If they're relying on government handouts, are they really capitalists?

Why would a capitalist care about where the capital comes from? If the terms are favorable, all is good.

The capitalist has enough to do just taking care of his own business. But now he has to deal with all these who just took government money for nothing and can compete without any costs on their side. Even offer same service for free because govt pays for it - what kind of business could beat that? And what kind of government strangles legit businesses and replaces them with state-funded zombies?

Being a capitalist is not defined as a love of obtaining capital. It's more than that: it includes a belief in markets and a dislike of government intervention, which can of course be intervention to prop up his competitors.

no, it's rather socialism trying very hard to imitate capitalism, but missing the main point