LOTHIAN Buses is to be reported to Scotland's Traffic Commissioner over claims its airport shuttle service is muscling in on the city's taxi trade.
The "Edinburgh Shuttle" was set up by Lothian Buses last December to take passengers between the airport and the city centre.
But taxi drivers have hit out at the shuttle buses for offering trips between destinations within the city as well.
A memo has been issued to shuttle drivers telling of a new 5 single fare available to passengers for journeys such as George Street to the Grassmarket.
The memo comes as council chiefs today revealed they are considering whether the shuttle service requires a private hire licence, instead of or in addition to its existing public bus licence.
Lothian Buses today said it was operating within the law. It said it has a statutory duty to have a fare structure in place because the shuttles are registered bus services.
Although customers are not allowed to pre-book journeys within the city, they are allowed to travel on the shuttle service if they want to because they are registered public buses.
But Jim Muldoon, the newly-appointed Edinburgh representative of the Scottish Taxi Federation, said: "Our view is they are operating illegally - it is effectively a private hire operation.
"This notice to staff shows they are going beyond the city centre to airport agreement.
"In light of that notice, I am calling for them to suspend their operation until we clarify what sort of service they are running and what licence it requires." It is understood that some of the city's taxi drivers have been logging instances of shuttle buses taking passengers between city centre destinations.
The shuttle service last month made the shortlist for VisitScotland's Scottish Thistle Awards. It was nominated in the innovation category for its booking system.
Murray Fleming, secretary of Central Radio Cabs, said: "The shuttle service has been put up for this innovation award but it doesn't mean they can circumvent the licensing laws. We all have to work by the many licensing rules set out and something is either legal or not.
"We need urgent clarification of the situation because these single fares - the likes of George Street to the Grassmarket - are the bread and butter stuff for taxi drivers."
Lesley Parson, Edinburgh Shuttle's head of sales and marketing, said: "Edinburgh Shuttle operates as a bus service between Edinburgh Airport and a city centre zone. It complies fully with all the legal requirements for a bus service and in no way falls within the scope of private hire operation.
"The 5 fare which is available on request within the zone between the zoo and George Street is offered on a per passenger basis just like any other bus fare."
A spokeswoman for the Traffic Commissioner said it has still to receive the complaint.
Tim McKay, vice-convener of the city council's regulatory committee said: "We are currently investigating the service Edinburgh Shuttle are offering."