European competition authorities have extended their investigation into Ryanair’s takeover bid for Aer Lingus, saying the deal may reduce competition on a significant number of routes.

The European Commission announced the move to a ‘phase two’ investigation of Ryanair’s euro694 million (£555 million) bid for its Irish rival on Wednesday.

Ryanair immediately withdrew the offer and said it would re-bid for Aer Lingus “if the EC clears the offer following its review”.

In a statement the EC said: “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.

“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 said it would decide by January 14 whether to block or clear what is Ryanair’s third attempt to take over Aer Lingus.

Ryanair said it would make no further comment.

In a statement ahead of the announcement, Aer Lingus said: “The board remains of the view that Ryanair’s offer is not in the interests of shareholders, fundamentally undervalues the business and is likely to be prohibited by the EC due to the scale and extent of the competition issues.”

The EC blocked a Ryanair bid for Aer Lingus in 2007 and Ryanair withdrew a bid itself in 2009.

Ryanair has attempted to interest carriers including British Airways, Virgin Atlantic, easyJet and Etihad Airways in competing on routes it would otherwise have a monopoly on if the takeover went ahead.