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The European Court of First Instance, the EU's second highest court, rejected a challenge from no-frills operator easyJet yesterday to the merger of Air France and KLM.

In case T-177/04, the court affirmed the European Commission's decision in early 2004 to allow the deal with Air France and KLM to go through. The merger created the EU's largest airline.

easyJet claimed the EU had underestimated the risk to competition from the merger.

In response, the court said easyJet had failed to show "cogent evidence" that Brussels made "manifest errors of assessment".

easyJet declined to say whether it would appeal. But chief executive Andy Harrison said: "This merger was waved through by the commission without the due consideration it deserved.

"We had hoped the court would give the European Commission a rap over the knuckles for bowing to political pressure and agreeing the merger in double-quick time.

"The fact of the matter remains that France suffers from the least competition and the highest air fares of any major European country. The European Commission had a great opportunity to address this profound structural failing by using the Air France/KLM case to inject some genuine and much-needed competition into the market."

He said the commission's decision only gave "a cursory nod" to the interests of air passengers.

"We were disappointed with the commission's initial decision and we are disappointed with today's court ruling. Once again, it is consumers that lose out."