Ryanair is threatening to sue the Italian aviation authority for refusing the Irish carrier access to airport slots to protect state airline Alitalia.

Ryanair, and its chief executive, Michael O'Leary, are embroiled in a bitter row with the Italian authorities over the airline's plans to fly from Rome to Sardinian airport Alghero.

ENAC, the authority, is refusing Ryanair access to slots in Alghero. The airline has sold 10,000 tickets for the route, which it is planning to launch on April 28th.

Mr O'Leary claims that ENAC is trying to prevent competition with the troubled Alitalia, which also flies to the destination.

ENAC's president, Vito Roggio, recently said he favoured Alitalia holding 70 per cent of Italy's domestic market. However, Ryanair and other budget operators have been building up their business within Italy.

Ryanair has singled out Alghero as a potential third Italian hub. It already has bases at Rome's Ciampino Airport and Oirio al Serio outside Milan.

Mr O'Leary has threatened to take legal action against the regulator by the end of the week unless it facilitates Ryanair's plans and provides the slots.

However, ENAC has said that it has asked Ryanair to moderate its operating plans.

It also emerged yesterday that the airline has settled its legal row with the British Airport Authority (BAA) over fuel levies at Stansted Airport in England.

Both parties filed suits against each other last year, but announced yesterday that they had settled the dispute. Ryanair has paid the cash it was withholding from the BAA, which was estimated at £1 million (€1.4 million) at the time.

In turn, BAA has dropped a breach of contract case it was pursuing against the airline in the English courts. Ryanair also said that from the beginning of this month, BAA cut its fuel levy charge at Stansted from 0.68p a litre to 0.412p, which will save the airline £1 million a year.