NEW YORK (Bloomberg) — Robert Benmosche, chief executive officer of American International Group Inc., was rebuffed by the insurer's board after saying he should be allowed personal use of the bailed-out company's aircraft, according to two people familiar with the matter.

The board said flights will be limited to business purposes because creating an exception would require approaching the Treasury Department for approval, said one of the people, who asked not to be identified because the talks were private. AIG posted an expense guideline on its website this week saying that personal use of corporate jets is "strictly prohibited".

AIG, which was rescued a year ago with a US lifeline that swelled to $182.5 billion, has to sell assets to repay its government loans under the direction of Benmosche, who took the CEO post last month. Outrage over bonuses and perks including corporate jets led Congress to require that Troubled Asset Relief Programme recipients disclose their policies on expenses.

"For personal use, he ought to hop on a commercial airline," said Frank Glassner, CEO of Veritas Executive Compensation Consultants LLC. "It would be irresponsible for them to say go ahead and use the corporate jet before the TARP funds are paid back."

Christina Pretto, an AIG spokeswoman, said yesterday that there is "no conflict between Bob and the board on this matter".

Benmosche's predecessor, Edward Liddy, had a $1-a-year salary and flew commercial flights between New York, where AIG is based, and Chicago, en route to his home. The insurer reimbursed Liddy $47,578 for the flights, AIG said in an April filing. Liddy left retirement in September 2008 to run AIG after its first government rescue.

Benmosche, 65, who was CEO of MetLife Inc. for eight years until 2006, will get a $7 million annual salary and is eligible for as much as $3.5 million a year in long-term incentive awards, AIG said in August. Executives from General Motors Corp., Ford Motor Co. and Chrysler LLC were lambasted in November for flying to Washington in jets to plea for federal assistance. Ford was the only one of the biggest three US automakers to shun a bailout.

"For Benmosche to use the corporate jet for personal use has the same wisdom as the top three executives of the automakers flying into Washington on their jets to ask for a handout," Glassner said in a telephone interview.

In March, MetLife said that CEO Robert Henrikson was no longer required to use corporate aircraft for personal travel. MetLife said earlier that month it may be selected for a Treasury capital infusion. The insurer later said it won't seek US funds.

John Mack, CEO of Morgan Stanley, agreed to start reimbursing the company for his personal use of the corporate aircraft, the bank said in March. The executive's personal flights cost the company $368,675 last year, according to a filing.

Citigroup Inc. chief executive officer Vikram Pandit said this week that he will no longer use the company's aircraft for personal use. Pandit previously agreed to reimburse Citigroup for any personal use of corporate jets, according to a filing.

Firms including AIG, Citigroup and Bank of America Corp. disclosed policies this month to comply with a government-imposed deadline for information on entertainment, company events, office renovations and travel.

"The AIG corporate aircraft is available for travel solely related to business purposes," the insurer said in its guideline. "The use of the corporate aircraft for personal matters is strictly prohibited."

The insurer also banned celebratory events except those "acknowledging key AIG career milestones". The company was rebuked by Congress last year because of a $440,000 spa trip in California that occurred days after its first government rescue, and Liddy cancelled most company conferences. Events that are approved, including holiday parties, should be held at company facilities, AIG said.