A regional airline has complained to the consumer watchdog about Qantas "dumping excess capacity" on some routes but Qantas has hit back, accusing its rival of "throwing tantrums".
Regional Express Airlines - better known as Rex - has told the Australian Competition and Consumer Commission Qantas' behaviour on three routes - Adelaide to Whyalla, Adelaide to Kangaroo Island and Sydney-Ballina - is making its own services unviable.
The airline says it has decided to stop flying to Ballina and Kangaroo Island in the coming weeks due to a downturn in demand, claiming Qantas has gone beyond competing on merits.
"Rex has to face up to the reality that it is not able to match Qantas' financial firepower and unlike Qantas, Rex is not able to continue servicing a money-losing route indefinitely," the company said in a statement on Monday.
"The Rex Board has decided that in light of the sharp downturn experienced in the last six months and the poor economic outlook for the next 12 months, Rex will be exiting the Sydney to Ballina and Adelaide to Kangaroo Island routes in the coming weeks.
"This is not a decision that Rex has taken lightly having serviced Kangaroo Island continuously for 30 years and Ballina for 24 years."
But Qantas said Rex had a "track record of throwing tantrums" when things weren't going to plan.
"Not long ago, they blamed us for the fact their pilots were applying for jobs with Qantas," a spokesperson said.
"Now it's because we've added services and given regional consumers more choice."
The end of Rex services to Kangaroo Island is another serious blow to the local community after the devastating bushfires and their impact on tourism.
Qantas began services from Adelaide to the island in 2017 and also introduced direct flights from Melbourne.
It says it is committed to continuing to service the island until at least March 2021.
It began flying to Whyalla in 2015 and in January this year announced extra services from Sydney to Ballina from late March.
Rex said it was obvious the excessive additional capacity introduced by Qantas prevented Rex offering a sustainable alternative.
But Qantas said it was focused on adding new routes to regions with genuine growth potential.
"That includes stimulating those towns with more capacity, which helps build momentum and can grow the size of the pie over time," it said.
South Australian Premier Steven Marshall said the loss of Rex services to Kangaroo Island was bad news at an already difficult time for locals.
"We want to be doing everything we can to build up tourism on the island, so this is unequivocally a blow," he said.
But he said the island had been served by a single carrier until recently, so the situation going forward would not be much different.