The General Court, the EU's second-highest judicial authority, also backed the European Commission's refusal to order Ryanair to sell off the 29.8 percent stake it accumulated in Aer Lingus, which makes it the largest shareholder in the airline.
Aer Lingus is demanding that they force Ryanair to offload its shares - and says it will consider an appeal to the EU's highest court.
Aer Lingus' chairman Colm Barrington said Ryanair's minority stake was causing "anti-competitive effects" and was "contrary to the interests of the majority of our shareholders."
Ryanair's CEO Michael O'Leary said the Tuesday ruling "will not prevent Ryanair making a future offer for Aer Lingus" but he had no immediate plans to launch a third takeover effort because it would be unlikely to succeed unless the Irish government sold its 25 percent stake.
"We continue to believe that the long-term financial viability of Aer Lingus can only be secured as part of one strong Irish airline group, particularly when the rest of Europe's airlines are consolidating," he said.
The European Commission rarely blocks takeovers but refused to allow Ryanair's hostile €1.48 billion ($1.85 billion) takeover, saying it would create a monopoly for flights from Dublin airport. It was only the second time in five years that it stopped a deal.
Airline takeovers in Europe can face a rough ride with regulators due to the high market share - and the number of takeoff and landing slots - that many carriers hold in their home country.
The EU's executive said the ruling made it clear that companies have to put forward their own solutions to eliminate competition worries "in due time." Ryanair finally made some concessions under EU pressure - but the court agreed with regulators that they were too little, too late.
Lufthansa sold off some airport takeover and landing slots to rivals to win separate EU approvals to buy Austrian Airlines and Brussels Airlines last year.
Regulators are currently assessing British Airways PLC's merger with Spain's Iberia SA which will create Europe's third largest airline. They are due to approve it by July 15 - or open a longer investigation.
They must also rule on United Airline's merger with Continental by July 27. Separately they will examine a deal between Greece's Olympic Air and Aegean Airlines SA by July 30
Only the EU courts can overrule antitrust regulators - but they found no fault with the decision to block the Ryanair bid, saying officials did a careful analysis of the harm to competition for the 14 million passengers who fly with the airlines to and from Ireland each year.