Aer Lingus had complained to the EU executive that it should have forced Ryanair to reduce its shareholding to prevent the firm interfering in the running of the airline when it blocked a proposed merger in June. At the time, the commission argued it didn't have the legal competence to force Ryanair to sell its stake in the company.

Competition commissioner Neelie Kroes blocked Ryanair's takeover bid, citing a threat to competition at Dublin airport, especially on routes to and from London. Since the commission blocked the merger, Ryanair has increased its stake in Aer Lingus by four percentage points to 29 per cent, just short of the threshold that would trigger an obligation to launch an offer for the entire company.

In advance of the commission's formal decision on Wednesday, Aer Lingus said it would appeal the decision to the European Court of First Instance, the EU's second-highest court.

The airline said that the EU merger regulation gives the commission the power to force a divestment.

Under EU rules, Aer Lingus must receive a formal commission decision on its request before it can file an appeal to the EU tribunal.