The European Commission on Wednesday launched an in-depth investigation into Lufthansa AG's (LHA.XE) plan to buy Austrian Airlines AG (AUA.VI).

The commission deepened the probe amid worries that, unchecked, the merger could lead to higher fares and reduced choices for consumers on certain routes. The commission said that in the "absence of appropriate remedies," it had "serious doubts" whether the deal could be allowed.

Despite the concerns, Europe's antitrust chief, Neelie Kroes, said she hopes that "in a spirit of mutual cooperation, we will be able to work closely with Lufthansa in the coming weeks to find timely solutions to these concerns."

The commission's initial probe found that the deal raised competition issues on the routes from Vienna to Frankfurt, Munich, Stuttgart, Cologne, Zurich, Geneva and Brussels.

Although remedies have already been proposed that significantly reduced the problems, they "were not sufficient to allow the merger to be cleared at this point in time," the commission said.

The commission now has up to 90 days to decide whether to allow or block the deal.

The deal with Lufthansa is seen as key to maintaining the solvency of Austrian Airlines, which has been hit hard over the last year, first by soaring oil prices and then the global economic crisis.

Lufthansa is proposing to pay EUR4.49 a share for Austrian Airlines' outstanding shares. The takeover will also receive help from the Austrian government in the form of EUR500 million in restructuring aid, which is being scrutinized by the commission separately.

This deal was straightforward enough that the airlines should have been able to get clearance in phase one, said one Brussels-based lawyer with interest in the case. "It is likely that the merger probe has been extended due to hiccups in getting clearance to the state aid," he added.

In a sensitive case, where national politics are heavily involved, the commission likes to keep its decision's clean, closing all possible investigations at the same time, Brussels lawyers say.

The German airline said the commission's launch of an in-depth probe comes as a surprise, against the background of both airlines' long-term joint venture, but that it "remains confident to receive the necessary approvals with justifiable remedies."

-By Peppi Kiviniemi, Dow Jones Newswires; +32 (0)2 741 1 483; peppi.kiviniemi@dowjones.com