The European Commission has begun a formal inquiry into the subsidies Dublin Bus and Bus Eireann receive from the Government.

The subsidies cover not only operating costs but also the replacement and expansion of the fleets of both companies, and grants for investment in infrastructure and training.

The inquiry follows a complaint from a representative body of private bus operators to the commission.

In a statement today the Commission's transport directorate said it had doubts about whether the annual subsidy respects state aid rules, especially those related to public service obligations.

It also doubted whether grants were compatible with the common market, especially as dedicated bus infrastructure such as bus stations, garages and maintenance facilities are not available on an equal basis to all potential bus operators.

Private bus operators also complained about training grants made available to Bus Eireann and Dublin Bus, but the commission said it lacked the information to take a position at this stage.

Dublin Bus today issued a statement saying it is confident that the investigation will confirm its arrangements are in line with relevant European legislation and will assist the progress of the investigation.