Papua New Guinea's government is said to be concerned that competition from Qantas is threatening the survival of the country's second biggest carrier, Airlines PNG or APNG.
The Australian airline entered into the PNG market in July hoping to capitalise on the country's multi-billion dollar ExxonMobil-led Liquefied Natural Gas project.
A subsequent price war has resulted in flights to Port Moresby from Cairns being cheaper than to Sydney.
At the same time, APNG is said to be lobbying the PNG Cabinet for a merger with Air Niugini, though the larger airline says this isn't being considered.
APNG's management blame a nine million US dollar loss last year on the global economic downturn, a crash en route to Kokoda that killed 13 people and the Icelandic volcanic eruption.
Air Niugini declared a substantial profit for the same period.