Federal Transport Minister Catherine King has rejected calls to overturn her decision to deny a bid by Qatar Airways for extra flights despite the government's admission reduced competition was driving up airfares and hurting customer service.
Speaking at the launch of the federal government's Aviation Green Paper, Ms King said: "In making this decision, I did have a national interest, not commercial interests, at play."
The minister said her decision also took into account the experience of several women who were taken off a flight and subject to invasive body searches at Doha Airport in 2020.
"This is the only airline that has had something like that [female passenger body searches] that has happened, and so I can't say that ... I wasn't aware of it," she said.
"But certainly it wasn't the only factor. [It] provides context for the decision that was made."
The government has come under sustained pressure over the Qatar decision, which came to attention as the nation's largest airline, Qantas, was accused of acting to stifle competition, including by "hoarding" limited flight slots at Sydney Airport and subjecting travellers to extensive flight delays and cancellations.
Federal Opposition Leader Peter Dutton said the fact Qatar currently operated flights to Australia called into question Ms King's claim the treatment of women at Doha figured in her decision.
Instead, the opposition has accused the government of running a "protection racket" for Qantas over the Qatar decision - a claim it has rejected.
But in its Green Paper, the government admits the aviation industry has become highly concentrated and airlines are no longer competing head-to-head, raising concerns about a lack of pressure on carriers to hold fares down.
Ms King said the government wanted an aviation sector that was "reliable, it is competitive and it is affordable".
The government is looking to strengthen consumer protection, improve complaints handling processes and make it easier for people with disabilities to fly, she said.
The Green Paper said the competition shortfall had serious consequences for travellers.
"The [government] recognises a reduction in competitive tension could adversely impact consumers and businesses, potentially leading to higher prices and lower service outcomes," the paper said.
Qantas has almost 62 per cent of the domestic market and Virgin Australia 33.4 per cent, giving them a combined 95.1 per cent dominance of the sector, the paper said.
Not only is the market highly concentrated, but structural changes since the pandemic have meant the carriers do not compete directly with each other and instead focus of market niches, the paper said.
Qantas' major competitor, Virgin, had adopted a mid-market model while Bonza and Rex would "need to expand operations significantly to become meaningful competitors".
The market's concentration has coincided with a significant deterioration in service standards.
In July, barely 68 per cent of flights departed and arrived on time, well below the long-term average of around 82 per cent, while 4 per cent of flights were cancelled, double the historical average.
Flight cancellations by Qantas have been particularly high on the Canberra-Sydney route, reaching 11 per cent in July in what Canberra Airport boss Stephen Byron labelled a "national disgrace".
Rex executive John Sharp accused Qantas of "gaming" the system by ensuring it operated enough flights to hold on to limited slots at Sydney Airport, effectively blocking access by rivals.
The concerns have come as Qantas itself has hit severe turbulence.
Late last week the competition watchdog announced it was taking the airline to court over claims it sold tickets to flights it had already cancelled. The ACCC said it would seek a penalty in excess of $250 million.
The carrier's reputation has also been badly damaged by poor customer service standards, its handling of flight credits, its treatment of staff and the bonuses provided to former chief executive Alan Joyce, who abruptly resigned Tuesday.
In its Green Paper, the government said it would consider increased cabotage - allowing foreign airlines to carry domestic passengers - as a way to boost competition, but warned of a "range of difficulties".
It said it favoured the existing case-by-case approach.
The government also flagged it will consider asking the Productivity Commission to launch an inquiry into regional airfares.
Ms King said public feedback on the Green Paper would be taken into consideration in developing its Aviation White Paper.