BUS company Blackburn Transport went almost £500,000 into the red last year - and its boss today blamed a fares battle for the losses.

Blackburn Borough Transport said the bulk of the £462,243 trading deficit was down to its "war" with the now defunct Buzy Bus Ltd.

Michael Morton, managing director of council-owned Blackburn Borough Transport, said he was unable to discuss his company's accounts until he had presented them to the annual meeting in February.

He insisted the company was not going out of business but said he could not rule out fares rises either.

He blamed the bulk of the losses - following a £75,387 profit in 2002 - on the fight for passengers which began towards the end of 2002.

Blackburn Borough Transport's problems with Buzy Bus started when its rival began matching its routes and "poaching" customers.

Buzy Bus Ltd also advertised as Blackburn Transport Ltd, which added to the confusion.

Blackburn Borough Transport's accounts for the year ending in March 2003, leaked to the Lancashire Evening Telegraph, show that income from passenger fares fell by £571,159, an eight per cent decrease. Gross profit fell from £1,264,493 to £891,807 - 30 per cent down.

After taking out annual costs, the gross profit became a net loss of £462,243. Administration expenses for the company rose 15 per cent to £1,300,022.

However, Mr Morton said he was confident the current plight can be turned around and redundancies have been ruled out.

Andy Kay, Blackburn with Darwen Council's executive member for regeneration, said: "Competition of that kind is never good for any company. Bus users have not suffered since Buzy Bus went out of business and we have been able to cover their services."

Buzy Bus Ltd, which also operated the Catch-Me-Bus.Com company, folded in November when directors David and Suzanne Bailey resigned.

The husband and wife were later arrested by police who raided offices in Eden Street, Blackburn. Officers are now conducting an investigation into allegations of suspected insurance fraud.

Mr and Mrs Bailey were released on bail pending further inquiries which are expected to least for another month.

A public inquiry into the firm's collapse was opened in Preston last month. The Government's Traffic Commissioner said the inquiry was needed to establish why Buzy Bus had not given the statutory notice before leaving passengers stranded.

However, the inquiry was adjourned because of Suzanne Bailey's health.

Coun Kay added: "Circumstances have now changed and we are still trying to assess what the impact might be.

"At the moment, and I can only speak from my point of view, it is not up for sale, despite what some people say."

Blackburn Borough Transport was privatised in 1986 but the council is the only shareholder. It operates as a non-profit-making organisation, a fact which drivers said became a hindrance during its fight with Buzy Bus.

Despite tensions between the two companies, Blackburn Borough Transport Ltd stepped in to cover Buzy Bus services when the company stopped running.

Coun Kay added: "Blackburn Borough Transport has been a very good servant for people for a long time."