UPDATE 1-Flybe discussing loan on commercial terms with government -BBC

(Adds Flybe statement)

By Sarah Young

LONDON, Jan 17 (Reuters) - Struggling British regional
airline Flybe is in talks with the government about a loan on
commercial terms which would not represent a state bailout, the
BBC reported on Friday.

British Airways and Ryanair have opposed
government-backed support for Flybe, saying it prevents a level
playing field and breaches state aid rules, although the details
of the plan have not been made public.

The government has said that its support for Flybe, which
provides links between many regional UK and European airports,
does not breach EU rules on state aid.

Flybe's boss Mark Anderson said any government help would be
made on commercial terms, the BBC reported, citing an address he
gave to Flybe staff.

"We are in conversation with the government around a
financial loan - a loan, not a bailout - a commercial loan, but
that is the same as any loan we'd take from any bank," the BBC
quoted Anderson as saying.

Flybe was rescued from near collapse on Tuesday, when its
shareholders agreed to invest more money alongside government.

The airline declined to comment on the BBC's report of what
Anderson said, but did say that it had agreed with Britain's
finance department a payment plan for a debt of less than 10
million pounds ($13.1 million).

"This agreement will only last a matter of months before all
taxes and duties are paid in full. This is a standard 'Time to
Pay' arrangement with HMRC that any business in financial
difficulties may use," a spokesman for Flybe said in an email.

Flybe is owned by Connect Airways, a consortium created by
Virgin Atlantic, Stobart Group and investment adviser
Cyrus Capital. They bought the struggling airline last year and
have already provided it with 110 million pounds of funding.

But the airline's losses were such that the new funding was
used up quickly, Anderson is reported to have said.

"Three-quarters of the money the shareholders invested was
gone before we even really started. That has hurt this business
and more money is needed," the BBC quoted Anderson as saying.

But he tried to reassure staff about Flybe's future.

"We are not making millions of profit at the moment but if
we stick to the plan, and what we have to do, we will," he said.

UK Infrastructure company Stobart said on Thursday it was
providing 9 million pounds of funding for Flybe as part of this
week's government-backed deal.
($1 = 0.7645 pounds)
(Reporting by Sarah Young, Editing by Paul Sandle and Alexander
Smith)