Virgin Australia is seeking legal advice as its dispute with Qantas over its foreign ownership escalates.

Virgin Australia is considering legal action against Qantas as the feud between the two airlines escalates.

Addressing shareholders in Brisbane, Virgin CEO John Borghetti hit back at Qantas boss Alan Joyce’s public campaign against the increasing ownership stake held by Virgin’s major shareholders – Air New Zealand, Singapore Airlines and Etihad Airways.

Mr Joyce has claimed the financial backing from foreign airlines allows Virgin to run at a loss in order to undermine Qantas and the Australian aviation industry.

“To say that Virgin Australia is driven by a strategy of uncompetitively low prices and irrational behaviour is offensive and absurd,” Mr Borghetti told Virgin’s annual general meeting.

“Anybody who believes that we would do that deliberately, seriously … we’re a public company, we’ve got responsibilities, we’ve got directors and management that are liable.”

Chairman Neil Chatfield said Virgin had “instructed legal advisors to act for us in dealing with this matter”.

Speaking to media after the meeting, Mr Borghetti declined to say if formal legal proceedings against Qantas had begun.

“I’m not going to talk on that subject at all,” he said.

Qantas remains defiant on the issue.

“We’re very comfortable with the observations and statements we’ve made,” Qantas said in a statement.

“The question of motive behind Virgin’s commercial decisions is one that market analysts and commentators have been asking for some time, and have rightly repeated in light of the latest equity injection.”

Under laws established when Qantas was privatised, foreign ownership is restricted to 49 per cent, while the holding of foreign airlines was capped at 35 per cent.

Virgin is currently raising $350 million by issuing new shares to its shareholders, which could increase the collective ownership of Air New Zealand, Singapore Airlines and Etihad Airways from 63 per cent to 70 per cent.

Richard Branson’s Virgin Group owns another 10 per cent stake.

Smaller shareholders are not pleased with restrictions placed on their ability to buy the new shares, and Australian Shareholders Association representative Stephen Mayne said he would go to the Takeovers Panel on Thursday unless the airline reversed those conditions.

“I’m just pointing out the invidious position and the reality of the voting blocs that exist at this company in trying to deal with what we regard as an oppressive structure of a capital raising,” he said.