Airline Rex says a federal government debt guarantee to Qantas will hurt regional operators.
"We believe that if the government was to guarantee Qantas's debt, it would put companies like Rex and other regional airline operators in the most uncompetitive position," Regional Express Group deputy chairman John Sharp said on Wednesday.
"Our position would be twice as bad as what Qantas is complaining about relative to its position with Virgin (Australia)."
Qantas has been calling for a level playing field in the aviation sector, due to the financial backing provided to Virgin Australia by Air New Zealand, Etihad Airways and Singapore Airlines.
Legislation prevents Qantas from having major foreign shareholders.
If the Australian government were to guarantee Qantas's debt, it too would become a government-backed airline, Mr Sharp said.
"And so Rex will be confronted with two government-backed airline operations that we will be competing with," he said.
"That will be unfair. That, I think, is a significant distortion of the market place."
If the federal government were to guarantee Qantas's debt, the government should guarantee the debt of all airlines, he said.
Rex made a net profit of $3.6 million in the six months to December 31, down 60 per cent on its $9 million result in the same period a year earlier.
Both total and passenger revenue fell, fuel costs were up, and the carbon tax on fuel cost the airline $1.3 million.
Passenger numbers fell by about 30,000 to 548,303.
Mr Sharp said the fall in passenger numbers reflected the challenging circumstances facing regional Australia, including a very substantial drought.
Rex again called for the Abbott government to fulfil its election promises to regional aviation "before the irreversible collapse of regional aviation occurs".
The company said the second half of the financial year was likely to be a continuation of the trend in the first half, because the economy was not expected to improve.
A volatile Australian dollar and the cost of fuel prevented the company from providing forecast for full year profitability, Rex said.
Its shares were up three cents at 82 cents at 1358 AEDT.
