* Deal can still be approved if airlines offer more remedies
* Concessions offered so far not sufficient
* EU prohibition would be first in 3 years
(Adds details, shares, byline)
By Foo Yun Chee
BRUSSELS, Jan 20 (Reuters) - EU regulators are set to block the proposed merger of Aegean Airlines and Olympic unless they offer more concessions to encourage rival airlines to enter the Greek market, three sources said on Thursday.
A prohibition would be the first by the European Commission since June 2007, when it blocked another deal in the airline sector -- the attempt by Irish low-cost carrier Ryanair to acquire Aer Lingus.
The two Greek carriers suggested some remedies to the European Commission after it opened an in-depth investigation into the merger last July, saying it was concerned it could lead to a monopoly on many domestic routes.
But the concessions offered have been insufficient to ease regulatory worries, the sources said.
Airlines typically give up airport slots or provide access to their frequent-flyer programmes, among others, to secure regulatory approval for acquisitions.
"The Commission will take a decision next week," said one of the sources, who had direct knowledge of the issue.
EU Competition Commissioner Joaquin Almunia, who has set a Feb. 2 deadline for a decision, is expected to announce on Jan. 26 e will prohibit the deal.
However, the same source said that if the companies came up with further last-minute remedies there was still the possibility of the merger receiving EU approval.
The Commission blocked the Ryanair/Aer Lingus deal more than three years ago, saying it would result in less choice and higher prices for consumers.
Aegean sought to acquire Olympic in March 2009 but the Greek government picked buyout firm Marfin Investment Group despite its lower bid because it feared an Aegean bid would face competition issues.
A combined Aegean and Olympic would create a dominant carrier in Greece's domestic market, with a fleet of 64 aircraft and a workforce of 5,850 employees.
Aegean shares ended little changed at 2.15 euros. (Editing by David Holmes)