Loss making Polish airline Lot has been dealt a blow as Turkish Airlines pulls out of a takeover deal. Turkish has been involved in rapid expansion recently and a deal with Lot would have given it access to Warsaw which could have been used to get more passengers travelling through Istanbul.

Marcin Pirog, boss of Lot, said it was disappointing that a deal was no longer on the table but that he understood there had been legal difficulties because foreign investors from outside the EU are not allowed to own a majority share of European airlines.

Lot is 68 per cent owned by the Treasury in Poland. The Treasury has been looking at ways of privatising the airline and it had been hoped that Air China might take an interests after services were resumed to and from the country last week. Lufthansa is another potential partner, but is still to express and interest.

If a buyer cannot be found then Lot could be floated on the stock exchange in Warsaw. Lot has come under pressure from and increase in competition in Poland. OLT Express is a new domestic carrier aiming at reducing Lot’s market share and Irish low cost carrier Ryanair will soon be resuming its services in the country.

Some analysts are worried that Lot could follow Hungarian airline Malev which went bust earlier in 2012. Other European airlines are likely to be interested in Lots landing and take-off slots and therefore have a vested interest in seeing it flounder.