Qantas has called on the federal government to examine a "virtual takeover" of Virgin Australia by foreign airlines which it says could distort the domestic aviation market.
But Virgin Australia says the sector has changed forever, and is no longer a monopoly dominated by Qantas.
Virgin Australia is raising $350 million by issuing new shares to existing shareholders, including its three major owners - Air New Zealand, Singapore Airlines and Etihad Airways.
The foreign airlines currently own 63 per cent of Virgin Australia, and that could increase to almost 70 per cent after the share issue.
Richard Branson's Virgin Group holds another 10 per cent.
Qantas chief executive Alan Joyce has written to the prime minister to voice his concerns about the "uneven playing field" created by current policies.
Virgin Australia's foreign ownership could rise to 80 per cent without the need for any further regulatory approval, while the airline retains all traffic rights afforded to Australian airlines, he said.
The Qantas Sale Act limits foreign ownership of the airline to 49 per cent.
"We have asked federal and state governments to fully examine the motives behind the virtual takeover of Virgin Australia by foreign airlines, and to prevent destabilising of the domestic aviation industry, local tourism and jobs," Qantas said on Monday.
Virgin Australia has responded by saying the competition it has introduced to the aviation market has lowered airfares, and provided thousands of jobs for Australians.
"The landscape of Australian aviation has changed forever. It is no longer a monopoly," it said.
Should Virgin Australia's three major shareholders be given board representation, the majority of directors would still be independent, the company said.
The Australian Council of Trade Unions said the government needed to ensure the national carrier remains viable and that the fate of the airline should not be left to the market.
