Video report by ITV News Political Correspondent Libby Wiener
The owner of British Airways has filed a complaint with the European Commission over the government bailout of struggling airway Flybe, after its boss branded it a "blatant misuse of public funds".
International Airlines Group (IAG), which also owns Aer Lingus, claims the bailout breaches state aid rules and gives the struggling airline an unfair advantage.
The complaint follows a letter written to Transport Secretary Grant Shapps by Willie Walsh, the CEO of IAG, who asked why the taxpayer was funding the multi-million pound bailout of Flybe, rather than its rich owners.
Mr Walsh is angry because the firm - which was rescued in part by a deferral of an estimated £100m APD tax bill - is owned by, among other shareholders, Virgin Atlantic, which in turn is part-owned by US aviation giant Delta.
“Virgin/Delta now want the taxpayer to pick up the tab for their mismanagement of the airline,” Mr Walsh said in his letter.
“This is a blatant misuse of public funds.”
“Flybe’s precarious situation makes a mockery of the promises the airline, its shareholders and Heathrow have made about the expansion of regional flights if a third runway is built.”
The boss of EasyJet echoed Mr Walsh, saying "any special conditions that would apply for one company and not the others that would give it a benefit would be something that we would find hard to swallow."
He demanded the details of the bailout package, saying he does not support and "state funds" being used to help a firm, "particularly if its also backed by well funded companies in the first place".
Downing Street has since insisted there has been "no state aid to Flybe" and any support that is given to the firm would be on "strictly commercial terms".
The Prime Minister's official spokesman said: "The actions we have taken will support and enhance regional connectivity across the UK so local communities have the domestic transport connections they rely on.
"Any changes implemented as a result of our reviews of air passenger duty and regional connectivity will apply to all airlines in the competitive aviation market."
In response to IAG's complaint, the spokesman said: "The Government is fully compliant with state aid rules, there has been no state aid to Flybe."
Business Secretary Andrea Leadsom defended the rescue, saying the government "isn't in the market to bailout companies" but said Flybe was saved because it is a "viable" business providing an essential service.
"I can't honestly see that somebody would think that it was the right thing to do to allow that regional connectivity to be lost overnight," she said.
"For some regions in the UK it is the only available air-link and in some places the only available link so that is vital for shared prosperity around the UK."
She said the difference between Flybe and Thomas Cook, which went bust last year, "is that in the case of Thomas Cook it had huge amounts of debt".
"Any taxpayers money would simply have been throwing good money after bad - it was not a viable company."
She said the review of APD will create a "level playing field for all airlines"
Meanwhile, campaigners warned Boris Johnson that any APD review that leads to cheaper air travel would be a "complete scandal" and "rip up" the Prime Minister's pledge to show leadership on the climate crisis.
Greenpeace Chief Scientist, Dr Doug Parr, slammed the prospect of cutting tax for airlines "shockingly bad".
He said: "We're living in a climate emergency - as Parliament has declared - and aviation is an undertaxed, carbon intensive form of travel.
"There may be certain groups or certain places where they operate an essential service. But we're talking about a tax cut right across the board for the aviation industry - it's a completely shockingly bad way to go about this."
But Ms Leadsom said the "government is absolutely committed to meeting our legally binding commitment to net zero by 2050".
"That is my department's number one priority," she added.
The Treasury said the APD review ahead of the March Budget would consider the UK's climate commitments to meet net zero greenhouse gas emissions by 2050.
Mr Shapps said his department will "undertake an urgent review into how we can level up the country by strengthening regional connectivity".
Mr Shapps said APD worked "slightly oddly", adding "it costs twice as much to fly within the country as it does to fly to for example France and back".
He added the taxpayer had not paid any money into the firm.
Flybe's shareholders Connect Airways, a consortium including Virgin Atlantic, Stobart Group and Cyrus Capital Partners, will put in more funding as part of the agreement.