Qantas Airways has dismissed reports the airline warned politicians it may go under if Etihad Airways was allowed to increase its stake in local rival Virgin Australia.
A Qantas spokesman on Friday confirmed chief executive Alan Joyce and a number of executives met MPs in Canberra this week, where they discussed a range of issues.
However, the spokesman described a Fairfax Media report on Friday that management told the MPs the airline would go under if Etihad increased its stake was "pure speculation".
Mr Joyce has spoken previously about the need to reform the Qantas Sale Act - which places extra restrictions on the Flying Kangaroo's ownership structure that do not apply to other Australian carriers - to create a level playing field.
Fairfax Media said Qantas told the MPs the Abu Dhabi-based Etihad would "cross-subsidise Virgin's domestic business with the specific aim of weakening Qantas".
"Virgin/Etihad will be able to flood the market with capacity until its competition is forced to significantly reduce its own operations or worse," Fairfax Media quoted a Qantas briefing paper as saying.
Earlier in June, Etihad Airways purchased 4.99 per cent of Virgin Australia.
The airline's chief executive James Hogan told reporters on the sidelines of the International Air Transport Association annual general meeting in Beijing Etihad had sought Foreign Investment Review Board approval to move to a 10 per cent stake.
However, Mr Hogan said Etihad had no intention to move to a full takeover of Virgin Australia, nor was there any desire to take control of Australia's second largest carrier.
Etihad is not the only foreign entity with a large chunk of Virgin Australia - Sir Richard Branson's UK-based Virgin Group has a 26 per cent stake, while Air New Zealand owns 19.9 per cent of Australia's second-largest carrier.
Virgin and Etihad have an existing 10-year partnership, which involves among other things extensive codesharing, reciprocal frequent flyer benefits and joint-bidding for corporate contracts.
The Qantas Sale Act prohibits foreign airlines from owning more than 35 per cent of Qantas stock, while individual foreign shareholdings cannot exceed 25 per cent and the airline has to remain majority Australian owned.
These conditions do not apply to Virgin Australia.
Independent aviation commentator Stephen Pearse said he expected the Etihad investment would have no impact on Virgin's operations.
"Unless it is a full takeover and Virgin Australia were to become private, then it will continue to be a publicly listed company and have the rest of its shareholders to answer to," Mr Pearse said on Friday.
"Virgin is not going to operate on a loss-making basis."
At 1500 AEST, Qantas was down 1.75 cents at $1.1225, while Virgin was 1.5 cents lower at 37.5 cents.