The European Commission is set to reject Ryanair's proposed acquisition of Aer Lingus, a move that could prompt Michael O'Leary to take a legal challenge to the decision.
A final recommendation might now be given to EU commissioners at their meetings on either June 20th or June 27th, according to informed sources.
A deadline of July 4th had been set for a decision to be presented to the full commission.
It is understood the competition department of the European Commission has conducted detailed "market tests" and found Ryanair's proposed "remedies" would be insufficient to allow a takeover. It is believed to have questioned whether a new entrant would enter the market in Dublin airport if Ryanair acquired Aer Lingus.
The two airlines currently operate the majority of traffic through Dublin.
It is understood the competition department's draft prohibition decision has been circulated to the 27 EU member states for consideration by their national competition bodies.
The mergers division of the Competition Authority in Ireland is thought to be weighing up the draft decision before making any observations to Brussels.
It is not clear if Ryanair will be given another opportunity to offer "remedies" to the competition department's draft decision.
Ryanair has already made three submissions to the commission, offering a variety of concessions in the hope of getting the green light for its unsolicited, proposed takeover, which was originally valued at €1.48 billion.
A decision by the commission to prohibit a takeover is rare. It has happened just 20 times in more than 3,000 cases reviewed by the European Union's executive arm since 1990.
The decision runs to more than 300 pages in an effort to deal with issues that may end up in court, according to sources.
The commission's competition spokesman Jonathan Todd declined to comment on the investigation.
A spokesman for Ryanair said the airline was maintaining its policy of not commenting on the process.
No comment was available from Aer Lingus.
The EU regulator said in a confidential charge sheet, known as a statement of objections, in March that it was concerned about the deal's impact on competition, especially at Dublin airport.
It noted Aer Lingus and Ryanair were head-to-head rivals and the number of routes on which they competed had risen to 37 from eight in the past six years, driving prices down.
Ryanair, whose bid lapsed automatically when the commission launched an in-depth investigation of the deal in December, said in a confidential offer it would make space for a new rival to base as many as six aircraft at Dublin airport.
Ryanair also offered to sell Aer Lingus's slots at London's Heathrow airport. The commission considered that would not solve the problem.
Shares in Ryanair fell by 12 cent or 2.25 per cent in Dublin yesterday to close at €5.21. Aer Lingus was unchanged at €2.94.
Even if the commission had approved the Ryanair deal, it would encounter problems as the Government, which owns 25 per cent of Aer Lingus, has opposed the transaction, along with employees and other shareholders.
The European Commission has also laid the legal groundwork to force Ryanair to sell some or all of its 25 per cent shareholding in Aer Lingus, which Mr O'Leary has said he intends to keep. (Additional reporting by Reuters)
