Qantas feud at the top turns nastier

After an emergency meeting, the tourism body's board gave its full support to Mr Dixon and said that his investment in Qantas was not a conflict of interest.

In reply, the Qantas board said its corporate governance charter was best practice.

To try to end what it sees as a slow-burn strategy, Qantas had earlier said it would cut its funding to Tourism Australia unless Mr Dixon stepped down as chairman or dissociated himself from a rebel investor group agitating for a big change in direction at the airline.

The board's decision leaves it at odds with Qantas, which has said it does not believe Tourism Australia can manage what it deems Mr Dixon's conflicts of interest. Mr Joyce also launched a stinging attack on the group of renegade investors he labelled as "Airline Partners Australia Mark II", as he tried to put an end to their destabilisation strategy.

He mounted a spirited defence of his own five-year blueprint for Qantas, and criticised key aspects of the rebel investors' plans to sell its budget offshoot, Jetstar, and the frequent-flyer loyalty scheme.

While declining to detail the breakdown in his relationship with Mr Dixon, he insisted that his priority was the airline and his strategy aimed at turning around its underperforming international division.

"I don't want to be distracted from it," he said. "Personal relationships and anything else around it are secondary to doing the right thing by Qantas," he said. Mr Joyce said he had not met Mr Dixon, the former Qantas boss, for a "catch-up" for eight months. Before their relationship soured late last year, the pair met as often as every fortnight in swish Sydney eateries.

The investors, including Mr Dixon, former Qantas executive Peter Gregg, Sydney financier Mark Carnegie and ad man John Singleton, have been seeking support from large shareholders and unions for a change in strategic direction at the airline. They have questioned the benefits to Qantas of the proposed alliance with Emirates.

Mr Joyce said Mr Dixon was a member of the "APA Mark II club", noting that the group included some key players in the failed $11.1 billion bid for Qantas in 2007 by Airline Partners Australia. Mr Dixon, who had once been a mentor to Mr Joyce, declined to comment.

The Qantas boss said Mr Dixon was "very much out there briefing against the company", and he had no choice but to suspend the airline's relationship with Tourism Australia.

Late on Tuesday, Mr Joyce wrote to federal Tourism Minister Martin Ferguson to tell him that Qantas was suspending its dealings with Tourism Australia because he believed Mr Dixon was in a position of "untenable potential conflict".

"The consortium is determined to stymie the Qantas-Emirates partnership, which has otherwise been enthusiastically embraced by the tourism industry, our customers and our shareholders," he said in the letter to the minister.

Qantas is the largest private funder to Tourism Australia, followed by Emirates. Its three-year funding program for the tourism body totals $44 million and is up for renewal next July.

The Tourism Minister appoints the chairman and the rest of the body's board, which includes as a director former Virgin boss Brett Godfrey.

Describing the dispute as a "commercial matter", the minister left it in the hands of the board to resolve.