AIR BERLIN PLC 
Lufthansa last month signed a 210 million euro (£185.63 million) deal to take over Air Berlin businesses Niki and LG Walter, plus some short-haul planes, to cement its position in Germany and expand its Eurowings budget brand.
The deal has come under fire from airlines and consumer groups who fear it will give Lufthansa dominance of German domestic routes and in Austria.
The source told Reuters that the European Union Commission was leaning toward blocking the takeover of Niki.
The talks between CEO Spohr and the EU's Vestager come ahead of a Thursday deadline for Lufthansa to propose concessions to allay European Commission concerns over the deal.
It is expected to have to offer significant remedies as more than 100 of its routes overlap with those of Air Berlin, and the merged company would have a near monopoly on some routes.
If Lufthansa fails to propose concessions, the Commission will launch an in-depth probe, which could call into the question the whole takeover as Niki, Air Berlin's Austrian business, would have to be propped up financially for longer before Lufthansa could start restructuring it.
Lufthansa declined to comment. The European Commission said its investigation was ongoing, adding it could not prejudge its outcome at this stage.
Air Berlin, which has struggled to turn a profit over the last decade, filed for insolvency in August, leaving the future of thousands of workers in the balance.
(Writing by Maria Sheahan; Editing by Sabine Wollrab and Jason Neely and Louise Heavens)
By Klaus Lauer and Foo Yun Chee
