Aeroelastic behaviour of a transonic rotor in a newly designed 1.5 stage compressor with variable geometry is studied numerically in this paper. The stage is intended to be the front part of a one-shafted large frame industrial gas turbine (IGT) compressor. The compressor was designed using open-source software MULTALL and numerical computations were performed using the three-dimensional aeroelasticity code AU3d, which has been tested and validated for many aeroelastic test cases over the past 25 years. Flutter analysis for the 1F mode was performed at various design and off-design operating conditions which are typically experienced in IGT (varied inlet temperature and inlet guide vane angle). Although in all the cases the rotor remained stable, clear trends in aerodynamic damping were observed, which can be explained by shock position. In the last phase, the effects of increased tip gap size on the flutter stability were studied. The increase in tip clearance did not result in flutter; unsteady computations without blade motion showed a tip rotating instability with 11 cells travelling at 84% of the shaft speed in the stationary frame. Due to the frequency proximity between the rotating instability and blade natural vibration mode, large amplitude displacement driven by lock-in was observed in the fluid-structure coupled simulation. It was concluded that this type of aeroelastic instability which can be mistaken for flutter is the main threat for this IGT compressor.