Ryanair unit Lauda on Thursday urged the Austrian government not to grant Lufthansa's subsidiary Austrian Airlines state aid to help weather the coronavirus outbreak, saying Austrian taxpayers should not subsidise a German company.

Lauda's move demonstrates the intense pressure on the European Union's major airlines and the competitive challenges that any national financial support could pose.

Lufthansa, which like Ryanair was forced to ground nearly all its flights due to the deadly new virus, is currently in negotiations with Berlin about state aid for its German operations but also with the Swiss, Belgian and Austrian governments regarding financial support for its divisions in these countries.

"We do not believe that Lufthansa should receive state aid from Austrian taxpayers in exactly the same way we do not believe that Ryanair should receive state aid from Austrian taxpayers," Andreas Gruber, the managing director of Ryanair's Austrian unit Lauda, said.

If German-owned Austrian Airlines (AUA) was to receive aid from Vienna, then Lauda would expect similar support as its Austrian staff are entitled to the same fair treatment under EU state aid rules, he said.

Ryanair bought the Austrian leisure airline from Niki Lauda two years ago to challenge Lufthansa in Germany and Austria. The late Formula One pilot had bought it from the remnants of insolvent carrier Air Berlin.

With 550 staff and a market share of 8%, Lauda is the second-ranking carrier at Vienna airport after Austrian Airlines, which has a share of 43% and around 7,000 employees.

The finance ministry has so far not commented on press reports of a potential aid package for Austrian Airlines of EUR 500-800 million. It has said the carrier could make use of the instruments included within the government's EUR 38 billion coronavirus aid package offered to companies operating in Austria.

Lauda said short term government payroll support should be provided to Austrian Airlines as well as Lauda.