Regional Express (Rex) has warned it could pull out of its Dubbo-Sydney service as a clash about charges at the city's airport intensifies.
The airline has put Dubbo Regional Council "on notice" the council's increased passenger tax, along with security screening costs, are putting the commercial viability of Rex's services "in jeopardy".
Council CEO Michael McMahon has disputed Rex's claims about the purpose of the fees and said it did not want to "burden ratepayers into subsiding the airport nor individual airlines".
The debate has resurfaced against a backdrop of an increase to the fees paid by airlines by $1.99 per passenger, or 13 per cent.
Rex has put an offer on the table of a $119 "community fare" between Dubbo and Sydney, if the council would cap increases to the passenger fee to CPI, and scrap the cost of screening Rex aircraft, not required under federal legislation.
Rex appealed directly to ratepayers and residents in a full-page advertisement in the Weekend Liberal, in which it accused the council of "gouging" travellers for more than $3 million a year and said the council's "grandiose projects" at the airport were "unwanted and unneeded".
"Rex has solemnly put [the council] on notice that its intended actions are putting the commercial viability of Rex's services into jeopardy and could result in Rex deploying all its 61 weekly flights and associated Sydney Airport slots to another reason," Rex chief operating officer Neville Howell said in the advertisement.
"As the peak slots to Sydney Airport are now full, this would mean that Dubbo will lose these peak slots forever."
Mr McMahon said the council remained committed to working with airlines, but in a sign a resolution was no closer, he also said the council remained "equally committed" to ensuring the airport could provide the quality infrastructure required to support airlines and safe travel.
"Council does not want to burden ratepayers into subsiding the airport nor individual airlines," he said.
Rex's suggestion the rise in passenger fees was linked to further capital improvement was disputed by the CEO.
"As communicated to Rex and the public on multiple occasions, the $1.99 increase was introduced specifically for the renewal of the current runway. Not lengthening," he said.
"This renewal which is calculated to cost this community over $8 million in 20 years.
"As communicated to airlines, this increase positions the business on a trajectory of CPI increases in the future."
The council remained open to "exploring opportunities to partner with airlines to support route viability and lower passenger fares", but it was critical that any partnership did not come at the cost of council responsibly maintaining the asset, he said.