Stagecoach Group had planned to run the service every 25 minutes using two 150-passenger capacity hovercraft, but Edinburgh Council’s development management committee blocked the plans, citing the visual impact of the proposed ramp, noise and "transport concerns".
The Stagecoach plans included using the company’s former bus depot at Invertiel in Kirkcaldy and next to the Lothian Buses depot at Seafield Road in Portabello for departures and arrivals.
Stagecoach estimated that 870,000 passengers per year would use the hovercraft link – more than 32,000 passengers used the service when it was trialed for two weeks in 2007.
Stagecoach, which first submitted the planning application in December 2009, said it had carried out noise analysis and bird studies on behalf of Scottish Natural Heritage.
Stagecoach Group chief executive Sir Brian Souter said: "This has been a long and painful process. We are completely scunnered and have no intention of appealing against the planning decision."
Steve Burgess, a member of the council’s development management committee, said the application had been refused because it would obstruct access to the beach and create noise that would impact on residents. "There was also a lack of parking," he added.