Officials at the European Commission have approved the take over of Olympic Air by rival Aegean Airlines after a protracted dispute.

The Commission originally rejected the proposal two years ago, citing concerns a merged airline would dominate the Greek market.

However, Joaquín Almunia, vice president of the European Commission responsible for competition policy, said earlier the picture was now “quite different”.

Olympic has shrunk in size, cutting back from 32 international jets, to 14 turboprops operating regional services only.

Meanwhile, the ongoing economic crisis in Greece has resulted in a 26 per cent drop in demand for domestic flights from Athens, down from 6.1 million passengers in 2009 to 4.5 million in 2012.

Olympic now requires the takeover in order to continue operations.

“A thorough analysis of Olympic’s business prospects has confirmed it’s extremely unlikely that the company will become profitable in the foreseeable future, under any business plan,” Almunia said.

He concluded: “We have investigated this case very thoroughly.

“It was not obvious that an acquisition that received a negative decision almost three years ago could today be cleared on the basis of a new notification.

“But the reasons I just explained to you are powerful enough to explain why we took this decision.”

Aegean is proposing to pay Olympic shareholder Marfin €72 million for the airline.