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Brussels probes Ryanair's fresh takeover bid for Aer Lingus

European officials have launched an in-depth investigation into Ryanair's second takeover bid for Aer Lingus to determine how seriously competition would be hit.

The inquiry could run until January 14 as experts look at how air travel would be impacted by a single operator flying out of the country.

"On a large number of European routes, mainly out of Ireland, the two airlines are each other's closest competitors and barriers to entry appear to be high," the European Commission said.

"Many of these routes are currently only served by the two airlines. The takeover could therefore lead to the elimination of actual and potential competition on a large number of these routes. The commission will now investigate the proposed merger to determine whether these initial concerns are confirmed or not."

Ryanair, which already owns 30% of Aer Lingus, offered €1.30 per share earlier this year, valuing the company at €694m (£559m).

The Irish government still holds a 25% stake in Aer Lingus, which it hopes to sell as a state asset following an agreement with European and IMF bosses in charge of the bailout. A successful Ryanair bid could generate €175m (£138.4m) for the Exchequer.

Aer Lingus said it is much stronger today than when the first bid was rejected in 2007 and is now the only significant competitor out of Ireland.

"The number of routes into and out of Ireland on which Aer Lingus and Ryanair compete has sharply increased since 2007. The reasons for prohibition are therefore even stronger than before," it said.

Ryanair said it has withdrawn its offer on the back of the EC investigation and that it will table a renewed offer if Brussels officials give the all-clear.

The low-cost airline will have to seek a derogation from the Takeover Panel to allow the second bid within 12 months of the first offer lapsing.